The Next Economy
How Digital Technology Is Supporting a Circular Future for eCommerce

Growing emissions and decreasing resource capacity have sparked an increasing interest in a circular economy model among ecommerce companies worldwide. In contrast to the linear economy, where each new innovation (i.e., switching hub, phone, appliance) renders existing offerings obsolete, a circular economy considers sustainable design from the beginning — and in each stage — of product development and use to give material goods a different life cycle. Many ecommerce companies are considering how this approach, with the support of digital technology, can reduce their footprint and help consumers do the same.

However, there are challenges associated with realizing circular models. Rethinking and overhauling product development to be sustainable from the beginning is a feat in itself. Changing overall business operations to lay the groundwork for becoming a more environmentally friendly company is also a notable task. But a circular economy also expects a lot from end users — who must unlearn ingrained consumption and disposal habits to now use products in new, more sustainable ways. It’s a lot to consider and problem-solve.

Capitalizing on ‘green’ tech

Fortunately, these are challenges that technology can help organizations address. As we know, online purchasing/ecommerce inherently provides environmental benefits such as paperless transactions, faster purchase-to-delivery, fewer carbon emissions and more; but layering supplemental technology on top of an already “green” purchasing cycle furthers these benefits.

For example, data and analytics allow ecommerce companies to source valuable information to help maximize their operational efficiency, better understand consumer behaviors to design sustainable products that get used and reused, rethink packaging and delivery methods to reduce waste and emissions, and more.

To get the most out of data and analytics, benefitting their company, customers and the planet, organizations need to first identify effective data solutions — then, actually use them. According to the World Economic Forum, only 9 percent of companies are actively using software that supports data collection, analysis and reporting on Environmental, Social and Governance (ESG) activities. Additionally, an SAP Insights research center survey found that only 21 percent of business executives were completely satisfied with the quality and availability of data collected for sustainability.

Shifting consumer preferences

There is certainly some work to be done on the ecommerce side. But with that effort comes great opportunity — there is strong consumer interest in purchasing circular products, as well as some big expectations that must be addressed. A recent study by Footprint found that 63 percent of consumers are willing to pay more for products and services if they help protect the environment. 68 percent are more likely to choose a brand, store, or restaurant that uses sustainable packaging; and 77 percent are more likely to buy products if they can be sure they were packaged sustainably.

The same survey found that the onus is on companies to create this sustainable change. 87 percent of surveyed consumers agreed that companies have a responsibility to protect the planet and its people; 85 percent said brands should play a major role in solving sustainability because they’re the ones causing the problem; and 78 percent said that companies and brands are not currently doing enough to protect the planet.

Turning plans to action

So, how can ecommerce companies make change a reality? As with most forms of organizational transformation, the first step is to assess where the company is in the transition to a circular model; then, develop a strategic plan based specifically on where the company aspires to be. Technology and consultancy resources, like SAP’s Sustainability Advisory Service, can help companies better understand where they are and what they need to do to achieve their sustainability goals.

Once a plan is established, digital solutions exist that can help ecommerce companies operate more sustainably throughout their transition to a circular model. For example, the ecoinvent Association created a tool to easily import simplified and vendor-agnostic carbon-emission factors — also called life cycle impact assessment (LCIA) scores — into product footprint management solutions. Queen of Raw offers dashboards to help track environmental benefits and monetize waste within a global marketplace.

And on the consumer-facing side, Identify by Everledger uses cloud and blockchain technology to help tackle greenwashing and share more accurate and transparent product origin stories. In one example, Everledger powered a Web3 brand with MCQ — a new line born from Alexander McQueen — using blockchain technology to give items a longer life cycle, extending the life of garments into their second and third use.

The future of ecommerce lies in a circular model, and more and more digital tools are helping to make that future a reality.