Online Retail

E-commerce

The E-Commerce industry is composed of firms that provide an online marketplace for other firms or individuals to sell their goods and services, as well as retailers and wholesalers that provide an exclusively web-based platform for consumers to buy goods and services. Firms in this industry sell to consumers as well as to other businesses. Because of the accessibility of e-commerce sites, the industry is a global marketplace for buyers and sellers. Note: The industry scope exclusively applies to “pure-play” e-commerce operations and does not address the manufacturing or brick-and-mortar retail operations of companies. Many consumer goods manufacturers and retailers have incorporated, or are in the process of incorporating, an e-commerce component to their business. SASB has separate standards for the Multiline and Specialty Retailers & Distributors (CG-MR); Apparel, Accessories & Footwear (CG-AA); and Toys & Sporting Goods (CG-TS) industries. Depending on the specific activities and operations of firms in the aforementioned industries, disclosure topics and accounting metrics associated with the E-Commerce industry standard may also be relevant.

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Source: SASB

The retail sector has been pushed to new horizons in recent years, with investors and consumers alike now focused on sustainability and purpose-driven brands. The biggest challenges for the sector are greenhouse gas emissions from packaging and international shipping, but investment opportunities exist to create reusable packaging, report bulk shipping, and ensure carbon-neutral shipping. Technology can also play a role in optimizing last-mile deliveries and returns through data analysis and situating fulfillment centers with access to efficient road infrastructure.

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Industry Characteristics

• The pandemic has significantly altered consumer sentiment and purchasing behavior, and there seems to have been a change in consumer consciousness over the past two years, which will continue to shape future shopping patterns, along with the increasing preference for convenience and shopping online. This has led to greater focus by retailers on ESG issues, with many of them committing to ambitious environment and social goals. Shareholders and investors are also likely to continue demanding action from retailers to report metrics relating to sustainability, employee diversity and inclusion, and corporate governance. Source: Deloitte
• Consumers want to buy from purpose-driven brands, who not only prove how they offset carbon emissions and reduce single-use packaging, but are helping to build a sustainable, circular economy for future generations. This involves supply chain transparency and detailed information which consumers may not have previously looked for, such as how products are manufactured, the quality of ingredients or raw materials, if they were ethically sourced, and under what conditions they were made. Source: Co-operative

Sustainability Impact

• Global emissions from international shipping are expected to reach 709 million metric tons of CO2 in 2025. However, under the IEA's "Sustainable Development Scenario", in which the use of alternative fuels such as hydrogen, ammonia, and biofuels have increased, CO2 emissions from shipping could fall considerably in the coming decades. Under this scenario, emissions from the international shipping sector are projected to drop to 120 million metric tons of CO2 by 2070. Source: Statista
• The greatest share of greenhouse gas emissions generated by the e-commerce industry comes from the packaging of goods, accounting for approximately 45 percent of total estimated emissions. According to simulated scenarios, package returns represent about one fourth of the total e-commerce emissions. Source: Statista

Sustainability Investments to watch

• Multiple solutions do exist for online businesses in their quest to sustainability. Some of them include: introducing reusable packaging, resorting to bulk shipping, ensuring shipping is carbon neutral, implementing a returns program, reducing packaging size, and finally switching from polluting to biodegradable packaging. Source: Climatiq
• The role of logistics digitization comes into play here- through the usage of advanced technologies that can provide insightful data to help e-commerce businesses and e-commerce fulfillment centers optimize last-mile deliveries and returns.Optimizing last-mile deliveries by situating the fulfillment centers with access to efficient road infrastructures is proven to reduce fuel consumption and consequently, carbon emissions. Source: RSA Global
• Neutralizing carbon emissions throughout your e-commerce business operations can be a very costly investment. This is where working with carbon-neutral companies works because they already have infrastructures in place and an established network that is ready to support a sustainable business launch. Source: RSA Global
• Beyond the US$12 trillion directly estimated, conservative analysis shows potential for an additional US$8 trillion of value creation across the wider economy if companies embed the Global Goals in their strategies. Source: Business Commission
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