Why are eCommerce Brands Adopting Sustainable Business Models?

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Why are eCommerce Brands Adopting Sustainable Business Models? | Futurebusiness

Modern executives have to think beyond ‘simple’ organisation and functional concerns and strategize for sustainability, balancing the bottom-line and profit-making with protecting the planet and using resources wisely. Sustainability isn’t a fad, it’s a long-lasting trend that is becoming deeply entrenched in how companies operate and do business. IBM Institute for Business Value (IBV) conducted a survey in February 2022, which found that 51% of global consumers say that environmental sustainability is more important to them than it was 12 months ago.

Sustainable Business Models (SBMs) are basically defined as, “a business model which creates, delivers, and captures value for all its stakeholders, without depleting the natural, economic and social capital it relies on.”

Companies across a huge number of industries are developing SBMs or operating them already – and eCommerce platforms are no exception. With 62% of Gen Z individuals preferring to buy from sustainable brands, and 81% of people expecting to buy more ‘environmentally-friendly’ products over the next couple of years, it makes sound business sense to be operating with an SBM, or at the very least, be in the process of developing one.

eCommerce Businesses with SBMs

Understandably, not many companies want to be the ones to lead the charge into the unknown. Looking to others who have taken that leap can be a cost-effective and sensible step – after all, if you see the mistakes they’ve made, you know to avoid them, and likewise, if they’ve had great success in certain areas, you can consider adapting and adopting those techniques.

Whilst there are a massive number of eCommerce platforms utilizing SBMs, we’re highlighting just a couple that have had both successes, and issues to overcome.

Hello Fresh

Meal-Kit platform Hello Fresh is developing a ‘lean and low-waste supply chain’, and the CEO Dominik Richter says the company, “generates 66% less food waste than the average of 12 leading traditional food retailers globally.”

Combining this with a data-driven system of dynamic-forecasting, Hello Fresh have reduced both costs and food wastage by ordering food as close to that required by customers as possible.

The SBM hasn’t been without its critics though, with particular attention paid to the packaging of the products – and Hello Fresh have needed to adapt their model to provide for more eco-friendly options.

Lush

Cosmetic brand Lush had to develop its SBM from a somewhat negative consumer opinion, due to historic usage of chemicals and animal testing.

As part of their modern sustainable approach, Lush is now focusing on ethically sourcing goods, making sure there is no animal testing, and that products are 100% vegetarian, with the packaging being free of BPA plastics, and made from 100% recycled materials.

This new focus is being supported by the actions of the business (to encourage customers to see that the company is not just saying that it has made changes), with the Sustainable Lush Fund investing in ethical agriculture as part of its value chain.

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Key SBM Points to Take Away

The above examples highlight just how important a sustainable focus can be to the image of an eCommerce brand, and how SBMs can’t just focus on one area of the business alone.

Sustainability has to be adopted across the entirety of the company and apply to every stage and process involved. Using eco-friendly changes as marketing and sales points can be effective, but it has to be balanced with perspective to prevent negative or critical responses.

If a business is only just starting to make Economic, Social, Governance (ESG) a focus – this needs to be shared with consumers, along with a plan of action for how these changes will develop.

More than this, the plan actually needs to be followed – a pledge is not an action, just the promise of one, and without the actual work to back up what is being said, consumer and investor trust will not be grown or developed.

SBMs are likely to become something of a new normal, or at least an industry standard benchmark. With global interest in sustainability, platforms such as the United Nations Sustainable Development Goals (UN SDGs), and continued consumer demand for accountability, companies need to make significant changes to outdated and eco-unfriendly processes.

The initial outlay of developing a SBM may seem high, but the cost of not keeping up with industry trends, investor expectations, and consumer demands, is likely to be considerably higher – and much more damaging to the eCommerce brand’s reputation, company value, bottom line, and profit.

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