Life in plastic, it’s fantastic?

Many investors still see the environmental effects of e-commerce as a minor issue compared with the energy sector, for example, but this view will rapidly become outdated as consumers’ insatiable hunger for ever-faster online delivery grows. We are still very early in the shift of human activity from offline to online, and global e-commerce currently only accounts for around 17% of the retail market, but as penetration rises, packaging waste and emissions will become an increasingly critical issue. The Covid-19 pandemic has speeded the adoption of online retail, making it more important for us to address its negative effects.

Chief among these is what we do with all the packaging created by online shopping. Global demand for filled-air packaging is expected to increase by US$1.16 billion between 2020 and 2041, while some estimates claim that the plastic air-filled packaging created from Amazon deliveries in 2019 could circle the Earth a staggering 500 times. Much of this packaging ends up polluting the world’s rivers, lakes and seas, affecting water supplies, soil, plants and wildlife.

The downsides of packaging, logistics and current incentives

Paper can be recycled and is less toxic than plastic if it finds its way as waste into natural habits, but it still can have negative effects. The pulp and paper manufacturing industry is the single largest industrial consumer of water in the developed world and pollution caused by discharge from mills harms aquatic habitats as well as human health in some countries. Recycling reduces the need for virgin fibre, but it does not eliminate it. Recycled paper uses around 25% virgin fibre for better strength and quality.

E-commerce is also leading to more delivery vehicles on our roads. Last year, the World Economic Forum estimated that under a ‘business as usual’ scenario, the number of delivery vehicles in the world’s 100 largest cities would increase by 36% over this decade, resulting in 32% higher CO₂ emissions and a 21% increase in congestion. Given the increase in e-commerce use in the past year, these numbers are likely to be an underestimation.

Current incentives work against greener practices. Free delivery for consumers means they tend to opt for home rather than local collection point delivery. Drivers race to deliver in the shortest amount of time possible, leading to speeding, distractions from mobile phones and satnavs, tiredness and engines left idling between drop-offs rather than switched off. Recent investigations into the rights of gig workers have perversely meant that companies have rescinded the few perks available to avoid appearing like employers.

The other incentive problem is around packaging. It is more economical for companies to have standardised boxes, often resulting in oversized packaging. In addition, the surge in demand during the pandemic has increased the price of recycled board to such an extent that it may not be economic for many retailers to use recycled packages.

Addressing the e-commerce problem

Packaging solutions

E-commerce companies are increasingly having to confront the issue of sustainable packaging because of more environmentally conscious consumers, legal challenges from environmental groups and, particularly for the largest global players, reaching their operational capacities to meet demand.

Cutting emissions

More companies like Amazon are starting to publish carbon footprint data to give investors a better sense of their emissions profiles. Uber, for example, tracks individual driver’s mileage, engine size and idle time to track emissions. It also requires drivers to only use hybrid or electric vehicles, and has launched dockless e-bikes and electric vehicle products. In certain cities, Uber has added a small clean air fee to help the company become a zero-emission platform in European, US and Canadian cities by 2030, and globally by 2040.

Government initiatives

Where e-commerce companies are not seriously addressing their environmental footprints, regulators and governments need to step in. This can be necessary for small businesses, which are mostly focussed on growing market share, but local policymakers can often be effective in driving change early in the life cycle of new companies. While unit costs of compliance may be greater for smaller enterprises, they are more versatile and nimble, which can make it easier to adopt new sustainability standards.

Coupang’s innovation in Korea reflects broader Asian leadership on e-commerce sustainability. The Taiwanese government has partnered with four major platforms to produce more environmentally friendly packaging with returns made easy. In India, Amazon has committed to a “100 percent successful transition” away from single-use plastics following the government’s move to phase them out.

Sustainable packaging is a win-win situation

We are seeing significant innovation from companies in both developed and developing countries to deal with the challenge of sustainable packaging. Pressure from consumers, environmental groups and a gradual realisation from the companies themselves are helping to change e-commerce practices. Investors also play an important role by holding the industry to account for their delivery systems.

Solving the packaging waste and delivery problem is not a zero-sum game, it can be a win-win where the environment benefits and so do companies. If an e-commerce business model is designed with sustainability in mind, it can be both economical and sustainable.

For more information: Cutting the environmental footprint of e-commerce is a win for all (fidelity.lu)