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.
ESG activities in e-commerce are crucial for consumer choice. A fire at a retailer’s logistics center led to a boycott due to poor labor practices. Covid-19 pandemic helped online shopping businesses 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.
E-commerce companies are making efforts to achieve a carbon-neutral economy. Leading players have launched climate change manifestos, while some companies have supported sustainable food production. The industry also addresses labor, with one company hiring half a million employees in 2020.
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
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