Building a Sustainable Future in eCommerce: The Path Forward

By Gladys Chun, General Counsel, 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, millions of consumers in  Southeast Asia are embracing online shopping as their preferred way to buy everything from groceries to 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: carbon emissions from transportation, packaging waste, increased electricity consumption to power more warehouses, data centres and more. This impact will surely only increase with the rapid growth of the eCommerce market in Southeast Asia, which is expected to surpass $230 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.

At the same time, there has 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 and meet the evolving preferences of their customer, to 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, recycled materials. Lazada Logistics, under its Fulfilment by Lazada (FBL) initiative, has integrated sustainability considerations into its packaging practices, ensuring 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 (FSC). Additionally, Lazada Logistics repurposes inbound carton boxes as void fills in packaging, promoting the reuse of materials and reducing the need for plastics fills.

Another area where more innovations are being introduced is to reduce the carbon footprint 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, 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, with their progress tracked regularly and disclosed to keep the companies accountable. The recent development of global disclosure standards, like those from the International Sustainability Standards Board (ISSB), is a positive step. These standards provide a unified framework for reference as companies 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, and are in the process of expanding the platform to track Scope 3 emissions, water, waste, and electricity data. 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 in previous years.

Secondly, with technology playing a critical role within the eCommerce industry, applications of emerging technologies can likewise be leveraged to greatly enable sustainability efforts. In operations, these range from data centre energy efficiency standards to optimising logistics in supply chains. AI and machine learning, for example, are being used to optimize supply chains, predict demand and manage inventories more accurately, reducing overproduction in eCommerce. For example, AI is currently being used in Lazada Logistics’ last-mile delivery operations to optimize delivery routes, ensuring that more deliveries can be made with the same route or delivery vehicle, reducing the number of trips required and 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 of sustainability and digital transformation.  ECommerce companies are in an 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 partnering in research, public outreach, fundraising, programme delivery or evaluation for impact sector stakeholders.

Southeast Asia’s eCommerce industry is at an important crossroad. 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.