Building a Sustainable Future in ECommerce: The Path Forward

By Gladys Chun, General Counsel of Lazada Group

In recent years, sustainability has evolved to become a key focus area for businesses across industries and especially so for the eCommerce sector. With some of the fastest-growing eCommerce markets in the world, Southeast Asia is home to millions of consumers who are embracing online shopping as their preferred way to buy everything from groceries and gadgets to fashion and beauty products every single day. This rapid growth, accelerated by changes in shopping habits during the pandemic, has been both a boon for economic growth and a challenge for environmental stewardship. As the industry continues to expand, it is crucial that eCommerce companies address these challenges early on and lead the way in building a sustainable future.

The urgency for sustainability in eCommerce

The environmental impact of online shopping can be both visible and hidden. This can include carbon emissions from transportation, packaging waste and increased electricity consumption to power warehouses and data centers, among other things. This impact will surely only increase with the rapid growth of the eCommerce market in Southeast Asia, which is expected to surpass USD186 billion by 2025, according to a report by Google, Temasek, and Bain & Company. Addressing these challenges is not only time-sensitive but also crucial to the long-term and sustainable growth of any company in today’s landscape.

There has also been growing consumer demand for sustainable practices. Today’s consumers are more informed and conscientious than ever before. A study by Mastercard revealed that 68% of consumers in the region are more mindful of their environmental impact due to the pandemic. This shift signals a need for eCommerce companies to align their strategies with sustainable practices so they can meet the evolving preferences of their customers and better position themselves as leaders in the industry.

Notable trends in sustainable eCommerce practices

Several key trends and best practices are emerging in the industry that reflect the growing importance of sustainability. These trends are not just about managing environmental impact but also about creating long-term value for businesses and consumers alike.

For example, with packaging as one of the most visible sustainability challenges in eCommerce, companies are increasingly turning to eco-friendly packaging solutions, including biodegradable packaging options and recycled materials. Lazada Logistics, under its Fulfillment by Lazada initiative, has integrated sustainability considerations into its packaging practices to ensure all materials used are responsibly sourced. Since September 2023, all carton boxes used in Indonesia, the Philippines, Singapore, Thailand and Vietnam are sourced from suppliers certified by the Forest Stewardship Council. Additionally, Lazada Logistics repurposes inbound carton boxes as void fillers in packaging, promoting the reuse of materials and reducing the need for plastics fillers.

Another area where more innovations are being introduced is in the carbon footprint reduction of last-mile delivery operations. In Vietnam, Lazada Logistics partnered with Selex Motors, a startup that develops electric vehicles, and purchased 100 electric delivery motorbikes in the country. Most recently, the platform also opened Thailand’s first environmentally friendly logistics hub, the Tha Raeng Ramindra Distribution Center, which features solar energy utilization and electric motorcycles for goods transportation.

These innovations not only contribute to the reduction of carbon emissions but also offer a competitive edge in a market where consumers are increasingly conscious about their environmental impact.

The path to a sustainable eCommerce future

Firstly, to drive meaningful change, eCommerce companies need to set clear and measurable sustainability goals. These goals must then be communicated transparently to all important stakeholders, and their progress should be tracked regularly and disclosed to keep the companies accountable. The recent development of global disclosure standards, like those from the International Sustainability Standards Board, is a positive step. These standards provide a unified reference framework for companies as they continue to refine their reporting practices.

In 2023, Lazada developed its own in-house carbon data collection platform to track scope 1 and 2 emissions. The platform utilizes an improved activity-based carbon accounting methodology that is also constantly being refined to reflect real-world conditions to obtain more precise information for effective emissions management. This improvement enhances the data quality and accuracy for scope 1 and scope 2 emissions, making it more robust than the tracking methodology of previous years. The company is also in the process of expanding the platform to track scope 3 emissions as well as water, waste and electricity data.

Secondly, with technology playing a critical role within the eCommerce industry, applications of emerging technologies can be leveraged to greatly enable sustainability efforts. In operations, these range from data center energy efficiency standards to optimizing logistics in supply chains. Artificial intelligence and machine learning, for example, are being used to optimize supply chains, predict demand and manage inventories more accurately, which in turn helps to reduce overproduction in eCommerce. AI is also being used in Lazada Logistics’ last-mile delivery operations to optimize delivery routes. This ensures that more deliveries can be made with the same route or delivery vehicle, thereby reducing the number of trips required and the overall carbon emissions.

Last but not least, sustainability is a collective effort. Collaboration allows us to tackle broader sustainability challenges that a single entity cannot address alone. In my contribution to the Tech for Good Institute’s 2021 Platform Economy Report, I pointed out that governments and digital platforms can work together to enable the twin transition approach to sustainability and digital transformation. ECommerce companies are in a unique position to lead collaborations with other stakeholders across the value chain and the entire ecosystem – including brands and sellers, logistics providers, consumers, governments and non-governmental organizations – to create more sustainable practices. This can be in the form of aligning the company’s sustainability strategies with national priorities for sustainable growth; working with governments to find areas of collaboration, such as the digital transformation of MSMEs and public services; or impact sector stakeholders partnering for research, public outreach, fundraising, program delivery or evaluation.

Southeast Asia’s eCommerce industry is at an important crossroads. For the past few years, the industry has enjoyed incredible growth, but with great power comes great responsibility. By embracing our responsibility to sustainability, eCommerce companies in the region can not only manage their environmental impact but also stay ahead of their customers’ preferences. The future of eCommerce in Southeast Asia is bright, but it must be rooted in sustainability. By leading the charge, we can ensure that our industry contributes to a better, more resilient world for generations to come.

This piece has been adapted from the original Linkedin article of Gladys Chun.