Sustainable Commerce: How Businesses Can Balance Profitability With Environmental and Social Responsibility
By Donna-Marie Bohan
Sustainable Commerce: How Businesses Can Balance Profitability With Environmental and Social Responsibility
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A growing number of companies are integrating sustainability into their business strategies, a trend partly driven by new environmental, social, and governance (ESG) reporting regulations as well as the rise of environmentally and socially conscious consumers. But what exactly is sustainable commerce? And why does it matter in business?
In this article, I’ll delve into the concept of sustainable commerce, explore its benefits for businesses, shed light on the dark side of e-commerce returns, discuss best practices, and provide guidance on building a corporate sustainability program.
Defining Sustainable Commerce
In a world where environmental concerns are paramount, sustainable commerce stands as a practice that aims to minimize the negative impact of commerce on the environment and society. It’s a holistic approach that considers the entire lifecycle of a product or service, from production to disposal, and aims to reduce waste, conserve resources, and promote social responsibility.
Sustainability in commerce includes a variety of practices such as eco-friendly packaging, waste reduction, responsible sourcing, and ethical labor practices. By focusing on these practices, businesses can significantly reduce their carbon footprint and contribute to a more sustainable future.
Why Is Sustainable Commerce Important?
Sustainable commerce is not just a noble pursuit — it also offers tangible benefits for businesses. Beyond reducing environmental impact and conserving resources, adopting sustainable practices can also create new opportunities for growth, improve customer loyalty and satisfaction, and attract socially conscious consumers.
Furthermore, a growing interest in the circular economy, which offers alternatives to attaining products like renting them and buying preowned goods, means sustainable practices have become increasingly important to consumers. According to a National Retail Federation (NRF) survey, 70% of respondents have tried or would like to try purchasing preowned, repaired, or renewed products. As such, adopting sustainable practices can differentiate a business from its competitors and attract customers who prioritize sustainability.
Sustainable commerce therefore not only reduces the environmental impact of commerce and promotes social responsibility, but it also creates new opportunities for growth and enhances brand perception. And with consumers increasingly favoring environmentally conscious brands, it’s become an essential way to compete in today's e-commerce world.
Embracing Sustainability in E-Commerce: What Are the Business Benefits?
With the rise of ethical consumerism and shoppers generally becoming more aware of the environmental impacts of their buying habits, sustainable practices are more relevant than ever for online retailers and e-commerce businesses.
The perception of e-commerce brands in terms of sustainability is also changing. According to Wunderman Thompson’s Future Shopper study, 68% of consumers wished that retailers and brands offered better environmental practices and so customers are increasingly expecting businesses to be more environmentally sustainable. This has led to an increase in demand for more sustainable products, services, and practices.
By taking steps to become more sustainable, brands can benefit from a range of top-line and bottom-line business benefits, creating opportunities for the retail industry to improve their practices and grow. Here are some of the business benefits that sustainable practices can offer:
Improved Customer Loyalty
With consumers showing an appetite and appreciation for brands that demonstrate a purpose beyond selling products and services, it comes as no surprise that sustainable business practices positively impact purchasing decisions and foster customer loyalty. This is because sustainable commerce provides real value, encourages revisits and repeat purchases, and enables retailers and e-commerce brands to differentiate and set themselves apart from the competition.
Positive Brand Image and Reputation
Consumers are more likely to develop a deeper rapport with, and buy from, brands that they think align with their personal values. This emotional connection with a brand creates a positive perception in the hearts and minds of consumers, resulting in stronger brand affinity.
AI-driven efficiencies in packaging and logistics are resulting in double-digit percentage improvements, increased margins, and reduced waste and emissions. Additionally, offering customers transparency and access to sustainability information throughout their shopping journey can help you differentiate your brand and motivate customers to make sustainable choices, resulting in increased affinity and repeat purchases.
The Dark Side of E-Commerce Returns: A Sustainability Challenge
E-commerce can be a convenient way for consumers to shop but there is a dark underbelly: high return rates.
A study by Shippo found that the average e-commerce return rate sits between 20-30%, which is typically much higher than return rates for brick-and-mortar stores. Retail and apparel brands also tend to have much higher return rates than other industry verticals, most likely due to sizing and fit issues.
The returns process might sound simple in theory but when a consumer returns an item, that process mostly ends up costing the retailer, and the item in question is often thrown away.
In fact, returns cost retailers $816 billion in lost sales in 2022, almost twice the cost of returns in 2020. Furthermore, the returns process, which involves transportation and packaging, generated 24 million metric tons of carbon dioxide emissions in 20222.
Returns represent a major sustainability problem for retailers and e-commerce businesses, and reducing the return rate should be a priority.
Read this next: How To Lessen the Impact of E-Commerce Returns
Sustainable Commerce Best Practices: Tackling E-Commerce Returns
Simple nudges such as carbon labeling, clearly sign-posted delivery options, and showcasing the impact of returns on the environment can all help brands reap the rewards of sustainable commerce.
If companies want to become more sustainable, they should find ways to lower their e-commerce returns rates. Here are some strategies for reducing e-commerce returns to consider:
- Optimized product discovery: Informed and satisfied shoppers are less likely to return items they’ve purchased, so prioritizing transparency, accurate information, and exceptional customer service throughout the buying journey can go a long way. Consider writing accurate product descriptions, providing size and fit guidance, showing product videos, and more to proactively address the underlying issues that result in e-commerce returns.
- Product lifecycle management: Implementing the best possible product lifecycle management practices will help extend the life of the products that e-commerce retailers are selling, which will in turn reduce waste. This includes refurbishing, repairing, or recycling items to keep them out of landfills.
- Sustainable packaging: Many online stores are now making product packaging with recycled materials, reducing the use of plastic packaging needed to ship items to customers and eliminating excessive packaging.
- Donation: Some retailers are partnering with charities or organizations to offer their customers the option to donate returned items to those in need. This helps reduce the amount of waste generated by e-commerce returns and also provides support to those in need in the community.
- Resale: Similarly, retailers can also consider reselling returned items on the secondary market. By giving products a second life, you can reduce the waste created by returns while generating more revenue.
By adopting sustainable practices in areas such as packaging, donation, and resale, e-commerce retailers can reduce their environmental impact and contribute to a more sustainable future. And by improving product quality and implementing product lifecycle management practices, they can reduce their e-commerce return rate, leading to increased customer satisfaction and profitability.
Leading the Way With a Corporate Sustainability Program
We’ve taken a look at why sustainability is important in commerce, how it benefits businesses, and some of the ways in which you can apply it in practice. But what if you want to take a step further and build a structured program that clearly articulates and demonstrates your company’s commitment to sustainability and environmental protection?
To do this, here are some steps to consider when building a corporate sustainability program:
- Define your sustainability goals: Set clear and measurable sustainability goals that align with your company's values and industry standards. These goals should be specific, time-bound, and cover various aspects of your business operations, such as energy consumption, waste management, supply chain sustainability, product lifecycle, and more.
- Conduct a sustainability assessment: Assess your current environmental and social impact to identify areas where your business can improve. This assessment will help you understand your performance and determine the most significant areas of opportunity.
- Engage key stakeholders: Involve and seek the perspectives on sustainability issues of employees, management, suppliers, and customers to foster a sense of ownership and collaboration, enabling you to build a stronger and more sustainable company culture.
- Develop an action plan: Outline specific initiatives you’ll undertake to achieve your sustainability objectives. Consider timelines, responsibilities, allocated resources, incorporating sustainability into business processes and product designs, and KPIs to measure success and accountability.
- Educate and empower employees: Raise awareness and provide training to employees to ensure they understand the importance of sustainability and their role in achieving the company's goals. Encourage them to adopt sustainable practices in their daily work routines and provide incentives for these behaviors.
- Communicate progress: Transparently communicate your sustainability efforts and achievements through various channels, such as annual sustainability reports, social media, and your website. Highlight the positive impact you're making and share inspiring stories to engage and inspire your audience.
The Time To Invest in a Sustainable Future Is Now
It’s estimated by McKinsey that transitioning to more sustainable business models will provide business opportunities of $12 trillion per year. Companies are clearly leaving profits on the table by failing to invest in sustainable business initiatives.
Building sustainable change requires dedication, collaboration, and a long-term commitment. But by integrating sustainability into your business strategy and operations, you can not only contribute to a healthier planet, but also unlock new opportunities for growth and resilience in an increasingly environmentally and socially conscious marketplace. To get started, check out our use case library for creative ways to minimize returns and become more sustainable.