Illustration by Diego Blanco
It only takes a brief scroll through Reddit’s “egregious packaging” thread to find extreme examples of breakdowns in the ecommerce supply chain: A two-inch gasket delivered in a box big enough to hold a microwave. Paper towels cushioned by “about 40 feet of air bags.” A lamp packaged in a box, within a box, within a box. And the kicker: An order of eco-friendly packaging surrounded by plastic air pillows.
So, it may seem counterintuitive to learn that ecommerce is still more environmentally friendly than bricks-and-mortar shopping. According to research released in 2021 by MIT’s Real Estate Innovation Lab, the carbon emissions from making purchases online are, on average, 36% lower than those made in-store—even after factoring in ecommerce’s excessive packaging and higher rate of returns. This is primarily due to a more efficient transportation model (more on that below).
But for ecommerce merchants, this isn’t the time to rest on laurels. While online shopping may be a more sustainable model, it doesn’t come without faults—or, as the Reddit thread illustrates—without room for improvement.
In the packaging department alone, ecommerce and mail-order retail continue to use seven times more cardboard than traditional retail, with industry analysts estimating that half of packages ship with up to 55% empty space. But it’s technically not “empty” space. Instead, it’s filled with all things plastic: pillows, bags, mailers, bubble wrap, and polystyrene peanuts. In 2019, the ecommerce industry used nearly 2.1 billion pounds of plastic—a number that’s expected to double by 2025. Most of this plastic is considered “plastic film” and is difficult or virtually impossible to recycle.
Then there’s the issue of delivery. Even before COVID-19 resulted in ecommerce’s exponential growth, deliveries in the world’s 100 biggest cities were predicted to increase—and with them, greenhouse gas emissions. The World Economic Forum estimates that parcel deliveries will increase by 78% globally by 2030, resulting in 32% more emissions.
It’s becoming clear that sustainable supply chain management is no longer a point of differentiation in ecommerce—it’s a necessity.
What is a sustainable supply chain?
A sustainable supply chain is one that considers the full life cycle of your products, including how they’re designed, manufactured, delivered, and used, as well as how they’re disposed of when they reach the end of their life.
However, creating sustainability in the supply chain isn’t just about looking at the environmental impact of your business—it also includes managing the social and economic impacts, such as the fair treatment of factory or fulfillment workers.
Sustainable supply chain trends and challenges
Now is the time to build sustainability into your supply chain. Here’s why:
Building sustainability into your supply chain can help your business grow.
In the 2020 report How Sustainability is Fundamentally Changing Consumer Preferences, global IT company Capgemini found that 79% of consumers are changing their purchase preferences based on sustainability, with 77% concerned about the humane and fair treatment of workers and 66% choosing to purchase products and services based on their “environmental friendliness.”
This preference extends to the ecommerce space, particularly amongst millennial shoppers. According to the RetailX’s 2020 Sustainability report, 42% of those aged 18 to 25 are likely to consider the environmental impact of their online shopping deliveries, including thinking about the increase in traffic, packaging, and recycling consequences. Meanwhile, 73% of those surveyed said they expected ecommerce stores to use minimal or recyclable packaging.
This preference may not be new, but sales figures indicate it’s no longer just virtue signaling. Customers are finally putting their money where their mouth is.
“For years, brand managers have groused that while consumers say they intend to buy sustainable products, in store they don’t actually purchase them,” write marketing and business experts Tensie Whelan and Randi Kronthal-Sacco in the Harvard Business Review.
NYU Stern’s Center for Sustainable Business just completed extensive research into U.S. consumers’ actual purchasing of consumer packaged goods (CPG), using data contributed by IRI, and found that 50% of CPG growth from 2013 to 2018 came from sustainability-marketed products.”
Plastic waste is on the rise—but so are alternatives.
With the increase in online sales comes an increase in demand for cheap lightweight packaging materials capable of getting products safely into the hands of shoppers—all while lightening the load and decreasing the emissions of delivery trucks. That’s why plastic has long been the material of choice. Take, for instance, plastic air pillows: Technavio, a market research firm, estimates that demand for air-cushioning packaging products will grow by $1.16 billion by 2024.
The problem is that even those plastics marketed as recyclable typically end up in garbage dumps, incinerators, or in our waterways. Estimates vary, but less than 14% of plastic packaging produced globally each year is recycled.
Plastic isn’t your only option, though. Sustainable packaging alternatives are now available, including mailers and peanuts made from cornstarch. Start-ups offering reusable packaging to shoppers at check-out have also begun to emerge. LimeLoop, for example, provides vinyl packaging with a 10-year lifespan, which can be used 2,000 times. Each package is estimated to save 1,300 trees and around two million gallons of water for every 100 deliveries.
How LimeLoop works
“Sustainability is no-longer a green-washy flimsy differentiator, but a hardcore pre-requisite to commercial success and longevity,” writes Josh Pitman, Managing Director of Priory Direct, which works with 21,000 businesses in the UK to provide planet-friendly packaging.
[It’s] no longer a ‘CSR piece,’ but a core business discipline to be honed by all.”
Best practices to achieve sustainable supply chain management
If you’re ready to make a change to your own supply chain, you’ll need a holistic approach that takes your environmental, social, and economic impact into consideration. Here are just a few ways to start.
Define your sustainability goals and support your suppliers
While this article focuses primarily on the changes you can take to improve environmental sustainability within your supply chain, the social factors are no less important. Having defined sustainability goals—and the appointed staff, such as a chief sustainability officer, to help you achieve them—will allow you to examine your entire supply chain, including ensuring the people behind your products are being treated and compensated fairly.
It’s also up to you to assist your suppliers and 3PL partners with improving their own sustainability—and making sure they follow through, including with their own lower-tier suppliers, which is where most violations occur. This may include creating codes of conduct, strict procurement policies, and performing regular audits on your suppliers’ practices and operations.
When they fall short, see if you can work together to improve working conditions, just as you would if they were falling short in terms of the quality of goods being produced or weren’t meeting deadlines.
Use data and technology to your advantage
Technology and AI-based solutions can now help you do everything from load-pooling and dynamic rerouting (which can reduce emissions by 10%), to helping produce recommendations for online shoppers, which can minimize returns. Likewise, warehouse management software can be optimized to determine the dimension and weights of SKUs and to cut down on packaging.
Finally, by using supply chain forecasting methods to accurately predict your ecommerce store’s needs, you’ll also prevent deadstock, which can tie up warehouse space and have a massive environmental impact if unsold goods need to be disposed of.
Optimize your returns strategy or consider revising your returns policy
Free returns have become not just the norm but the expected cost of doing business online. But if you’re examining sustainability in your supply chain, it’s worth considering whether they should be offered at all. Research by Barclaycard has found that 30% of shoppers purposely over-order and then return unwanted items. The problem is that returned goods have double the environmental impact, with more packaging waste, along with the associated impact of two-way shipping.
To manage this, consider creating a discount for customers who are willing to waive their right to return. Or, offer to replace items without asking for customers to return the original product. Most importantly, you can avoid high returns altogether by ensuring your product descriptions and photos are detailed and up to date, so customers know exactly what they’re ordering.
Be transparent with shoppers about the real cost of same-day delivery
Like free returns, same-day delivery and two-day delivery have become standard, but that doesn’t mean they should be. Expedited freight transportation accounts for a roughly 0.75 kilogram (1.7 pound) increase in emissions per shopper—which is more than double that of non-expedited delivery methods.
One option is to follow Amazon’s example and offer slower shipping options in exchange for store credits or rewards. The key here is to communicate to your customers exactly why you’re making the option available and its impact on the environment. The checkout page is also an opportunity to promote any carbon offsetting programs you may be aligned with. You can even create an optional offsetting service charge.
Consider using biodegradable or reusable packaging
According to the MIT Real Estate Innovation Lab study, packaging is the largest source of ecommerce emissions. These packaging emissions are, on average, six times higher for online purchase, compared to in-store purchases, partially thanks to all that empty space. Yet, according to a January 2021 survey of 10,000 European shoppers, 54% of consumers expect to see sustainable packaging from large brands, and 50% from smaller brands.
The first step is to replace large packages (such as boxes) with those more appropriate in size (such as bags and padded mailers). The next step? Do away with “recyclable” plastic and consider eco-friendly packaging materials, such as compostable mailers. This is also the time to determine whether you really need value-added packaging, such as tissue paper or inserts.
Choose the right size of packaging
Overpackaging frequently happens at warehouses simply because packaging isn’t necessarily designed to fit specific products. This is particularly true for smaller products (such as makeup), which often end up in huge boxes surrounded by paper and air pillows to cushion them from damage. When you’re choosing to work with a 3PL, be sure to communicate your sustainability goals, as well as your packaging needs to see if you—and your products—are the right fit.
Shopify Plus merchant Allbirds, for example, doesn’t just place its shoebox within another box. Instead, its boxes are designed to function as both a shopping bag and a mailer and are made of 90% post-consumer recycled cardboard.
Determining the shortest and least-congested shipping routes can conserve energy and reduce your company’s carbon footprint. If you’re considering working with a 3PL, choose one that has fulfillment centers closest to the ZIP codes where the majority of your customers are based—rather than just selecting one with warehouses in urban areas. According to the MIT study, this can save 50% of transport-related greenhouse gas emissions and reduce the overall footprint per package by an average of 10%. It will also allow you to get products to customers’ doorsteps in a shorter period of time.
If you manage your own delivery, you may also want to consider an after-business-hours or nighttime delivery service with larger vehicles. A World Economic Forum intervention found out that a 15% reduction in traffic congestion is possible when carbon dioxide levels drop by 4% and delivery costs fall by 28%.
Offer in-store pickup or parcel lockers
If reducing the amount of packaging you’re using is your primary objective, another option is offering pickup in-store or from a parcel locker. In doing so, keep in mind that click-and-collect isn’t always the most sustainable option. Alan McKinnon, a professor of logistics at Kuehne Logistics University, Hamburg, compared the carbon footprint of in-store and ecommerce purchases. He found travelling to a store by a car produces 4,274 grams (150 ounces) of carbon dioxide. In order to offset this, customers would need to buy 24 non-food items to make it worth the trip. In contrast, a standard delivery van making 120 deliveries per 50-mile trip, emits only 181 grams (six ounces) per drop at a delivery address.
Electrify your delivery fleet
An increasingly popular option for inner-city areas with growing infrastructure to support it, delivery by electric vehicles—including bicycles and robots—can help lower the carbon emissions of deliveries.
Amazon, for one, has ordered 100,000 custom electric vans, which started to hit the road earlier this year. IKEA has also set the ambitious goal to have 100% of home deliveries made by electric vehicles or other zero-emissions solutions—such as bike deliveries—by 2025.
The future of sustainable supply chain management
With 94% of consumers saying they’re more likely to be loyal to brands offering supply chain transparency, sustainability isn’t just critical to improving global environments and working conditions—it’s necessary to make sales, and to earn and keep consumers’ trust.
Today’s ecommerce merchants are required to adapt to increasing regulatory pressure and changes to legislation, such as environmental and labor laws. But a sustainable supply chain isn’t one that’s just compliant; it’s one that’s innovative and puts people and our planet first.