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Sustainability Store vs online: climate-friendly?
Gambio studied the climatic effect of e-commerce with Logistics Advisory Experts GmbH, focussing on CO2 emission drivers. It compares physical stores and e-commerce in terms of climate impact. Dr Felix Hötzinger of Gambio spoke to Philippe Mettler, Head of Digital Commerce at Swiss Post about it.
There is intense debate about the sustainability of online retail. Digital commerce has a bad reputation, not least because of the high number of returns. But why is that?
Dr Felix Hötzinger: It always depends, of course, on whom you ask and on individual purchasing behaviour. This means that perception is mostly subjective.
This is why we commissioned this study: to get acquainted with the evidence regarding the climate impact of e-commerce compared to brick and mortar businesses, but not for a holistic sustainability assessment in terms of the three pillars of sustainability: ecology, economy and social issues. Topics such as CO2 emissions and environmental aspects mostly don’t figure into the shopping experience at a brick and mortar business, while for online commerce, with packaging waste and delivery vehicles, it is more visible, or even physically tangible. In addition, this is often polarized in the media to generate coverage – they are just doing their job, I am not taking aim at the media.
Online commerce is under the microscope because of its growth rates, which is totally normal. However, we also need to keep this figure in mind too: in 2020 e-commerce made up 11.2 percent of all retail sales in Germany; in electronics and fashion, more than one in three euros are already spent online.
In the end, especially in terms of the climate, it is important to find comprehensive solutions for the next generations, so as to not put our planet at any further risk. This is why we all need to optimize in a meaningful way. We don’t want to use the study as a facade, it is quite the reverse. Nevertheless it is vital to replace the current myths with data and facts.
In the meta-analysis, you look at the difference between brick and mortar businesses and e-commerce regarding CO2 emissions in particular. What are the main differences? And what are the central factors?
Looking at the myths that have developed and the responses to them, it is easy to see that the results differ drastically. Without referencing lots of numbers from the study so as not to bore your readers, the main differences are best read as follows:
Myth 1: brick and mortar businesses are more climate friendly than e-commerce.
Study result: buying products from e-commerce is often more climate friendly than at a brick and mortar business.
Myth 2: online retail leads to increased levels of traffic.
Study result: e-commerce leads to a net reduction in the level of traffic.
Myth 3: the high rate of returns is largely responsible for the bad carbon footprint of e-commerce.
Study result: the high rate of returns barely affects the total carbon footprint of e-commerce.
Myth 4: e-commerce’s carbon footprint is bad due to the additional packaging waste.
Study result: the increased packaging requirement of e-commerce has a negative impact on its carbon footprint, but only to a minor extent.
Myth 5: the energy requirements of e-commerce are higher than brick and mortar businesses.
Study results: the energy requirements of brick and mortar businesses are higher than for e-commerce particularly due to building emissions.
In the interest of fairness, the study examined all features of both forms of commerce, those of e-commerce as well as brick and mortar businesses, and the respective average values were of course used. Nevertheless, it can be said that e-commerce is much better than its reputation when it comes to climate friendliness. It is definitely worth looking at the study regarding the fine-grain data.
Central issues: how does the parcel get to the customer, what is decisive in the path to the customer, and another more important factor is the infrastructure required during the purchasing process, especially real estate. Where are the main differences?
The study identifies the essential differences in the supply chains and then analyses them in terms of their ecological footprint. Since in both distribution channels goods are often first transported from the place of manufacture to a central warehouse after production, we have excluded these comparable upstream procurement channels from the analysis. But, from the central warehouse onwards, the supply chains begin to differ. For example, in the case of brick and mortar businesses, products are usually transported in bulk from the central warehouse to a regional warehouse, from there they are delivered to the shop, usually by truck. The customer is responsible for the supply chain from this point on. With regard to the shipment-related CO2 emissions of a purchased product, the type of transport chosen plays a particularly important role. A large amount of the CO2 emissions are generated by the “last mile”: transporting the products from the parcel center of the respective company to the customer’s front door – and back if they need to exchange it.
E-commerce, on the other hand, has much smaller consignment structures. A product purchased online is transported, also usually by truck, from the distribution center to the outbound parcel center near the distribution center. Then the product arrives at the CEP parcel center near the customer, also with a truck. The last mile is done by the parcel service provider – usually with a delivery van. If there are any returns, then the parcel is usually brought to the nearest branch of the parcel service provider and then transported to the returns center of the online retailer. This shortened route naturally has an effect.
The online shops, however, also need a vast infrastructure of servers and therefore lots of power. How is this reflected in the balance?
Let’s look at the energy consumption of the IT infrastructure. Interestingly, the study by the German Environment Agency only ascribes this to e-commerce and gives a value of 5–60 g CO2; they don’t give a direct consumption value for brick and mortar businesses!
And the emissions of the IT infrastructure in e-commerce are higher than in brick and mortar businesses, but practically pale in comparison to the building emissions. Because it is primarily the energy for the buildings that account for the largest proportion of the ecological footprint of brick and mortar businesses – particularly in comparison to e-commerce.
Next, do e-commerce packages need additional packaging? How does this affect the balance sheet? And how relevant are the much-maligned returns?
Let’s start with the last question. The perception is certainly mainly shaped by fashion. Electronics have significantly lower return rates and it is negligible for food. So we must make distinctions. Reducing return rates is actually one the main goals of e-commerce.
Return rates, packaging material and logistics are relevant CO2 factors, however, not the most crucial, as this study confirms. The costly, energy-intensive infrastructure for the presentation of goods, i.e. the real drivers of CO2, hardly plays a role in e-commerce. As for packaging, this is, in purely arithmetical terms, less of a problem than lighting or heating.
Traffic in conurbations caused by parcel delivery drivers is also a recurring theme. What does the balance sheet look like here?
Here are the facts: online retail is responsible for 0.5 percent of traffic in cities and high street stores are responsible for 11 percent.
So what does their balance sheet look like?
Online retail and brick and mortar businesses must continue to ensure that their climate footprints steadily improve, even though online retail is comparatively more climate-friendly overall due to the shortened supply chain and because it doesn’t need to present its goods in the shops. In sum, if I were a polar bear I would shop online…
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