By Partha Ghosh, AVP, Head of Consulting, Digital Experience, Europe – Infosys
2024 was one of the hottest years on record where reducing carbon emissions became clearly an existential priority. As a major emitter accounting for about a quarter of all GHG emissions, the retail industry needs to be at the forefront of the fight against climate change. Apart from moral and regulatory obligations, retailers are facing pressure from rising consumer demand for sustainable and ethical products.
While technology has added to the problem in the form of ecommerce – there’s a large environmental footprint due to transportation emissions and packaging waste – it is also providing several solutions to drive sustainability in the industry. With a thoughtful, sensible, approach and appropriate use of technology, ecommerce businesses can improve not only their own sustainability posture, but also that of their communities.
How retail businesses can use technology to improve ESG (environment, social and governance)
By unifying information across the commerce supply chain, Artificial Intelligence, Machine Learning and Advanced Analytics provide insights, such as which operations produce the most emissions or overutilise natural resources; the technologies also offer recommendations for improving sustainability, for example, using electric vehicles in transport fleets, replacing plastic packaging with natural materials, or increasing the share of local suppliers. Providing transparency throughout the supply chain, down to tier 2 or lower vendors, they enable retail organisations to comply with ESG regulations: for example, businesses can use AI solutions to monitor vendors’ premises to check adherence to safety norms and fair labor practices, or to read product labels to identify hazardous goods with mercury and lead content. And now they can use various generative AI tools to design packaging that consumes less material, optimise delivery routes to save fuel, and deploy smart shopping assistants that help consumers make more sustainable choices.
Another technology that can improve sustainability in commerce is Blockchain; by recording every transaction across the value chain in a decentralised, immutable, and highly secure Blockchain ledger visible to all network participants, retailers can, among other things, monitor them from an ESG standpoint, from origin to delivery. This also helps them comply with complex regulatory obligations, such as the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) which mandates that organisations should identify, address and report environmental and social impacts across company-owned and supplier (including indirect suppliers) operations. What’s more, retail and ecommerce businesses can even automatically enforce adherence to agreed sustainability metrics in the supply chain by entering into Blockchain-enabled smart contracts with vendors. Another way that Blockchain can decarbonise commerce is by digitising trade documents, so they don’t need to be transported physically.
How ecommerce companies can support sustainability in their networks
Commanding massive customer and supplier bases, ecommerce businesses are uniquely positioned to drive sustainability awareness among their stakeholder groups. An outstanding example is outdoor-and-sports clothing brand, Patagonia, which is highly reputed for its commitment to sustainability. The company has gone far beyond its own operations to create a sustainability movement among its customer community. One initiative is Worn Wear, a recommerce program, through which it takes back used Patagonia products that it recycles or resells at discounted prices, to lower resource consumption and landfilling.
Furniture retailer, IKEA, also has several initiatives that support sustainable suppliers, including a plan to increase the share of products made from renewable materials from 60 percent to 100 percent by 2030, and another aiming at ensuring all raw materials used are deforestation-free, by 2025; the company also uses AI to forecast demand with great accuracy across dozens of markets to mitigate waste caused by overstocking. Yet another example is Atlanta-based Sustainable Home Goods, which promotes sustainability and fair trade by partnering with local businesses and artisans to create jobs in their communities.
The fight against climate change is everybody’s battle. Retail organisations can fulfil their responsibilities by not only incorporating sustainable and ethical practices within their businesses but also driving these values in their networks. Thanks to the advances in digital technology, there are several solutions that can support them at every step.