Sustainable commerce refers to developing products or purchasing products that use sustainable materials (either organic, recycled, or natural) as well as ecological products for packaging and ecological solutions for shipping. For the consumer, sustainable commerce can include supporting local suppliers or vendors, which can overall reduce carbon emissions, especially if those retailers use sustainable commerce practices. The three tenets of sustainable commerce include: social equity, economic viability, and environmental protection. A large consideration to a sustainable commerce model includes transparency throughout the product's lifecycle to help consumers feel good about their purchases.
Typical breakdown of the triumvirate of concerns central to sustainable commerce.
Sustainable commerce practices are especially important for e-commerce companies, where the use of new technologies and the logistics necessary for shipping products to consumers can have a large environmental impact. This is especially true as more commerce shifts from brick and mortar to online retail.
The environmental side of sustainable commerce includes shipping and logistics, business efficiencies, and packaging materials.
For sustainable commerce, the shipping and logistics side can be as simple as working to reduce the overall carbon emissions of shipping a product to and from warehouses and to customers, either from a warehouse in an e-commerce solution or in a storefront. The use of either climate-neutral or environmentally friendly shipping solutions across a supply chain can reduce the overall carbon footprint of a product or a company.
With the increase of demand for transparency, retailers take on a greater risk of product liability, which can cause financial and reputational risk. This comes with consumer demands for safer products with greater transparency into the product supply chain and material sourcing. Retailers can, in turn, take steps and influence the sustainability of products and practices in their supply chain through investments, which can extend to investing in initiatives to accelerate the development of safer and more sustainable products.
Business efficiencies can be as simple as running offices and stores efficiently by implementing recycling programs, utilizing alternative energy sources, and using recycled materials where available.
Other efficient business practices include offering augmented or virtual reality technologies that would allow users to see clothes or other products on their bodies or in their homes prior to purchasing, thereby reducing the volume of purchases and returns. However, this would remain limited based on the sophistication of the customers' technological capabilities. A simpler option would be for a retailer to offer clear and detailed information about a product so consumers can be better informed in their purchases. An alternative in the clothing example would be for a retailer to offer understandable and simplified color languages and detailed size specifications.
As well, moving away from the popular "try-and-return" business model can reduce the waste involved in such a model. For example, in the beauty industry, a company such as Taobe has used samples based on a consumer's beauty profile to help consumers find the product that fits their interest or goals. This offers to solve the same problems the "try-and-return" model tries to solve.
Businesses could also offer delivery points for consumers, or vice versa, so consumers in apartments, urban environments, or other hard-to-reach locations can have an assured delivery point. A delivery point would reduce missed deliveries, decrease the environmental impact of multiple delivery trips, and improve the overall efficiency of the delivery route. Companies can also offer order consolidation in the form of free shipping, such that a consumer may have to wait a little longer, but their order can be shipped in bulk and reduce the overall shipping costs, packaging costs, and carbon footprint of a purchase.
Perhaps the most readily understood part of sustainable commerce is the materials used for shipping products, either to a retailer or from an online retailer to a customer. The use of ecological or recyclable products for packaging can reduce the overall impact of shipping products. Meanwhile, some companies have offered consumers the option to plant trees at the time of purchase as a carbon offset. The problem of packaging also extends to a shipment being properly packaged to ensure the product arrives intact to further reduce returns and replacements and, in turn, reduce the overall impact of a purchase, both with transportation and landfill costs.
Example of packaging solutions designed to be biodegradable.
Packaging material companies can also find new ways to use previously wasted materials. This can mean using compostable boxes, paper tape, and recycled wrapping. Some companies have included prepaid mailing labels in order to encourage the consumer to return the packaging solution for the company to reuse. Other companies are developing packaging materials from materials such as corn starch, which breaks down completely in a short period of time.
For companies in the sustainable commerce model, social equity involves working to provide positive change either in their organization or outside of the organization where possible. This includes having an ongoing commitment to employee enrichment opportunities, developing community through outreach projects and programs, educating employees and customers about sustainability, and, where possible, supporting local, fair trade, and socially responsible businesses.
Image of where the various parts of a pair of jeans are sourced from.
Social equity measures can include offering customers transparency, if not visualization, of the supply chain of a product for a better consumer understanding. Transparency gives the customer a better possible understanding of the cost of sourcing components or parts, where those pieces are supplied from, the potential labor conditions of those sources, the carbon footprint of shipping and sourcing those parts, and the overall environmental and social implications of the sale of a product.
The economic viability of sustainable commerce refers to the possibility of engaging consumers and developing sustainable ways of developing, selling, and shipping products to those customers. This likely includes the development and use of newer technologies to change how products are sold and consumed, and would also likely require a change in the mindset of consumers in how they interact with products.
There is a demand from consumers interested in sustainable commerce that companies not promote profit over the environmental and social impact the company can have. However, companies that embrace sustainable commerce and related practices can increase consumer interest, with a reported 70 percent of global consumers willing to change their consumption habits to reduce the overall impact of their purchases.
An example of transparency in the pricing of a product.
Transparency into where products are sourced, who manufactures those products, where they travel from, how much workers are paid, how much the prices are marked up, and where the cost specifically comes from are important factors in how consumers can interact with a product. These transparency factors are also important for a company to consider in terms of how they can engage with consumers about their products. This could include developing applications to allow customers to set parameters and store preferences. These could include preferences for how customers want to shop, delivery speed, environmental impact, and allowing them to choose how they want to interact with the value chain of a product. For example, a customer could prefer to select a product sourced from a small, startup manufacturer rather than a global multinational. However, such a solution would require retailers and businesses to offer consumers data that those retailers and businesses are traditionally hesitant to offer.
Alternative purchasing models, outside of a single-owner purchase, can offer consumers new ways to interact with products. Models such as pay-for-use, subscription, or leasing can offer different ways for products to maintain value through a lifetime. These models have been used already in the automotive, home entertainment, lighting, and high-end fashion industries. They offer a way for consumers to use items that are seldom or single-use items without purchasing it on their own and later throwing them out, but rather recycling them through a market so others with similar needs can use these items for a period of time.
Secondhand shopping, or thrift-shopping, especially in fashion, offers an alternative and sustainable commerce model. This allows companies to offer secondary services, such as curation services, to the consumer in place of offering novel products. These companies can reduce their environmental impact without having any need for storage facilities, and instead act as a facilitator for sales between sellers and buyers, similar to companies such as eBay or Etsy.
Recommerce is the selling and buying of open-box of non-new inventory. This offers retailers a way to keep goods out of landfills. This can also prolong the lifetime of products and reduce the number of new products manufactured for greater sustainability. Recommerce options, especially in the case of second-hand shopping, also work to encourage durability in products rather than disposability, which could, in turn, appeal to consumers who may be uninterested in purchasing used items, but still have a desire for durable products that will last them longer and also reduce their overall environmental impact.
The COVID-19 pandemic saw an increased use of e-commerce solutions. Close to 60 percent of shoppers during the 2020 holiday season purchased from online stores, whereas 30 percent of those same shoppers in 2019 made their purchases online. With the increase in online shopping has come an increase in concern about where products are sourced and their sustainability. This includes a 54 percent increase in consumers who have reported being willing to change their purchasing habits to reduce environmental impacts, with a reported 44 percent of consumers looking for more sustainable purchasing options.
Although sustainability is not self-evidently related to the COVID-19 pandemic, the increase of e-commerce and the related packaging, a more visual sign of the material demand of e-commerce, and the awareness of online tools available for interrogating and understanding the impact of products (be they social or environmental) has increased. Meanwhile, the concern over security of global supply chains in the wake of fears of the spread of the virus through shipping lines and the complete closure of those shipping lines due to local closures has led to greater investigation of outsourcing; this previously robust system that created efficiencies and interdependencies for firms has seemed more vulnerable during the COVID-19 pandemic and, in turn, led to a call for more sustainable business practices.
Based on increased pressure from students and from the industry, a growing number of business schools are expanding efforts to embed sustainability into courses and research. Previously, courses covering environmental impact, social impact, and sustainability topics were curriculum add-ons; these topics have now been made mandatory towards graduation in some universities. A few schools are overhauling their master of business administration (MBA) degrees and requiring courses in sustainability. Other schools are revising core content to offer specializations and out-of-classroom learning opportunities so students can better understand sustainability.
