As we write this article, de-growth has become a hot topic as the world has been brought to a standstill by the COVID-19 virus. The deadly virus has spread throughout the globe, causing non-essential businesses to shut down, and people to isolate themselves in their homes.
Experts agree that COVID-19 is not a random event. Kate Jones, chair of ecology and biodiversity at University College London, has referred to COVID-19 as “a hidden cost of human economic development”. Our pursuit of economic growth has always had a downside, COVID-19 is a sudden, but not unexpected result of this uncontrolled growth.
“We disrupt ecosystems, and we shake viruses loose from their natural hosts. When that happens, they need a new host. Often, we are it.”David Quammen, Author of “Spillover: Animal Infections and the Next Human Pandemic”, Source: NY Times
Business growth has been commonly used as the primary measure of success for companies, especially within eCommerce. The sustainable nature of that growth, for either business or the environment, has rarely been considered.
Could COVID-19 be the kick-start of a de-growth movement in eCommerce?
The eCommerce industry has become very accustomed to growth. Both retailers and their digital teams have lived in a world where year-on-year (YoY) online growth is the expected norm. The only debate has been how much growth.
With bricks and mortar sales stalling, retail businesses switch attention to online to deliver overall business growth. This YoY growth is both celebrated and demanded, “comping” last year sales number is both a minimum requirement and foremost criteria of business health.
Company values, brand health, customer experience, and indeed sustainability, are all afterthoughts. For many retailers, business has become very short-term focused.
In a world where natural resources are limited, and the damage caused by consumption becoming evident, is there a fundamental issue with this “comp” model? Is infinite eCommerce growth sustainable?
The Problem with Growth
A focus on growth is not just an eCommerce problem. We live in a world where growth and expansion is both a priority and a measure of success.
The concept of growth underpins the global economy. The World Bank targets continual annual growth of Gross Domestic Product (GDP). The economic model does not allow for anything else, with the argument that this growth model is the driver behind the quality of life we have all become accustomed to. This ignores the potential quality of life for future generations.
For retail businesses selling consumer goods, whether online or offline, growth means selling more stuff. Selling more stuff means using more natural resources, increasing carbon footprint, and creating more waste.
Our planet is struggling to cope now, how do we expect further growth to improve this. In a finite world, how can infinite growth be sustainable.
The concept of de-growth is nothing new. A recent article by the Harvard Business Review highlighted the idea dating back to the 1970s and explained how this is an essential part of the sustainability movement.
The article explains the simple concept. In response to increasing environmental and social problems, the only real solution is to produce and consume less – to shrink our economies to cope with the finite capacity of our planet.
For business leaders, this concept of de-growth is entirely unthinkable. As per The World Bank growth targets, the view is that growth is an economic necessity, and any threat to that not only undermines business but basic societal functioning.
With business leaders unlikely to drive change, and politicians focused on short-term goals for the next voting cycle, it’s likely to be left to the people to force change. Consumer-driven degrowth is something already happening at a grassroots level, with consumer demand actively being transformed, despite political and corporate resistance.
COVID-19 Forced De-growth
COVID-19 has caused a widespread slowdown to all business, including the manufacturing of products, selling of consumer goods, and the global travel that has become part of our daily routine. eCommerce is not immune to this slowdown, with many online retailers forced into a significant reduction in trade.
While both the risk to life and effect on business is devasting, the forced and instant COVID-19 global shutdown has shown significant environmental benefit as a result of the economic slowdown.
The estimated environmental benefits have included:
- 40% drop in Nitrogen Dioxide (NO2) seen in China. Similar expected decreases in other greenhouse gases.
- 30% drop in fine particulate matter recorded in New York.
- A drastic drop in NO2 levels over Northern Italy.
These environmental benefits caused by the forced slowdown perfectly highlights the fundamental benefits of the de-growth movement. On the flip-side, the sudden and genuine threat to life from the Coronavirus provides a terrifying insight into our potential future if we continue with our current economic model of infinite growth.
The only difference is that it will be the future generations who will be at risk – our children, and grandchildren, rather than our parents. We have a window to the future; the big question now is whether we will heed the warning.
As part of the Harvard Business Review research into de-growth, they examined companies at the forefront of the degrowth movement. The aim was to identify the key strategies that could be utilised by other businesses.
1. De-Growth Adapted Product Design
Designing products with the principle objective of extending the product lifespan should be central. This extension of life includes looking at modular systems where parts can be easily replaced or upgraded, alongside focusing on locally produced materials.
- Mobile phones- Instead of a business model built around replacement phones every 1-2 years, manufacturers should focus on repairing rather than replacing. Why couldn’t core components be made to last, with individual parts upgraded regularly rather than the entire phone?
- Fashion- This is one area that is already seeing progress. Companies such as Patagonia use quality materials with a focus on durability, alongside offering repair services, with a direct encouragement to repair instead of purchasing new.
For eCommerce, adapted product design comes in the form of technology-led retail products to improve the impact of online retail. Subscription models, such as fashion rentals are one significant idea, which, although currently have questions surrounding sustainability, have huge potential.
2. Value-Chain Repositioning
De-growth value-chain repositioning occurs when firms exit from certain stages of the value chain and delegate tasks to stakeholders. In other words, companies start to add efficiencies by outsourcing tasks.
- Motor- Local Motors created a recyclable vehicle, crowdsourcing designs and crowdfunding capital, with 50 individual parts printed onsite vs the standard car made of roughly 25,000 parts.
- Lego- The company launched a marketplace for both creating new Lego designs, and also creating a recommerce platform for trading used products.
For eCommerce, value-chain repositioning has multiple use-cases, but logistics seems the most relevant. A model where all companies agree to a consolidation of packages to create the most eco-friendly transport is the future.
3. De-Growth Oriented Standard Setting
Companies accepting the responsibility of setting the standards for their industry will become vital. Being a visionary in sustainable processes and setting an example for others to follow should be seen as a fundamental part of being a market leader.
- Fashion- Having already mentioned Patagonia as the clear leader in the space, other companies have the opportunity to follow suit. H&M recently touted an offer of opening their supply-chain to sustainable fashion start-ups. If they did this as a way of pushing the whole industry forward, rather than for any financial benefit, this would be a significant new standard for the fashion industry.
- Motor- By publicly releasing all patents in 2014, Tesla made sensitive material available to all other car manufacturers. Ignoring the potential competitive advantage they were giving up, Tesla had the understanding that pushing the whole industry forward would have a significant positive impact on society, and in turn, benefit their business.
For eCommerce, this could come from the retailers themselves, but more impactful will be to come from the technology and operational partners who underpin the industry.
De-growth eCommerce Strategies
What about specific de-growth strategies for eCommerce businesses? For an industry that is so accustomed to expansion, how does the eCommerce industry change its focus?
The short-term answer is that it shouldn’t necessarily. Advancements in technology make eCommerce growth inevitable. We should, however, as an eCommerce industry, hold ourselves more accountable for this growth. It shouldn’t be the sole measure of success. Sustainable eCommerce businesses should be growing, but with more focus and celebration upon improving customer experience and reducing environmental impact.
One example would be sale events. Discounting deeper and for longer to “comp” last year is not sustainable, for either business or the environment. Yet we still celebrate record-breaking Black Friday/Afterpay Day/Boxing Day sales as some form of great achievement.
As customer expectation increase regarding the environmental impact (or lack of) that a business has, sustainability will actually become a dominant factor influencing growth. Much like the digital revolution, the companies who invest early in sustainability will be the ones who survive.
Further Reading: Carbon Offset: The Good, the Bad, and the Unexpected. Read More
Main image source: The Ecologist- The rise – and future – of the degrowth movement