Even before COVID-19, the e-commerce explosion was well underway, and now there’s no turning back. It’s clear that major brands and retailers see e-commerce’s meteoric growth as indicative of how consumers will behave for the foreseeable future. But as e-commerce sales increase, so too does the environmental impact of e-commerce shipping, from growing carbon emissions to proliferating packaging waste.
A global focus on climate change has fast-tracked the need for greener e-commerce logistics. In the wake of the United Nations Climate Change Summit in Glasgow, Scotland, now is an opportune time to commit to drastically cutting emissions and setting net-zero targets. Indeed, it has become essential for e-commerce companies and their partners to be proactive about reducing their environmental impact in order to address consumer concerns, maintain business performance, and comply with government regulations.
Here are five ways that brands, big and small, can take responsibility to promote sustainability and reduce the environmental impact of their e-commerce shipping.
1. Use more sustainable packaging.
According to the U.S. Environmental Protection Agency, packaging waste makes up 30% of the United States’ total annual waste.1 Of particular concern is plastic packaging, which makes up over 40% of total plastic usage worldwide.2 Because plastic is such a versatile and cheap material, it is often used in excess throughout the supply chain to protect products and cut costs. Most e-commerce packages are filled with bubble wrap, packing peanuts, plastic cushions, and polystyrene. But of the 34.5 million tons of plastic waste generated each year, only 8.7% is recycled,3 as customers are often confused by unclear recycling or disposal processes. Rampant overuse of plastic packaging not only leads to greater waste but also takes up greater space in warehouses and delivery vehicles, leading to the overuse of materials and energy.
Consumers today want companies to utilize their capital and resources to offer alternatives to plastic packaging. In a 2020 consumer packaging survey, 64% of respondents said they’d be more likely to purchase from a retailer that offered compostable packaging.4 A sustainable approach to packaging, therefore, not only has environmental merits but also increases consumer satisfaction.
Luckily, the packaging sector now offers many innovations that provide cost-efficient and effective solutions for businesses looking to minimize their use of plastic. From cornstarch peanuts to mycelium (mushroom) cartons to compostable mailers, many of these solutions are biodegradable. Sustainable packaging is now easier to implement than ever; there are not only a wide variety of alternative packaging options now available but a growing number of suppliers offering them. For example, packaging supplier Noissue provides customized packaging made from materials that are compostable, recycled, or reusable. The Better Packaging Co. offers a selection of sustainable packaging materials including compostable mailers, tape, and labels that are made from plants and are biodegradable.
There are even solutions for companies concerned about the growing amount of cardboard waste. A new reusable packaging startup Olive provides two-way shippers made from recycled materials that can be dropped off at the customer and then picked up again.
2. Purchase carbon offsets.
Transportation (both passenger and freight) is the leading contributor of greenhouse gases, accounting for 29% of all carbon emission in the United States, according to the U.S. Environmental Protection Agency.5 However, rising consumer demands for decreased emissions and increased sustainability are counterbalanced by their competing demand for expedited shipping and next-day delivery. Unfortunately, many e-commerce companies forgo sustainability and rely on carbon-intensive practices to maintain the competitive advantage of fast delivery.
Carbon-neutral shipping has emerged as a solution to overcome the complex challenge of competing consumer demands. This method of shipping entails buying carbon offsets equal to carbon emissions caused by the shipping. While reducing emissions across the entire shipping industry should be a top priority, carbon offsetting is a way to remove the unavoidable emissions created by air, road, or sea delivery. Here, e-commerce retailers and logistics companies invest in environmental projects such as forest conservation, wind-energy production, and next-generation farming—all designed to counteract carbon emissions.
The opportunities to purchase such offsets have risen as of late. A report from Ecosystem Marketplace shows the voluntary carbon market increased nearly 60% in value in 2021 versus 2020.6 Not surprisingly then, an increasing number of e-commerce marketplaces and logistics companies are seeking out partnerships with carbon-offset programs. Etsy, for example, was the first major online marketplace to offset 100% of carbon emissions from delivery and packaging. It funds verified emissions reduction projects through its carbon-offsetting partner 3Degrees. Similarly, the meal-kit company HelloFresh has partnered with TerraPass to offset at least 50,000 metric tons of carbon and 24,000 megawatt-hours of electricity.
Companies that are considering joining Etsy and HelloFresh in a carbon-offsetting program would do well to consider the following best practices:
3. Improve your returns management processes
Returns management can be a double-edged sword for e-commerce companies. A flexible and hassle-free returns policy is essential for selling online today. But lenient policies come at an environmental cost. Every year, product returns in the United States generate 15 million tons of carbon emissions—the same amount produced by 3 million cars.7 Part of the problem is due to the fact that 51% of shoppers consciously overbuy,8 purchasing multiple sizes or colors of a product with the intent to return what doesn’t fit or what they don’t like. Consumers engage in this practice because they know most online retailers will refund their money just as easily as it was spent. What they don’t realize is that each returned package contributes to greenhouse gas emissions and much of what is returned ends up in landfills.
To mitigate the cost, waste, and environmental impact of returns shipping, e-commerce retailers can implement reverse logistics strategies such as:
Some companies have also found that returns management software can make it easier to reduce the environmental impact of returns and better manage the reverse logistics process. For example, ZigZag provides a software-as-a-service (SaaS) platform that helps retailers manage and resell e-commerce returns in local markets, keeping them out of the landfill.
Digital technologies—such as advanced analytics, the internet of things, machine learning, artificial intelligence, and blockchain—can also be used to improve the reverse logistics process. According to a February 2020 Gartner report on the circular economy, 27% of survey respondents were currently using digital technologies to improve their reverse logistics process, and 39% planned to do so within the next two years.9 For example, analytics could be used to optimize routes for picking up returned goods.
4. Look for partners.
The recent 2021 U.N. climate change talks (COP26) highlighted the urgent need for global cooperation and coordination solutions to mitigate the impacts of climate change. To reach the goals of COP26, the private and public sectors are expected to collaborate on solutions that span across social, economic, and political systems. Similarly, strong partnerships are needed within the e-commerce industry to overcome sustainability challenges.
Common barriers to finding and implementing green shipping solutions can include increased costs, lack of governance, and complexity. These challenges often extend beyond the capabilities of a single company. E-commerce leaders should, therefore, embrace cross-sector partnerships to meet mutual sustainability goals and maintain operational efficiency. Amazon, for example, partnered with GreenBlue, a nonprofit focused on sustainable materials management, and the Sustainable Packaging Coalition to develop a fully recyclable padded-paper mailer.
Partnering with your suppliers on sustainability initiatives can be particularly fruitful. According to McKinsey & Co., companies that regularly collaborated with suppliers reported higher growth, lower operating costs, and greater profitability than their competitors.10 It makes sense that similar gains could be produced in the area of sustainability.
In 2017, for example, Walmart mobilized its suppliers to eliminate greenhouse gases by launching Project Gigaton. The project aims to eliminate 1 billion metric tons of greenhouse gases from Walmart’s global supply chain by 2030. More than 2,300 suppliers are currently participating in the effort, making it the largest private-sector consortium for climate action, according to Walmart.
The Walmart example shows that partnerships are critical to scaling sustainability and stimulating collective action towards greener shipping and logistics. Indeed, such partnerships could prove valuable for e-commerce companies of all sizes.
5. Rethink last-mile delivery.
Last-mile delivery is another area ripe for improvement. As e-commerce continues to grow, disruptive new technologies could make the last-mile delivery of products more environmentally friendly. Artificial intelligence, for example, can help companies plot more fuel-efficient routes. Meanwhile, initial research indicates that it is more energy efficient to use drones to deliver lightweight products short distances than to use over-the-road vehicles.
However, e-commerce companies do not have to wait for these technologies to become commonplace before improving the sustainability of their last-mile delivery process. The greening of the final mile has already begun. Throughout the pandemic, retailers responded to the surge in online orders by storing stock closer to the customers and transforming stores into fulfillment centers. Research indicates that this trend makes sense not only from a customer service standpoint but also in terms of environmental friendliness. According to economic modeling by Accenture and Frontier Economics, local fulfillment centers could reduce supply chain emissions by up to 26% by 2025.11
Increased environmental concerns and regulatory pressures have also catapulted electric vehicles to the forefront for last-mile delivery. Electric delivery vans are well-suited to serving a limited radius, making them an appropriate replacement for internal combustion engine vehicles (ICEVs) for local deliveries. As a result, many major e-commerce players and delivery providers are in the process of updating their fleets with electric or low emissions models. Amazon announced plans to roll out 100,00 electric delivery vehicles by 2030. Companies such as IKEA, Etsy, eBay, and Unilever have also urged legislators across the United States to adopt the Advanced Clean Truck (ACT) rule, which would increase the availability and production of zero-emission vehicles for last-mile deliveries.12 Such efforts to accelerate the use of electric vehicles prove that e-commerce reform is possible and happening now.
A new, greener era
The rapid expansion of e-commerce has collided with increasingly ambitious climate change targets to herald in a new era of green logistics. This year more than ever, the environmental impact of e-commerce will come under scrutiny from world leaders, policymakers, corporations, and—perhaps most influential of all—consumers. It is now time for the e-commerce industry to lean on green logistics as a way to balance sustainability, business goals, and consumer demands.
1. Sydney O’Shaughnessy, “The Problem With Packaging Waste: How Zero-Waste Grocers Are Powering Solutions,” Environmental and Energy Study Institute (May 6, 2020): https://www.eesi.org/articles/view/the-problem-with-packaging-waste-how-zero-waste-grocers-are-powering-solutions
3. “Plastics: Material-Specific Data,” United States Environmental Protection Agency (2018): https://www.epa.gov/facts-and-figures-about-materials-waste-and-recycling/plastics-material-specific-data
4. Sam McKeith, “5 common sustainable packaging fails and how to do better,” Sendle.com blog (March 4, 2020): https://blog.sendle.com/sustainable-packaging-mistakes
5. “Fast Facts on Transportation Greenhouse Gas Emissions,” United States Environmental Protection Agency (2019): https://www.epa.gov/greenvehicles/fast-facts-transportation-greenhouse-gas-emissions
6. “Voluntary Carbon Market Rockets in 2021, On Track to Break $1B for First Time,” Ecosystem Marketplace press release (Sept. 15, 2021): https://www.ecosystemmarketplace.com/articles/press-release-voluntary-carbon-markets-rocket-in-2021-on-track-to-break-1b-for-first-time/
7. Yale Climate Connections, “Free Returns Are Costing the Environment,” EcoWatch (November 27, 2020): https://www.ecowatch.com/free-returns-carbon-emissions-2649061779.html
8. “Online Shopping Survey,” Pitney Bowes (2019): https://www.pitneybowes.com/content/dam/pitneybowes/us/en/ecommerce/shopping-study/2019-global-ecommerce-report-v2-web.pdf
9. “Gartner Survey Shows 70% of Supply Chain Leaders Plan to Invest in the Circular Economy,” Gartner press release (February 26, 2020): https://www.gartner.com/en/newsroom/press-releases/2020-02-26-gartner-survey-shows-70--of-supply-chain-leaders-plan
10. Augustin Gutierrez, Ashish Kothari, Carolina Mazuera, and Tobias Schoenherr, “Taking supplier collaboration to the next level,” McKinsey & Co. (July 7, 2020): https://www.mckinsey.com/business-functions/operations/our-insights/taking-supplier-collaboration-to-the-next-level
11. Andre Pharand, “The sustainable last mile,” Accenture: https://www.accenture.com/us-en/insights/consulting/sustainable-last-mile-delivery
12. “RE: DEP Docket No. 05-21-03; DSM North America, eBay, Etsy, IKEA, and Unilever Support for Adoption of the Advanced Clean Truck (ACT) Rule and Fleet Reporting Requirements in New Jersey,” letter to New Jersey Department of Environmental Protection (July 18, 2021): https://www.ceres.org/sites/default/files/NJ%20ACT%20Letter_DSM%2C%20eBay%2C%20Etsy%2C%20IKEA%2C%20Unilever.pdf
Dennis Oates is the chief logistics officer at Sendle, a 100% carbon neutral carrier specifically designed for small e-commerce businesses.