Are we getting there yet for sustainable ecommerce?
Two-thirds of consumers say they’re willing to pay more for sustainable products than retailers realize, according to a recent report from First Insight indicating consumers and retailers are misaligned when it comes to sustainability.
There are other signs of a disconnect. Only half of senior retailer executives surveyed felt sustainability to be an important purchase consideration for consumers – quite the contrast to the three-quarters of consumers saying it is “somewhat” or “very important” to them. The report also reveals consumer preference for recommerce models is underserved.
The two sides do agree on one aspect, however: Nearly all senior retail executives believe that today’s consumer wants to see retailers behave more sustainably.
And then there’s legislation. Globally, we’re seeing government entities introducing laws governing sustainability.
If the Fashion Sustainability and Social Accountability Act passes, New York will be the first state where brands are responsible for their environmental impact. Similarly, Germany’s Supply Chain Due Diligence Act will see businesses held accountable for social- or environmental-related failures.
As such, sustainable ecommerce means more than meeting consumer expectations; it requires fulfilling industry and business practices as well.
Where to begin?
For retailers finding it tricky to navigate consumer expectations and industry legislation on the path to sustainability, there are a few ways to adjust and become greener. This included adoption of circular business models and innovative technologies.
Let’s look at some of the sustainable ecommerce initiatives that retailers are adopting to protect the environment while presenting new ways to boost revenue streams and customer engagement.
Transparent sourcing
The origins of a material or its ingredients can influence if a consumer purchases an item. Here, retailers can add “green” labels to their products, and seek alternative sources for their materials, if appropriate.
Some retailers are even investing in sustainable sourcing, such as farming or forestry, to ensure the availability of a long-term and socially responsible supply. For example, Ingka Group, a strategic partner in the Ikea franchisee system, acquired 60,000 acres of forestland in Texas and Oklahoma to increase its responsible forest management.
Consumer appetite for supply chain transparency remains post-pandemic. Increasingly savvy to greenwashing — from working conditions and sourcing of raw materials to the environmental impact of goods distribution — the public is paying attention and business leaders taking note.
Almost 20% of executives said the complete disclosure of information at every link of a retailer’s supply chain is one of the top three challenges impacting their business due to consumer desire for clear and honest information, according to McKinsey & Company’s “State of Fashion 2022” report.
To assist with transparent sourcing, retailers are using the latest technology to find areas in a business’ supply chains that are unsustainable or unethical. This includes tracing the product lifecycle through to the final article and highlighting where environmentally friendly changes can be made.
Recommerce
Popularized in markets like electronics and sporting equipment, reselling goods is increasingly gaining momentum in fashion and apparel.
Initiatives like Patagonia’s stand out for extending the lifecycle of a product, reducing the overall carbon footprint and helping prevent items from going into landfills. Last year, its Fair Trade program saw the business use 87% recycled materials and 100% organically grown cotton in one collection.
Recommerce does come with its own challenges given how many counterfeit products exist. Again, this is where having the technology to track and record the full traceability of a product’s lifecycle becomes essential as it means retailers can prove authenticity.
Sustainable packaging
While the harmful effect of plastic packaging on the environment is widely known, it is still commonly used by retailers all over the world.
Big brands like Unilever and Coca-Cola are regularly challenged on their eco-friendly plastic packaging credentials, including in the greenwashing report by the Changing Markets Foundation which says claims are often misleading.
With stricter sustainability regulations emerging on multiple fronts, some retailers, like Walmart, have seen the writing on the wall and started working towards improving plastic use and exploring sustainable alternatives. Its target is to reduce its virgin plastic footprint by 15% come 2025 by using recycled content, redesigning its packaging, eliminating unnecessary material, and exploring reuse models.
Better demand forecasting
Having accurate methods for predicting the optimal amount of stock is essential for today’s retailers to reduce their environmental footprint. This is particularly in fast fashion, where the negative social and environmental impact of unsustainable practices is increasingly under the microscope.
Every season, 30% of the clothes manufactured are unsold with billions spent by brands so products do not end up at unauthorized retailers. Furthermore, in the US, 85% of textiles are dumped into landfills or incinerated each year.
Having exactly the right amount of product means fewer unsold goods and less landfill waste. While simple in theory, the process of accurate demand forecasting has been made harder by supply chain restrictions and spikes caused by pandemic-related disruptions.
Some retailers are addressing this using advanced artificial intelligence (AI) to improve forecasting capabilities and reduce waste. Ikea, for example, is predicting how much the business will sell in the future with 98% accuracy.
Authenticity behind the action
For retailers to be received as genuinely sustainable, authenticity is key. Consumers desire sustainability but remain cynical. Deloitte’s research finds almost one in two consumers either do not know what commitments businesses have made to trust or simply do not trust a business’ climate change and sustainability claims.
Rather than making vague promises for the future, retailers must show evidence of their sustainable practices, not just to meet legislation but for consumers to see actual progress.
The path to sustainable ecommerce means retailers need the technology for tasks like tracing a product’s lifecycle and refining supply chains, and for the data to show consumers the results of steps taken.
Sustainability is a serious concern for most people these days. Get it right and you can attract customers boost profitability and ensure both your business and the planet benefit.
Marco Vergani is CEO of K3 Business Technology Group