Fuelled by the digitalisation era and, more recently, the global pandemic, the exponential growth of e-commerce and the online shopping sector has led to a significant surge in production, freight, and traffic worldwide. This expansion has resulted in a substantial increase in cross-border shipments throughout the European Union (EU), with cross-border online retail expanding by 17% in 2022, equating to a market value of €171 billion.
Although the environmental impact of e-commerce businesses is generally lower than that of traditional retail businesses, the production, packaging, and distribution of this escalating volume of goods emit considerable levels of greenhouse gases. Consequently, it is crucial for e-commerce companies to utilise their influence to decarbonise their supply chains while contributing to a more sustainable online retail landscape.
The carbon footprint of e-commerce
E-commerce is typically perceived to be an industry with a low environmental impact due to its online presence, yet these businesses ultimately rely upon carbon-intensive services to create and distribute goods to consumers. The vast popularity of e-commerce in such a short period, accounting for over 18% of retail sales worldwide, therefore inevitably relies heavily on the transportation and logistics industry, which is the largest carbon emitter in the United States - accounting for 29% of greenhouse gases (GHG).
Whilst the carbon emissions associated with e-commerce created through freight and logistics are somewhat ‘invisible’, e-commerce businesses have a significant visible footprint which is through the packaging utilised when importing and exporting goods. One year of packaging on a global scale is estimated to equal one billion trees, or 5000 packages per second. As such, e-commerce businesses holistically cause significant environmental harm, yet there is vast potential for e-commerce businesses to pave the way towards a more sustainable online retail economy through reducing their scope 1, 2 and 3 emissions.
E-commerce businesses have little physical presence, therefore the bulk of their carbon footprint are scope 3 emissions. These emissions are indirect, and are associated with the emissions of external business processes - such as the practices of suppliers. However, these indirect emissions are widely unaccounted for, with findings stating that only 25% of reporting companies engage with suppliers to try to reduce their carbon emissions. Failure to actively engage with these critical emissions means that companies will forfeit the opportunity of overall emissions reduction, thus meaning they will not reap the benefits of decarbonisation.
Effective decarbonisation strategies for reducing the carbon footprint of e-commerce businesses
1. Using sustainable packaging
Reducing packaging or transitioning to reusable and recyclable packaging concepts is a fundamental step which e-commerce businesses must embrace within their decarbonisation journey. Through transitioning away from unsustainable packaging, such as single-use plastics, to commonly less expensive and more sustainable multi-use packaging; e-commerce businesses will recognise immense cost savings and waste reduction.
2. Monitoring scope 3 emissions
In order for e-commerce businesses to truly reduce their emissions, it is vital that a key focus is placed upon reducing scope 3 emissions. Scope 3 emissions can account for up to 80% of a company’s emissions, thus mapping out these indirect emissions created by other businesses and functions within the supply chain is vital if businesses wish to reap the benefits of true decarbonisation. Plan A offers a comprehensive software that allows e-commerce businesses to monitor and reduce their scope 1, 2 and 3 emissions effectively.
Scope 3 emissions are those indirectly produced by other businesses and functions in a company’s supply chain, and since these emissions are often the province of other organisations, they are notoriously hard to monitor.
3. Reducing scope 3 emissions and increasing supply chain efficiency
E-commerce businesses must map out and analyse their supply chain to understand where the bulk of their emissions are coming from. In doing so, the origins of goods and their transportation methods can further be evaluated. For example, an e-commerce business could reduce their CO2 footprint by up to 25 times through choosing to purchase products in bulk and storing them in a warehouse in the EU rather than regularly ordering the products via international air-freight. Furthermore, e-commerce businesses can leverage their vast influence through encouraging their suppliers to implement sustainable practices.
E-commerce businesses could cut out 30% of their overall supply chain emissions via operational changes, such as procuring a low-carbon energy alternative. As such, prioritising efficiency within every operational process - like ensuring maximum freight loads - is paramount to the effective implementation of a sustainability strategy.
4. Digitalisation and delivery services optimisation
In today's fast-paced digital world, e-commerce businesses must prioritise sustainability and work to reduce their carbon footprint. Two key strategies that can help businesses decarbonise their operations are implementing carbon-neutral delivery services and leveraging technology to understand the environmental impact of their products.
Carbon-neutral delivery services are an essential component of a sustainable e-commerce strategy. By partnering with delivery providers that offset their carbon emissions or utilise electric or alternative fuel vehicles, e-commerce businesses can significantly reduce their environmental impact. Companies should seek out delivery partners that share their commitment to sustainability and are transparent about their efforts to minimize their carbon footprint.
In addition, e-commerce businesses should lean on technology to better understand the environmental footprint of their products. Advanced software solutions and tools can help businesses analyse and track the emissions associated with the production, transportation, and disposal of their products. By gaining insights into the life cycle of their products, companies can identify areas for improvement and make data-driven decisions to reduce their overall environmental impact.
Embracing digital tools can also enable e-commerce businesses to engage with their suppliers and encourage the adoption of sustainable practices throughout their supply chain. By collaborating with suppliers, businesses can identify areas where emissions can be reduced, such as in the manufacturing process or transportation methods.
As ESG regulations continue to evolve and the demand for sustainable practices grows, e-commerce businesses must stay ahead of the curve and take proactive steps to decarbonise their operations. By adopting carbon-neutral delivery services and utilising technology to understand the environmental impact of their products, companies can effectively reduce their carbon footprint, meet regulatory requirements, and satisfy the growing consumer demand for sustainable practices. Ultimately, prioritising sustainability within every aspect of the supply chain is crucial for the long-term success of e-commerce businesses in an increasingly environmentally-conscious world.
In conclusion, the rapid expansion of e-commerce and online shopping has had a considerable impact on the environment, particularly through the production, packaging, and distribution of goods. As the sector continues to grow, e-commerce businesses must prioritise sustainability within their supply chains and adopt strategies to reduce their carbon footprint. Key steps include utilising sustainable packaging, monitoring and reducing scope 3 emissions, increasing supply chain efficiency, and adopting carbon-neutral delivery services.
By leveraging technology and embracing comprehensive solutions like Plan A's software, e-commerce businesses can effectively reduce their emissions and contribute to a more sustainable online retail landscape. As ESG regulations continue to evolve, the responsibility falls on e-commerce companies to act proactively and lead the way towards a greener future.
To explore how Plan A can assist in monitoring, reducing, and reporting on your e-commerce's carbon emissions, book a demo today.