Online Marketplaces Sustainability Reports: the Methodology, the Insights, and the Actions
451 pages of Online Marketplaces Sustainability Reports: I have read them, so that you don’t have to
Online Marketplaces Sustainability Reports: the Methodology, the Insights, and the Actions
First, some great news: if you were wondering about the claims that the companies like #OLX, #Marktplaats, #Kleinanzeigen, #Vinted, #Vestiaire Collective, #leboincoinare net-net good for the environment, the data appear to show that their net carbon footprints are indeed negative.
Second, the biggest A-Ha: how incredibly cross-disciplinary, both online and offline, are the efforts required to convert these carbon footprint reports into actionable operational impact.
Finally, the So-What: Today, it's mainly the largest companies with granular internal data and access to proprietary databases who can translate carbon footprint insights into action. Progress on open-access environmental lifecycle databases and digitalization of operations for the companies of all sizes and industries is needed to achieve the full potential of decarbonization.
Let’s start with the example of Vestiaire Collective to illustrate how an online marketplace for designed second-hand fashion went well beyond their core software platform into the offline world to reduce their carbon footprint.
Similarly to the other Online Marketplaces, Vestiaire Collective Scope 1 and 2 emissions represent only 1% of the total company carbon footprint. This means that optimizing energy footprint of the internal company operations, while a no-brainer, was not going to have a significant effect on the total footprint.
A significant share of the Scope 3 carbon emissions is related to the transportation of traded products. Reducing this footprint required work on multiple fronts and went far beyond the “online platform product development” discipline.
- Digital Authentication: Vestiaire Collective increased the ratio of users who ship items directly to each other, without passing through the warehouses, to 65%. This required investments into digital authentication, which in turn reduces the volume of in-person authentication checks.
- Warehouses and Regional Local-to-Local Transport Partners: The share of air transport was reduced from 80% to 26% by investing into 5 warehouses across the globe that enable regional local-to-local transport.
- Packaging design and materials: The packaging volume was reduced by 80% by redesigning the boxes, the paper tags, the pouches, and the seals, and moving towards recycled, organic or bio-sourced materials.
This example illustrates how reducing the carbon footprint of online marketplaces necessarily takes them into the offline world, requiring additional expertise ranging from industrial production to transportation to packaging.
Expect to see increasingly cross-disciplinary impact, such as using digital ID and AI-driven authentication tools by Vestiaire Collective to simplify the product delivery journey, or Vinted setting up Vinted Go – a shipping vertical business that goes beyond enabling the original marketplace.
It is even more critical to reduce the burden of data collection and benchmarking, so that the corporate GHG emissions reports can focus on generating actionable operating priorities rather than on the descriptive methodology. There are a lot of opportunities to add value: for the companies with proprietary Life Cycle Inventory databases and tooling, and for the non-profit organizations like #Ecoinvent, which is dedicated to the availability of high-quality data for sustainability assessments worldwide.
The companies with large user bases and societal impact, like the online marketplaces in this article who often boast 30 to 40 million customer bases per country, will greatly benefit from investing into cross-disciplinary and offline expertise to further improve the net-negative carbon effect of their operations.
What are the key takeaways from the Four Sustainability Reports of Adevinta, OLX, Vestiaire Collective, and Vinted?
All these companies have a modest direct carbon footprint, mainly related to the electricity and heating of their offices and data centers. For example, Adevinta reported 40kT of CO2 emissions in 2022. For comparison, Unilever reported 92mT GHG emissions in 2022, approximately 125 times higher per employee (617 T vs 5 T).
End-to-end, the business of enabling second-hand trade is producing a negative carbon footprint, as extensively covered in the company sustainability reports.
The main drivers of this negative carbon footprint are the Avoided Emissions:
- Life extension of the items traded on the platforms, which reduces their annual carbon footprint. The Vestiaire Collective report estimates that buying a used garment extends its life by 2.2 years on average, reducing its carbon, waste, and water footprint by 73%.
- Displacement effect, when buying used prevents a new item from being made at all. The Vinted report estimated such avoided purchase rate based on 108,829 survey responses, reporting that the average of 39% of used products bought on Vinted replaced a new product purchase. For Vestiaire Collective, who focuses on luxury fashion, 82% of sold items replaced a first-hand purchase.
The displacement rates for multi-Vertical marketplaces such as Adevinta or OLX vary much more per category and country, ranging from nearly zero for the users considering a second-hand car purchase (OLX estimate), to a much higher percentage in the case of home décor or phones.
As for the decarbonization levers, the reports show that the key sources of carbon footprint for these marketplaces are largely outside of their direct control:
- Emissions related to Producing and Using the items that are being re-sold are the largest drivers of the total carbon footprint. As the OLX report illustrates, buying a used smartphone results in 36 kg CO2 -ed emissions savings, a used Television saves 172 kg, and a used car 776 kg CO2 -ed emissions. With 26 millions of such items sold second-hand on the OLX platforms in 2022, even a modest displacement rate generates a significant total impact, estimated at 5 million tonnes of CO2 -e.
- Transportation emissions related to second-hand trade require a lot of assumptions to assess when the transactions take place primarily off-platform. Adevinta Second-Hand Effect report used surveys to estimate the average distance between a buyer and a seller and the resulting footprint of a direct point-to-point transportation.
For transactional marketplaces like Vinted or Vestiaire Collective, the transportation data are available on a granular level, and have shown to be the main source of operational carbon footprint, 96% in case of Vinted.
Such detailed transactional data, combined with the existing emissions databases, gave Vinted and Vestiaire Collective highly actionable insights that they translated into operational priorities and executed upon.
In case of Vinted, the analysis has shown that delivering to a Pick-Up and Drop-Off (PUDO) location instead of to a buyer’s home reduced emissions by 62%. Vinted Go Service is now directly focusing on making this the prevailing standard.
As both Adevinta and OLX platforms increasingly introduce transactional commerce and pay-and-ship services, the transportation footprint will increase significantly. For example, OLX reported 12 million pay-and-ship transactions in H2 2023. Applying the average footprint of a home delivery from the Vinted data (1.77 kg CO2 -e), OLX pay-and-ship would generate 42kT CO2-e on an annualized basis, comparable to the entire Adevinta direct footprint.
Given the total user base and the number of items traded on these platforms, when Adevinta and OLX will enrich their environmental impact reporting and translate that into actionable carbon footprint reduction, the total impact across the 30+ markets they operate in will be even more significant.
What are the Key Methodology So-Whats?
1. Scope 1 and Scope 2 emissions are straightforward to calculate with the data and techniques available across different countries and industries. They are a small percentage of the total emissions, addressable with straightforward measures such as switching to sustainable energy in the office and data center operations.
2. Scope 3 emissions require conducting a lifecycle analysis for an individual company and applying many assumptions of varying precision.
There are a lot of similarities in the high-level lifecycle schemas for the online marketplaces. However, there are so many differences in the types of products traded, their carbon footprints, life extension, displacement rates, and transportation footprints, that to deliver actionable insights one must go vertical-by-vertical and country-by country, developing specific tailored solutions on a granular level.
For example, reducing the environmental footprint of electronics trade (phones, tablets, and TVs) may require investments into reparation centers, while for fashion the biggest impact is digital authentication and reduced packaging volume. Implementations depend on the price of labor, population density, and income in the region, leading to diverging optimal outcomes per country for the same global business.
3. There are several tools and databases that provide Life Cycle Inventory insights, most of them proprietary and vertical-specific (Kering, Vaayu, Aktio), but some are non-profit and open for all to use (Ecoinvent). The best actionable insights come from combining these databases with the internal transactional data and user surveys.
For example, Vinted sent their series of surveys to a total of 2.4 million users from 8 countries with a response rate of 10.8%. This created a unique dataset with 350,000 survey responses, allowing a granular matching of the transactions to Vaayu’s Product Life Cycle Assessment (LCA) Database of more than 600,000 data points.
Vestiaire Collective built upon Kering and PWC work on the Environmental P&Ls, that translate multiple aspects of the environmental and societal impact – from GHG and water usage to employment rates – into monetary values. Kering eP&L focuses on the Luxury Fashion vertical and can be applied across multiple companies to estimate and reduce environmental impact.
The more well-developed and more commoditized these databases become, the more opportunity for meaningful action there is for the companies of all sizes. Today, it’s mainly the large companies with the granular internal data who can afford to take facts-driven action. Hopefully, better databases and more digitized operations open these opportunities to smaller businesses.
4. User surveys will continue playing a meaningful role in the data collection and interpretation, complementing other data points, such as LCI databases or transaction and shipment route analyses.
These surveys are especially valuable in understanding customer motivation, choices available to them, and the means to empower sustainable behavior – this is where the Customer-Driven Product Development expertise of the online platforms can translate into broader environmental impact beyond their core operations.
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