How climate action is making a competitive difference for India's e-commerce
Increasingly eco-conscious consumers and investors are placing greater importance on environmental, social, and governance issues than ever before.
E-commerce players around the world have begun to make their supply chains greener – and India is the place where the trend has gained strong momentum.
Increasingly eco-conscious consumers and investors are placing greater importance on environmental, social, and governance (ESG) issues than ever before – thereby positively influencing several start-ups to embrace the trend. Against such a backdrop, climate action has become a major competitive differentiator for e-commerce players in India.
With business operations affected due to the COVID-19 pandemic induced travel restrictions and lockdowns, consumers are now increasingly preferring the online mode to purchase goods and services. Consequently, the Indian e-commerce (online retailing) industry is slated to grow at a CAGR of 22% between 2020 and 2024 to be worth $115.5 billion in 2024, according to GlobalData.
“E-commerce companies in India are covered under the Plastic Waste Management Rules, 2016. However, due to a lack of monitoring, they continue to use excessive amounts of plastic for packaging. The Indian government is concerned about the growing plastic pollution. A ban will make consumers even more conscious of the overuse of plastic and many will prefer e-commerce brands with effective green policies,” says Swati Verma, associate project manager of Thematic Research at GlobalData.
Several companies have already begun to act.
To ensure full compliance with all extended producer responsibility regulations, Walmart-owned e-commerce platform Flipkart recently announced that it has eliminated all single-use plastic packaging from the supply chain in India. Amazon too replaced plastic in its packaging with sustainable, biodegradable alternatives. Additionally, both the players are making efforts to reduce emissions in their delivery fleets.
Other e-commerce start-ups in India are also taking significant action. For example, online beauty store Nykaa has set up a recycling system for all its packaging and Tata Group-owned online grocery provider BigBasket transitioned to plastic-free packaging in 2020.
“Indian e-commerce companies will further strengthen their sustainability commitments. For foreign players like Amazon, this issue is crucial because of new government policies aimed at restricting their growth. For domestic start-ups, strong ESG credentials will help them attract more loyal customers and investors. E-commerce companies that are slow to adapt will struggle to compete in this lucrative market,” said Verma.