Sustainable E-commerce Business Model
Sustainable E-commerce Business Model
How can you make a Sustainable E-commerce Brand
There is no doubt that e-commerce has made shopping easier with the convenience of shopping from the comforts of home. But, with time it has also created a customer who is demanding and discreet about the shopping choices they make. This means the customer of today is much more conscious not only about his immediate surroundings but also about global issues that are shaping the world. Sustainability is one such topic that remains quite on top of the priority list of a socially and globally conscious customer.
It has been seen that if given a choice most customers are willing to opt for a brand that is environmentally conscious and incorporates practices that are sustainable in the long-term with minimal impact on the environment. Although some may call it a tall order, they are brands who are actively making the choice of switching over from environmentally degrading practices to more viable options. It not only improves efficiencies but also makes business sense. And can even be propagated as a feature to improve or resurrect a brand image.
This write-up seeks to enumerate the sustainable model for e-commerce companies and how businesses are preparing to change towards a nuanced approach that is more aligned with environmental stewardship. And it is beginning to be called sustainable eCommerce.
What does Sustainability mean?
If one needs to address the man on the street, then sustainability is about running a business or any economic activity, by being sensitive to the notion of there being finite resources on earth for our use. This, in turn, should compel us to make wise choices in fulfilling our present needs without compromising on the needs of the future generation.
It stipulates moderation in our consumption patterns while minimizing wastage and doing away with the ‘disposable’ culture. On the whole, the purpose is to bring in the much-needed balance between economics, environment and society.
Why is there a Focus on Ecommerce Companies?
We all would agree that eCommerce is growing at an unprecedented rate in many countries like the U.S, China and India. This growing pattern brings into sharp focus the impact eCommerce is having on the environment.
- Packaging Waste: If you look at the business model of an eCommerce company, you would be intrigued by the amount of waste that gets generated from eCommerce alone. All those cardboard boxes, plastic and Styrofoam packaging, it is all adding to the flow of waste, already accumulating in the landfills and oceans.
On the last count, there were more than 2 billion tons of waste getting dumped into landfills on a yearly basis. Considering the impact, it becomes essential that eCommerce companies embrace sustainability as a business practice and adopt packaging practices that are eco-friendly.
- Vehicular Emissions: Every product that gets delivered at the doorstep is transported by a vehicle running on non-renewable fuels. This adds to the already existing pollution in the atmosphere and to the traffic congestion in large cities.
Ecommerce companies are not restricted to ground traffic alone but also utilize aircraft for transporting goods. This also contributes to the existing atmospheric pollution by other sources of air transportation.
Sustainable Solutions for Ecommerce Companies
Packaging Alternatives: Many of us have grown hearing the term ‘reduce, reuse and recycle’ and these are applicable to eCommerce companies. One of the focus areas of eCommerce companies should be on reducing the amount of packaging.
- Size of Packaging: Even for packaging small electronic items like a mobile phone, eCommerce companies are using large boxes with excess material (bubble wrap) for protecting shipped items. Revisiting packaging practices & logistics can be the simplest solutions to solving such excess waste generation.
- Eco-friendly Packaging: Companies could switch over from traditional packaging to more environmental-sustainable packaging such as materials with 80% or more recyclable materials. Eco-friendly packaging along with right-sized packaging will prevent generated waste from straightaway going into landfills.
Transportation Alternatives: If we talk about eCommerce there will be a transportation component and it cannot be done away with, by any means. This calls for minimizing the environmental impact through these steps:
- Delayed Gratification: Every online shopper expects deliveries to be made as fast as possible. But there are environmental costs associated with features like same-day delivery, coming in the form of an increased presence of delivery vehicles adding to the congestion and pollution.
Alternatively, if we can hold back and make the conscious choice of delaying our delivery to a normal pace, we will be doing our bit to reduce pollution and congestion on the roads. Interestingly, Amazon has started a program wherein they credit $1 into your account if you choose slow shipping.
- Usage of Electric: Developed & developing countries are slowly making the transition to pollution-free vehicles. Ecommerce companies can follow suit and replace their vehicle fleet with electric vehicles with zero emissions. Already we are witnessing the visible change in attitude starting with Amazon which has pledged to become carbon neutral by 2040.
- Sustainable Shipping: Another trend that is catching up as an environmentally conscious practice is sustainable shipping. The only downside to this is that customers should be willing to pay more for choosing this shipping option. Already there is a small segment of customers especially in Europe who are willing to pay more for doing their bit to safeguard their environment. Some large logistics companies like DHL are offering climate-neutral shipping options to online customers.
Reasons for Companies to Become Environmentally Sustainable
Becoming environmentally conscious is not a branding exercise rather it is about honestly examining your current business operations and substituting some of them to align with the goal of environmental sustainability. It has more do with changing your business ethos and philosophy to affect an entire organization. Let’s look at more advantages for being sustainable:
- Improved Brand Image: Ecommerce Companies known to practice sustainability are considered to be positive organizations that are seeking to create a better world. Such organizations are known to leverage this goodwill in their advertising campaigns to showcase themselves as business outfits which are ‘different’ from the rest, giving a boost to their brand image.
- Increase in Productivity: Critics of sustainability cite that such practices heavily impact the profitability of the business. On the contrary, it improves efficiency (minimal waste generation), streamlines effort and conserves resources (reduced packaging). This, in turn, improves employee productivity and reduces cost. There may be instances when the one-time capital investments would be on the higher side, but these can be recouped in the long-term by the benefits that follow.
- Business Compliance: Going into the future, governments across the world are going to get stricter with issues related to the environment. Already climate change has become a burning issue world over, and every country is obligated in doing their bit. Such an emerging situation will make governments to roll-out more enforcement to safeguard the environment. Ecommerce companies aligned with sustainability will see themselves in an advantageous situation for their proactive approach.
- Attract Investors: Investors tend to shy away from companies which have a dubious track record when it comes to social and environmental issues. Alternatively, companies that are proactive in sustainable initiatives are mostly well known in the industry and easily attract funds from investors. Even though getting initiated into sustainability is daunting but it should be done for the benefits that follow.
- Interest the Millenials: The millennials as a consumer group are known for their purchasing power and it continues to rise to cross the $1.4 trillion by the end of 2020. This group happens to be particularly vocal about environmental issues and is known to go with brands with a proven track record for being eco-friendly. A brand that is environmentally conscious and has a solid social media presence should be able to easily connect with this young demographic to nurture a loyal following.
Steps toward Becoming an Environmentally Sustainable Brand
As a company, it is totally up to you whether you want to start small or take the plunge completely into evolving as an eco-friendly brand. Here is a look at, how to go about:
- Update your Brand Philosophy: Your brand philosophy helps in telling the audience, who you are and what you value. This is important with the view of carving a brand story and how customers perceive the brand. The brand philosophy needs to be disseminated on the website and other online channels. Especially on the website, you can showcase your stand on environmentally conscious business practices. That said, you would have ‘walk the talk’ by backing up your statements with actual actions on the ground.
- Standardize Recycling Policies: There are numerous advantages that can be cited for just recycling cardboard. For instance, cardboard recycling is known to save energy and prevents it from getting dumped in landfills. A sustainable e-commerce company will have policies in place for the use of recycled materials in their office space and utilization of only recycled materials for packaging.
This must be formalized as a policy initiative across the company with special emphasis in the packaging section. Once the company leadership takes a clear stand in formalizing a policy, others are likely to fall in line without counter questions and arguments.
- Saving on Energy Costs: A sustainable eCommerce brand has to take a holistic view of its business practices. Increased energy usage in the office environment, warehouses and other locations can also be detrimental to the environment. A sustainable eCommerce company can begin with an energy audit of all locations and implement measures (low energy lighting) that will significantly help in saving energy. These initiatives must find a space in the annual reports and other literature which the company produces both offline and online to reinforce its sustainability credentials.
- Include Sustainable Products: One of the easiest ways, an eCommerce brand can project a sustainable brand image is by including eCommerce sustainable products into its product catalogue. If the company believes in a philosophy, it must make a concerted effort at encouraging and making it easy for its customers to adopt an environmentally conscious lifestyle. Surprisingly, there is a growing market segment that is eager for such products and the company must make it a priority to fulfil the existing demand.
- Carbon Offset Charge: An eCommerce company that is earnest about sustainability can offset environmental downsides associated with its products and service by contributing to projects that curb greenhouse emissions. This can be a contributory effort from the company with voluntary participation from the customers. The eCommerce company can inform and request customers to pay an additional surcharge on their regular purchases as a carbon offset charge during the check-out.
- Incorporating a Circular Approach: In the normal scenario, a product is bought, used and disposed of in a linear fashion. Instead, an eCommerce company can encourage customers to give a second life to their used products, by-passing it on to second and even a third owner. This process is termed as a circular economy and is giving rise to resale & refurbished goods market, and even eCommerce sustainable fashion. These are growing in popularity especially among the young generation given the inexpensive pricing it offers. The idea here is to encourage customers to resell products or purchase recycled products. For instance, American brand Patagonia offers a space on their website, where users can buy clothes made from recycled clothes.
Conclusion
Every eCommerce company can aspire to become an environmentally conscious company offering sustainability online shopping. But many of the aforementioned steps might really not make business sense. It is totally up to the business to embark on sustainability initiatives at their own pace because you understand the business and the consumers. The over-riding message in the write-up is that the future of the planet is an issue that impacts everyone and we have to make enough effort to safeguard ourselves and the next generation. Besides this, evolving sustainable practices in the supply chain, product and in shipping are not only about the future of the planet it is also about an eCommerce brand carving a distinct brand identity from the rest.
At Your Retail Coach(YRC), we come with the necessary expertise in helping brands to make that change into a sustainable eCommerce marketplace. We have in-house experts who can guide a company from ideation to implementation on incorporating sustainability initiatives into their core framework. We have closely seen the evolution of eCommerce in India and around the world and our observations give us the confidence that brands can remain profitable by becoming environmentally sustainable with the right strategies and tactics.
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