E-commerce Industry ESG Thematic Report, 2023

Environmental, Social, and Governance (ESG) in the E-commerce Industry

The Environmental, Social, and Governance (ESG) approach is not only important in risk approaches such as risk avoidance but has significant impact on financial growth. The e-commerce sector has seen tremendous growth in recent years since they sell millions of products every day through e-commerce platforms. This has continued to increase post the Covid pandemic as people’s shopping behavior has changed dramatically. The change in shopping preferences has increased the responsibility of e-commerce retailers to make everyday products safer and more sustainable. This means effectively managing a company’s goals in line with ESG initiatives.

Inclusion of ESG activities in the e-commerce sector has become an important factor in consumer’s choice of e-commerce platforms. As a recent example, a fire at a leading e-commerce retailer’s logistics center was recognized as an avoidance of responsibility to consumers and as poor labor practices rather than damage to corporate property. This led to a boycott of the company.

In 2020, the global Covid-19 pandemic made way for the online shopping business to expand due to the restrictions on physical shopping spaces; thereby, helping companies operating in the e-commerce space to create a positive socio-economic impact globally. 

ESG Trends

The ‘E’ in the ESG – the environmental criteria, is a key factor that makes investment in this sector uniquely attractive to investors. The e-commerce industry produces less carbon footprint compared to retail shopping spaces, which helps economies meet their Net Zero goals. According to a study by Goldman Sachs, the carbon footprint from a typical e-commerce delivery only has about half the footprint of the traditional retail shopping space. Also, some of the transport fleets of some of the biggest e-commerce retailers are aggressive in transitioning to low-emission fleets around the world, thus helping the industry to emerge as a carbon winner.

Companies in the e-commerce space continue to make significant efforts to achieve a Carbon-neutral economy. On one hand, leading players in this space have launched climate change manifestos to reduce C0₂ emissions, transit to electric vehicles, and tackle food waste, whereas, on the other hand some other companies in this space have supported sustainable production of food, by discontinuing plastic bags for reducing the use of plastic each year.

Labor is another key social aspect that the industry addresses. The industry employs millions around the world providing them an opportunity to thrive and helping the economy flourish. In 2020 alone, one of the leading industry giants hired half a million employees, which made them one of the highest employers in the world.

ESG Challenges

The biggest challenge for stakeholders in the e-commerce industry is the lack of transparency around ESG disclosures, compared to other industries which have raised the bar in key ESG metrics reporting, including safety, turnover and emissions. Other challenges that are prevalent are labor management which identifies pay equity, working conditions, and the quality of jobs generated. Negative impact from the environment including the increase in CO₂ emissions and end-of-life waste in packaging are also major concerns. The rise in the number of e-commerce shoppers’ online means an increase in the availability of customer data, which calls for increased cybersecurity and data security risks; thus, requiring e-commerce companies to protect consumer data effectively.

Growth Of The E-commerce Market

In 2021, the global e-commerce market size was valued at US$ 13 Trillion and is expected to expand at a compound annual growth rate (CAGR) of 27.4% during 2022 to 2027. In 2022, the Indian e-commerce market is predicted to increase by 21.5%, reaching US$ 74.8 billion. E-commerce has completely changed the way business is done in India. The Indian e-commerce market is expected to grow to US$ 188 billion by 2025 from US$ 46.2 billion as of 2020.  Much of the growth in the industry has been accelerated by an increase in the access to the internet and the availability of smartphones to everyone. BharatNet Scheme, launched by the government of India under the Digital India program, to provide high-speed internet connectivity in rural areas at an affordable price and, with the launch of 5G network in early 2023, the e-commerce market is expected to grow faster.

Key companies in this theme

    • Amazon.com, Inc.

    • JD.com, Inc.

    • Apple, Inc.

    • Alibaba Group Holding Limited

    • Flipkart Private Limited

    • Walmart, Inc

    • eBay, Inc.,

    • Best Buy

Scope of the E-commerce Industry ESG Thematic Report:

    • Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape

    • Key insights on infrastructure developments and ESG issues affecting the theme

    • Identify key initiatives and challenges within the industry

    • Identify ESG leaders within the industry

    • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process

    • Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment

Key Benefits of E-commerce Industry ESG Thematic report:

    • Developing a comprehensive understanding of macro-economic, Policies & Regulations and innovations affecting the ecommerce sector, globally

    • Key insights into infrastructure developments and ESG issues affecting the theme

    • Identifying ESG risks and opportunities to business among leading players in the ecommerce industry

    • Obtaining a clear and relevant understanding of company actions, progress, and impact and find opportunities for investment