Why E-Commerce Fulfillment Might be Undermining Your Carbon Reduction Strategy

In the 21st century, e-commerce fulfillment is an essential element for many consumer-facing businesses to meet expectations for near-instant delivery to their door. However, not all e-commerce fulfillment processes are equal. Beneath the surface there can be big differences in the modes of transportation used, with corresponding differences in the associated carbon emissions. For businesses in the direct-to-consumer (DTC) space who are looking to engage meaningfully on climate change, how e-commerce orders are fulfilled matters.

E-commerce is such a normal part of modern life that we take for granted the ability to order almost anything from anywhere simply by clicking a button on your phone. It is also big business, and has spawned specialist companies referred to as 3PL - Third Party Logistics providers - dedicated to fulfilling orders all around the world.

If you are in the business of selling products or services, chances are that e-commerce is now an critical part of your direct-to-consumer (DTC) sales channel. You might be big enough to have established your own distribution network, but more likely is that you are relying on 3PL for at least part of your DTC sales.

CO2 Emissions From E-Commerce Are A Blind Spot

Business, government, and society are aligned more than ever in recognition of the urgent need to address climate change and to limit the predicted global temperature increase to a level that averts catastrophe. But many parts of society continue to operate as before. Even in businesses that are setting climate change-related strategy and emission reduction targets, there can often be blind spots in divisions, departments or subsidiaries. In many cases this is due to a narrow initial scope, or exclusion of small components that later become large components. Also, few businesses have set strategy on climate change that extends beyond direct operations (and control) and into the realm of influence that includes supply chain and customer behaviour. These are both reasons why e-commerce fulfillment tends not to be on the radar, except in certain instances.

Specialist e-commerce fulfillment businesses are increasingly under pressure to be more transparent about their operations and the associated impacts. Amazon recently announced its 'Shipment Zero' vision for net-zero carbon shipments (with a target of 50% by 2030) - in large part to pressure coming from employees, investors, NGOs and consumers. The Etsy Marketplace has also taken action recently to offset all carbon emissions linked to shipments from its sellers to its buyers. However for many businesses who use 3PL for e-commerce fulfillment this area remains a blind spot, and therefore a risk. 3PL providers who are not consumer-facing have not been as proactive (although many will help clients who ask).

Some traditional 'bricks and mortar' retails are also using carbon emissions linked to fulfillment to position against e-commerce businesses. Primark has recently stated its view that its highly efficient supply chain logistics and product sales only via stores make it less polluting. While this is a provocative statement given Primark's fast-fashion reputation, and the fact that consumers often drive their car to the store, it does highlight that they are looking outside their direct operations to an extent.

It's All About Mode of Transport (and Full Loads)

When you look at the variation in carbon emissions for e-commerce fulfillment, the first obvious point is that the mode of freight transport matters... a lot. Freight by rail and by sea has very low associated carbon emissions per tonne kilometre, with road freight almost an order of magnitude higher. But that road freight figure pales in comparison with air freight, which is nearly five times higher for long-haul, and nearly eight times higher for short-haul. Air and road freight are the main modes of transport for e-commerce fulfillment, but all modes are relevant for the upstream delivery of products to the fulfillment centres.

Reference: Detailed Guide (MfE Guidance for Voluntary GHG Reporting – 2019, Ministry for the Environment (NZ)

I'm not going to dig into the variations in fulfillment centres from a carbon emissions perspective, as there are huge differences in how things get managed at small and large scale, and in isolated and interconnected markets. But I do want to highlight an example of why the way that e-commerce fulfillment is managed matters - let's take a look at a relatively typical example for my home country of New Zealand.

Case Study: USA E-commerce Platform - NZ Hoodie Order

New Zealand is a pretty isolated market, with the closest big neighbour being Australia, over 2000km to the North-West. Fulfillment here is either delivered domestically, or it requires some big distances and that means air freight. The west coast of the USA is even further away, over 10000km to the North-East.

For a hoodie just to be air freighted from Los Angeles (USA) to Auckland (NZ) there would be 3.4kg of associated CO2 emissions

Now let's look at the carbon footprint of the Hoodie that is being ordered. 2016 data provided by WRAP in the UK*, based on textile use there in 2013, indicates an average of 23.2kg carbon emissions per kg of textiles across their lifetime. That covers emissions from raw materials, including laundering, freight, and through to product disposal. Let's say that the Hoodie weighs 500g, that gives a carbon footprint of 11.6kg.

For that hoodie just to be air freighted from Los Angeles, USA, to Auckland, NZ, there would be 3.4kg of associated carbon emissions. That adds 23% more emissions to the Hoodie's footprint, just from air freighting it to the consumer (for comparison, sea freighting the Hoodie would emit 0.2kg CO2).

A consumer isn't necessarily going to know how their order gets fulfilled, i.e. which country it is sent from, and via which mode(s) of freight transport. But I would suggest that the lack of transparency around this means that quite a few would be shocked if they knew.

Engage & Be Proactive

Which brings us to the business drivers for taking a more proactive approach to managing e-commerce fulfillment carbon emissions. And yes, reputation is a big one:

  • Consumer loyalty: The e-commerce marketplace is highly competitive and businesses are looking for ways to build consumer loyalty and protect reputation. By actively engaging with your fulfillment provider you can increase transparency and reduce carbon emissions in ways that still support prompt fulfillment.

  • Reduced exposure to future carbon taxes: Although carbon taxes are not implemented in many countries yet, they are likely to be in the future. The most successful fulfillment processes in the future will be those that don't rely on carbon-intensive methods.

  • Reduced costs: At the end of the day, rapid long-distance freight modes like air are extremely expensive. If you can optimise your fulfillment processes to avoid, or at least minimise reliance on air freight you will deliver big savings.

Make Sure You're Getting the Whole Picture

E-commerce fulfillment processes usually occur outside a business' direct operations, and can fall outside its initial focus for sustainability efforts. A lot of risks linked to unsustainable practices can lurk here, but also the potential to drive significant positive impact. That is why adopting a 'value chain' approach to sustainability is so important in 21st century business.

Reference: Corporate Value Chain (Scope 3) Accounting and Reporting Standard

Your consumers don't see limits to responsibility between brands and upstream suppliers; they see a business bringing product to market and driving all the associated processes upstream to enable that. If your business is unsure how its e-commerce fulfillment is being managed on the ground, start asking questions.

Claiming that CO2 emissions (or in fact any other relevant environmental or social impact) associated with e-commerce fulfillment is not relevant is simply not a credible position for a consumer-facing sustainable business. Try taking an approach that improves the efficiency of your fulfillment process while also shifting freight transport modes - that way you can deliver broad value for your business.

Photo by NASA on Unsplash

* 'Valuing Our Clothes: the cost of UK fashion', WRAP, 2017