Sustainability in eCommerce: Reducing Environmental Impact in Fulfillment

  • 20 February 2024

“Active supply-chain decarbonization is becoming a license to operate for businesses, but companies aiming to be role models in the fight against climate change must overcome roadblocks along the way.”—Mckinsey June 2021.

“Fulfillment costs, for example, can account for 12 to 20 percent of eCommerce revenues, squeezing margins and making profitability a mirage.”—Mckinsey December 2021.

While a joint study by McKinsey and NielsenQ published in February 2023 stated, a total US consumer spending is over $14 trillion, that is two-thirds of the US GDP. And, a measurable chunk of this spending goes into everyday consumer packaged goods (CPG), inclusive of foods and beverages to cosmetics and cleaning products. This significant amount calls for attention and efforts to work for more sustainable and an inclusive economy.

After a close scrutiny and numerous joint studies conducted by McKinsey, one conclusive opinion is—for sustainability in eCommerce, and for reducing carbon footprint, the industry will have to consider collaborating with supplier networks, industry, stakeholders, logistics & transportation and the customers. Awareness towards sustainable operations management in eCommerce industry must be promoted for reducing eCommerce environmental impact.

The take away is a concerted effort has to be made throughout an organization for fulfillment practices in eCommerce and for moving ahead on the path to profitability. This could be achieved by engaging sustainable practices in packaging, logistics, and other fulfillment operations for the eCommerce platforms. And the best news is in this drive both consumer and companies are consciously making an effort towards carbon footprint reduction.

Importance of Sustainable eCommerce Fulfillment Operations

A joint exercise by McKinsey and NielsenIQ showed, “Products making ESG-related claims averaged 28 percent cumulative growth over the past five-year period, versus 20 percent for products that made no such claims.” The world is at tender hooks as sustainability has to be equated with inclusive growth. eCommerce industry has to buckle up for combating challenges related with bringing down global carbon emissions, raising living standards while making strategies for increasing profit margin.

1. Conscious Customers: Increasingly, it can be found consumers are more into the products whose packaging says ‘eco-friendly’, ‘fair trade practices’ or something pointing towards being environment friendly and being ethically sustainable. In fact, in a survey by McKinsey in the year 2020 in US, 60% consumers said they are ready to pay extra for a product that has sustainable packaging. For a 78% US consumers sustainable lifestyle is the priority, as per the latest study by McKinsey and Nielsen IQ.

2. Brands with ESG Products Boost Sales & Growth: Study also states whether new or old brands and irrespective of size, companies that have environmental, social and governance (ESG) products have more takers than without them. The report states, “Newer ones making claims outperformed their newer, nonclaiming counterparts in 32 percent of categories. In 68 percent of categories, established products making ESG-related claims outperformed established products without them.”

3. Multiple ESG Claims Build Customer Loyalty: A combined ESG efforts is appreciated and gets better response in compared to those products which are making only one or two ESG claims. It penetrates deeper with the customer and authenticity about the product is reinforced. To elaborate, opaqueness towards environment friendly process in the fulfillment practices in eCommerce enhances customer response. If a retailer brings transparency about steps taken to reduce carbon emissions by efficient route planning or manufacturing and warehousing a product, a customer’s loyalty and trust increase manifold. The report says, “Companies will probably have a greater ESG impact and a better chance of achieving outsize growth if they incorporate high-impact ESG-related claims across multiple categories and products.” An integrated and interconnected eCommerce Fulfillment Operations bring holistic working strategy and are rewarded by the customers by positive response.

eCommerce Environmental Impact

eCommerce platforms can be an exemplary module for being ‘regenerative’ and of possessing sustainable business strategists by incorporating AI-enabled supply chain management system. The well-integrated automated operations allow real-time insight into the journey of a SKU. This cross-channel exchange of communication with internal and external stakeholders, help management in sustainable decision making. From procuring raw-materials to manufacturing to warehousing to inventory management to logistics to last mile delivery; each process of the fulfillment can be done with the focus of ESG.

• Eco-friendly Packaging: Retailers can opt for recycled paper, cardboard or reusable containers to go green. Also, clubbing orders can be remarkable way to increase sales and reduce carbon footprint. The latter can be easily achieved as there is continuous exchange of data and trusting the browsing history of customers coupled with other relevant details, products of interest can be suggested at the check-out page or before.

• Efficient Route Planning: An AI-powered logistics system brings transparency in shipping and transportation. Companies can opt for Smart lockers (to store multiple products at one central place for the customers to collect in one go) or Blockchain (this is an integrated process, which helps in tracking of products through codes and continuous exchange of messages) for reducing carbon emissions.

• Collaborating with 3PLs: Outsourcing to 3PLs play a critical role in carbon footprint reduction. Partnering with logistics companies significantly cuts down delivery costs and easy to combine orders of the same routes, thus reducing carbon emissions through vehicles and transportation. Collaboration can be done for sharing delivery routes, common hub for delivery, warehousing, for procuring raw-materials and several other services as co-loading etc. All such activities are steps towards lowering carbon emissions to zero.

• Informing Customers: eCommerce platforms can educate and inform customers about eco-friendly delivery options and packaging services. This need not be an aggressive approach but a suggestion on how with collaborating and scheduling orders, one can reduce carbon footprint.

Advatix Cloudsuite™: Sustainable Practices for Logistics & Fulfillment

The AI-powered system of Advatix Cloudsuite™ does most of the repetitive manual work and reduces space usage, which takes care of carbon emissions through electricity and other elements required for labor management. Real-time visibility provides data, useful for smart decision making with respect to inventory management, warehousing etc. The fully-automated fulfillment solution allows configuring pick path and floor plans to maximize productivity while scan based system ensures reduced quality control issues. Cumulatively, these work towards carbon foot reduction as the system avoids redundancy, repetition and docking of stocks or going under stock.