Carbon emission and online order returns in the era of the rise of online commerce

Hello Ergonode blog readers! This is Marcin Piwowarczyk, CEO and Founder of Ergonode. I thought I would create a series of texts where you can acquire knowledge and learn about my personal view on products digitalization and the digital transformation. It’s called “The Digital Shelf” because it’s about key things related to the digital commerce shelf found by me and my team during market research.

In my last post, I did a quick look at how the theme of ecommerce returns is looking especially with regard to their causes. I was reading through various articles and came across a very interesting thread that inspired me for this new entry. Nature magazine created a short study on the impact of returns in online sales on carbon emissions. Interestingly, returns from this perspective are a real pain point for business sustainability, because while the delivery of products to the customer is fully covered and optimized on many levels (economic, but also climate impact), the returns completely break out of this chain. In the chart below you can see how returns (data based on the US market) generate an additional negative impact in the form of excess CO₂ emissions.

In Poland, the situation seems far different thanks to the widespread popularity of parcel vending machines, returns through this supply chain seem to be under much greater control compared to other possible forms. Importantly, according to the authors of the published report "Green Last Mile Europe 2022", CO₂ emissions can be reduced the fastest by educating consumers as much as possible and widely implementing out-of-home deliveries. According to InPost, one Parcel Machine reduces, annually, as much as 13,845 kg CO₂, which is equivalent to cleaning the atmosphere by 2769 trees.

The NRF (National Retail Federation) reports that in 2021 there were as much as $218 billion worth of goods returns in the US alone with all US e-retail sales reaching $1.05 trillion. And now when we confront these figures with the projected value of global e-commerce in 2022, which according to very cautious forecasts will reach $3,750 billion, it is likely that returns could account for nearly $800 billion.

Looking for information on what CO₂ might be involved, I came across analysis from the Chinese market, by analogy, one can venture that it might be a value exceeding 6 Mt CO₂ (more than 6000 tons!!).

Thus, the fight against returns has not only a strictly cost and operational dimension in companies, but also a real impact on the environment.

The authors of the Nature magazine article have mentioned 4 important points affecting product returns:

1. The quality of product returns data needs improvement, including better detail and broader coverage. Retailers, manufacturers and logistics organizations should cooperate and coordinate data management. Emerging technologies, such as blockchain technology, could aid this process.

2. In order to reduce product returns, consumers' poor shopping experiences should be better prevented. Online consumers make decisions based on pictures or videos. Companies should be responsible for transparency and actual perceptions of product features such as aesthetic and functional qualities to avoid false expectations.

3. Consumers' environmental awareness should be raised. In particular, relevant information on the environmental impact of products could be more prominent on shopping websites. This additional information will be useful for consumers to better understand the overall carbon impact of products purchased online.

4. Companies need to focus more effectively on improving the design of reverse supply chains from a carbon perspective. There are potential co-benefits associated with minimizing carbon emissions from product returns and ensuring profitability. Companies should design these reverse logistics networks to improve efficiency.

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If you would like to read more on this topic I recommend a few more articles:

Emission burden concerns for online shopping returns - https://www.nature.com/articles/s41558-021-01246-9

Low-carbon pathways for the booming express delivery sector in China - https://www.nature.com/articles/s41467-020-20738-4

Grocery store emissions - https://www.nature.com/articles/s41893-022-00959-9

A sweater you don't like is a trillion-dollar problem for retailers. These companies want to solve it - https://www.cnbc.com/2019/01/10/growing-online-sales-means-more-returns-and-trash-for-landfills.html

More online sales mean retailers need to solve a $50 billion returns problem this holiday season - https://www.cnbc.com/2019/12/19/online-returns-this-holiday-season-to-hit-record-41point6-billion.html

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Thanks for reading and see you next time!

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The Digital Shelf Insights is a monthly newsletter with digital transformation, commerce innovations and PIM insights, created by Marcin Piwowarczyk, CEO and Founder of Ergonode.