The dark side of online shopping and how to lighten it
Growth of the e-commerce sector…
In the past decade, e-commerce has risen significantly. Since 2014, e-commerce sales ratios have nearly tripled globally. A multitude of different factors explain this trend: from new consumer shopping behaviours to an increasing use of smartphones and tablets, to technological advancements in the delivery segments that allow for fast shipping options for example. The trend has been one of the driving factors behind the development of our BlueHalo climate technology that serves to lighten the environmental impact of the e-commerce explosion.
The COVID-19 outbreak has also been a catalyst in the rise of global retail e-commerce sales. While in-store retail sales fell dramatically when the pandemic forced consumers to stay home and brick-and-mortar stores to close, retail e-commerce boomed as internet users went online to buy all types of goods, including groceries.
With digital development exploding in the Asia Pacific region, it is no surprise that the global growth will be propelled by East and Southeast Asia.
Australia is the 10th largest e-commerce market in the world by revenue, and its value is set to grow more than 10% annually until at least 2024.
According to the Australian Bureau of Statistics, online sales in Australia registered a 55% rise in December 2020 compared to the same period the previous year and Australia Post’s Online Shopping Report, revealed that over four in five (82%) Australian households (almost 9 million) shopped online in 2020.
…leading to unparalleled growth in last-mile transport.
More online shopping means more deliveries. And more deliveries mean more vehicles on the road, more traffic congestion and increased air pollution.
An analysis, released in 2020 by the World Economic Forum, estimates that urban last-mile delivery* emissions are on track to increase by over 30% by 2030 in the top 100 cities globally. Without intervention, these emissions could reach 25 million tons of CO2e emitted annually by 2030.
Demand for urban last-mile delivery is also expected to grow due to the proliferation of fast delivery options (same-day and instant delivery). Fast delivery options have a much higher carbon footprint than other delivery options. Opting for fast delivery accounts for a nearly 0.75kg increase in carbon dioxide emissions per shopper, more than double that of non-expedited delivery methods.
This is mainly due to the use of air freight. Rush deliveries also mean that companies have less time to organise the most efficient transport, which means trucks are sent out half full, increasing the number of trips and vehicles on the road.
While this is driven by consumer demand for the convenience of online shopping and fast delivery, a growing number of stakeholders (customers, employees, regulators, and investors) are pressuring the industry to offer more sustainable options and to act on emissions.
* Last mile delivery refers to the very last step of the delivery process when a parcel is moved from a transportation hub to its final destination—which, usually, is a personal residence or retail store.
Consumers, investors, and employees demand more sustainable options in the industry
In Australia, for instance, a research done by Hubbed (a parcel collection point network) reveals that 68 per cent of Australians would choose lower-carbon-emitting parcel delivery methods.
Two-thirds of consumers would also like retailers to label lower-emitting delivery methods as ‘low carbon’ on their checkout pages, to help them choose the most carbon-friendly option when shopping online.
Consumers are open to shifting their behaviours and the challenge for delivery service providers and retailers is now to cater to these emerging consumer preferences.
Another analysis from the Boston Consulting Group also shows that Transportation and Logistics (T&L) companies which are pursuing tangible plans to reduce emissions have generated superior Total Shareholder Return (TSR). From 2017 to 2020, the average annual TSR of T&L companies that demonstrated a high commitment to environmental, social, and corporate governance (ESG) standards was 10 percentage points higher than that of industry peers. Although it is difficult to prove causality between ESG commitments and TSR, the correlation is striking.
Actions e-commerce retailers and carriers can implement to reduce their impact on the planet
The main challenge of the industry is to manage increased parcel volumes, while reducing their impact on the planet. To do so, e-commerce retailers, carriers and the whole supply chain will need to have environmental strategies in place. Below are a few examples of what can be implemented:
- Have more efficient processes – this can be by optimising delivery routes, consolidating shipments, minimising returns, etc.
- Invest in electric vehicles to reduce the carbon footprint of the deliveries
- Offer delivery methods that reduce the number of vehicles on the road – consider offering alternative delivery choices at checkout, such as delivery to collection points. This way, couriers can deliver multiple parcels to one location.
- Place inventory closer to customers – by either building fulfillment networks or partnering with third-party logistics providers (3PLs). These centres can shorten the distance between customers and their online orders, speeding up delivery times, and reducing emissions in the process.
- Use eco-friendly packaging and reduce packaging waste – overpackaging is not only problematic from a waste perspective, it can also make the parcel larger and heavier to send, which can increase carbon emissions.
- Prompt consumers to think twice about fast shipping – if fully aware of the carbon footprint of their packages and deliveries, some consumers are more likely to opt in to sustainable shipping solutions. An example is to add a “green button” on shopping websites, which allows customers to make the eco-friendly choice of waiting a little longer for their delivery to ensure it is shipped in the most energy-efficient way.
These are just a few examples and of course there are many other actions which can be implemented. One thing though is that most of these initiatives can take time to implement and usually require a significant financial investment.
One solution we have to act NOW and respond to consumer demand is to offer carbon neutral delivery options
While famous e-commerce platforms, freight and logistics companies have pledged to go carbon-neutral in the coming years, many small brands are also turning to carbon-neutral shipping.
At this time, there’s no way to totally eliminate carbon emissions from shipping and logistics, as most of the transportation industry still relies on fossil fuels. However, carbon neutrality can be achieved immediately thanks to offsetting.
For example, Smartways, which is Climate Active certified, has become the first Australia and New Zealand-wide healthcare logistics company to offer carbon neutral transport services. They have neutralised approximately 6,000 t/CO2e in FY21. Smartways has undertaken this initiative in part in response to the powerful customer, end user and other stakeholder sentiment for action on climate change. The broader healthcare ecosystem now has a carbon neutral option contributing to efforts that work to balance out the carbon footprint of freight. Smartways has achieved this by integrating Tasman Environmental Markets’ BlueHalo® carbon offset technology that meticulously calculates the carbon emissions of every service and then purchasing verified carbon credits to offset these emissions.
On top of acting on climate change, the path to carbon neutral comes with many more benefits:
- Acquisition of ‘sustainability conscious’ customers
- An opportunity to deepen brand loyalty & connection with existing customers
- Grow the brands connection to the local market by building local offset projects into portfolio
- Build a brand narrative and communications to demonstrate impact, connection to communities
- More engaged employees and retention of staff that are proud to work for a business that cares
- Leading the way and set new benchmarks within your industry
What is BlueHalo® carbon offset technology?
BlueHalo® is a Software-as-a-Service (SaaS) built by a team of environmental and IT experts. It can quickly and easily be integrated into any front or back-office system to calculate freight CO2 emissions and direct offset costs to selected projects. It can also be integrated directly into an e-commerce checkout and deliver seamless, high-impact climate compensation options to customers.
Carbon emission calculations are based on distance travelled, type of travel (air, freight, ground), the weight and size of packages.
Want to find out more about BlueHalo®? Contact Tasman Environmental Markets (TEM) for a demo at info@tem.com.au.