How the circular economy can influence and impact the e-commerce sector
As enterprises move online, the shipping and logistics sector offers many solutions that can help them become more sustainable, writes Natasha Parmanand, Managing Director, Operations Sub-Saharan Africa, at FedEx. Among these is the growing field of reverse logistics.
Sustainability is today an integral part of doing business, thanks to both public demand for environmentally friendly goods and services, and the need to comply with Environmental, Social and Governance (ESG) regulation in many economies.
For the logistics sector, which is founded on goods shipping and transportation, this is a great opportunity to reimagine processes and enhance efficiencies for minimum carbon emissions. The circular-economy model is a great guiding principle.
Instead of the linear-economy idea of production, consumption, and disposal, the circular economy is based on more sustainable ways of doing business through sharing, reusing, recycling and refurbishing products.
It offers an opportunity to integrate sustainable principles into the operations of the logistics business itself. One particularly exciting circular-economy trend is in the area of reverse logistics – the movement of goods from customers back to the sellers or manufacturers.
Reverse logistics is a part of the circular economy, and it is a large market. A recent BrandEssence report estimated the size of the global reverse-logistics market at $614.2 billion in 2022,and saw it growing at 6.6% a year.
Reverse logistics offers an opportunity to extend the life of every product. The approach aligns with the principles of the South African Bill of Rights, which states that everyone has the right “to an environment that is not harmful to their health or wellbeing; and to have the environment protected, for the benefit of present and future generations.”
The government has even adopted a Circular Economy Guideline, with a focus on the waste sector.
There is growing agreement that it is time for logistics providers to embrace these principles, and many are – right across the African continent.
The rise of e-commerce, driven by the pandemic, has become a key driver of small business, and the logistics sector. The United States Department of Commerce International Trade Administration forecasts that Africa will surpass half a billion e-commerce users by 2025, with some predicting the continent’s e-commerce market will be worth $46 billion by then.
E-commerce is one of the greatest frontiers of opportunity of African trade, while reverse logistics is now a key component of trade in general. The reverse-logistics model can take several forms.
Waste management is a significant part of the reverse-logistics industry. This can take the form of food banking, where excess food not sold – for instance by retailers, hotels and restaurants – is returned to the value chain for redistribution to the needy. Thefood waste can also be collected for reprocessing into biomass energy.
At FedEx, we have found opportunities to minimize food and packaging waste through our collaboration with Liviri, which ensures shipped food remains fresh, and that packaging can be easily reused and recycled.
Another reverse-logistics application is in the area of product cascading, where materials, components and peripherals associated with a product are kept in circulation for as long as possible. They are repaired and exchanged, and new designs are created that still work with existing designs.
Refurbishment is another new service that manufacturers offer, encouraging customers to send in their used products for remanufacture, to extend their life, in order to be used again by the same customer, or new ones.
In addition, businesses should look to create channels for recycling or waste management, even when a product has reached its due date. Brands should incentivize customers to donate their used items for recycling or reprocessing. This is especially true with e-waste, which can often be successfully recycled, and which is becoming the focus of emerging South African government policies.
Then, there is the fundamental offering of a clear, simple returns process, where customers can easily return unwanted goods for replacement or refund. These returned goods then become prime candidates for recycling or resale. To facilitate this process, at FedEx we have designed packaging like our Reusable Padded Pak to be easily repurposed for product returns.
African small businesses would do well to expand their reverse logistics offering. There are significant benefits. A recent study found businesses felt that a strong reverse-logistics offering gave them a stronger brand image, improved customer satisfaction, and made them more profitable.
The recent ratification of the African Continental Free Trade Agreement (AfCFTA) offers a powerful opportunity to build Africa’s digital infrastructure, and its regulatory framework, to facilitate e-commerce opportunities for its people.
However, as we commit to e-commerce, it may be useful to think of it as part of an ongoing relationship between customers and clients, involving logistics and reverse logistics. As the circular economy takes root, e-commerce will stop being a one-way transaction – and become a two-way interaction.