Did you ever wonder the impact of your recent Kindle e-book reader purchase on the environment? Yes you did save some paper but is the energy used during the reading of that book more than compensated for the loss of the tree that would have been used to create printing paper for that book? Well you may not have given a deep thought on such topics but environmental protagonists around the world are debating the pros and cons of e-commerce ecosystem on our carbon footprints. Read on to know how e-commerce is impacting the earth’s e-cosystem.
The total e-commerce transactions worldwide stood at 38.5 billion in the year 2015, up from 25.4 billion in the year 2012. In 2012, 39.2% of the global internet user base purchased products online. By 2018 this number is expected to swell up to 47.3% which translates to over 1.7 billion internet users. In value terms, the global e-commerce value is expected to grow up USD 2.3 billion from USD 1.2 billion in 2013.
E-commerce sales are poised to account for 8.8% of total retail sales, or USD 2.5 trillion. It stood at USD 1.3 trillion in 2014, or 5.9% of total retail sales during that year.
Such unprecedented growth can be attributed to the fact that e-commerce provides a convenient and quick way of buying and selling goods and services, both locally as well as globally.
The Ecosystem
This growth in e-commerce has created an entire ecosystem that consists of companies in supporting sectors such as technology, logistics, payment solutions and packaging materials besides creating a new breed of companies and e-retailers engaged in developing/sourcing multitude of goods and services that can be easily delivered through e-commerce channels.
Carbon footprint of businesses
Almost all the businesses leave a carbon footprint as a result of their operations and there are no exceptions. Even a clean business such as technology, leaves a huge carbon footprint. Information and Communication Technology (ICT) industry will have 30 billion connected devices by 2020 which will produce unprecedented amount of data. This massive amount of data will be collected, processed, stored and managed in large scale data centers around the world. Even today, the cloud data centers around the world use more energy than used by Japan and Germany combined.
Till date, e-commerce companies have been focusing on providing goods on discounts to customers in a bid to wrest market share from traditional brick-and-mortar stores. Besides discounts, they’ve been focusing on speed and efficiency of the delivery network, easy payment options to customers and robust packaging of goods. While being critical to the business, all the above actions contribute towards increase or decrease of carbon footprint of these companies.
Lets look at some of the major factors that increase and decrease the carbon footprint of transactions that take place on e-commerce platforms vis-à-vis those that take place via traditional channels.
Let us have a look at all the above mentioned factors in detail.
Factors That Increase Carbon Footprint
- Packaging: E-commerce companies pay a lot of attention to the packaging of goods that are shipped to the customers. Packaging typically consists of an extra layer of corrugated box, foam/plastic/bubble wrap around the product to protect it during shipment. According to US-based, Environment Protection Agency, packaging accounted for 30% of the total solid waste generated in US in 2012.
- Need of energy intensive devices: 40% of all e-commerce transaction globally happened via a mobile device. Countries such as Japan and Korea witnessed over 50% of all e-commerce transactions on mobile. Demand for higher computing power has led to the development of devices that consume more power and require stronger batteries. Long hours spent in browsing websites on mobile devices is certainly one of the factors that has led to the development of these energy-intensive gadgets.
- Impulse buying leading to mass consumption: Web-based shopping encourages, at times even rewards, profligate consumption. Ease of buying, heavy discounts, multiple payment options and reward points are some of the factors that encourages consumers to buy more. Heavy buying on the internet has already dramatically increased mass production of various products on a global scale.
- Massive Data Centers: The demand for huge data centers will go on increasing with the increase in the amount of data that needs to be stored, processed and retrieved in the least possible amount of time. Further, the requirement of mirror servers in separate geographical locations adds to energy consumed per byte.
- Use of faster modes of transport: The demand for faster transportation for ecommerce adds massively to carbon footprint. Goods sent by air transport contribute towards much higher emissions as compared to goods transported by train or even road.
Factors that reduce carbon footprint
- Efficient Delivery Schedules: E-commerce companies tend to optimize deliveries to maximize their ROI per trip. In other words, multiple deliveries are carried out on a single route which lowers the cost of distribution and reduces carbon footprint. According to a study, it was found that consumers who drive to the store have to buy 24 items to make the trip equal to the carbon footprint of just one item ordered online. This, of course, assumes that there are no returns in the e-commerce transaction.
- Eliminate visit to stores: In the traditional retail model, the largest contributor to carbon emission is the visit that customers make to supermarkets to buy goods. While these emissions are higher in developed countries, the developing world is fast catching up. According to a study by Carnegie Mellon University, the 65 percent of the total carbon emissions in the traditional model is due to customer transport to and from retails stores. E-commerce firms on the other hand are able to optimize delivers which results in relatively much lower carbon emissions.
- Online payments: Online payments have received a major impetus with the advent of mobile wallets, reward programs, higher debit/credit card penetration and increase in online banking. On-line payments eliminate the use of currency notes thus saving paper for printing new notes, their printing costs and the pollution generated during their disposal.
- Innovative delivery methods: Ecommerce firms are innovating with delivery methods. For instance, Amazon has introduced bicycle courier in US. They have recently introduced this service in India as well with a pilot in Mumbai and later expanding the operations in Delhi, Bengaluru, Hyderabad and Chennai. Cycle deliveries are typically carried out for distances ranging between 3–5 kms.
- Tie-ups with existing logistic players: In a bid to lower delivery costs, e-commerce firms are tying up with logistic partners which have a much larger reach due to existing infrastructure. For instance, e-commerce companies in India have tied up with India Post, due to its unrivalled reach across the length and breadth of India. Postmen deliver posts by bicycle which results in reduced carbon emissions. Further, combining deliveries from various e-commerce companies help logistic companies to optimize routes and attain better ROI while creating the least possible impact on environment.
Conclusion
The jury is still out on whether the net carbon footprint of e-commerce companies is positive or negative for the environment. The companies are working towards reducing their carbon footprint through the use of technology, efficient operations, innovative delivery channels etc. Certain studies do point out that e-commerce purchases result in less carbon emission than in-store purchases although the results of these studies vary with geography.
Originally published at cashdealkart.com on February 14, 2016.
