Amazon’s Business Is Growing And Diversifying And So Is Its Sustainability Strategy

Amazon's Business Is Growing And Diversifying And So Is Its Sustainability Strategy

Amazon’s latest sustainability report underlines the multi-pronged approach the company is taking to hit its sustainability goals as well as support suppliers, partners and customers on their path to being more sustainable. The numbers shared in the report also help to understand the complexities of reaching such goals at a time of business growth and diversification.

During the pandemic, Amazon grew at an early pace. From an e-commerce perspective, Amazon became the go-to source for millions of people worldwide looking for everything from food to entertainment. Such a demand spurred more than 750,000 full-time and part-time jobs worldwide, investment into its delivery network and the doubling of its fulfillment and distribution network centers. And the retailer business was not the only part of the company that grew. Amazon Web Services saw incredible growth in 2021 as an acceleration in digital transformation drove businesses to increase their spending on computing, storage and database services.

It is not a surprise that with all this growth, the company did not lower its carbon emission over the previous year and instead recorded an 18% increase in 2021. However, Amazon did record a decrease of 1.9% in its carbon intensity, signaling that the company grew its operations sustainably. This is the third year in a row that Amazon saw its carbon intensity decrease. What does this mean? Absolute reduction refers to the total quantity of emitted greenhouse gas (GHG) emissions, whereas intensity quantifies total carbon emissions, in grams of carbon dioxide equivalent (CO₂e), per dollar of gross merchandise sales (GMS). People are divided as to which set of numbers makes for a better target. While I am not a sustainability scholar, I would argue that both these disclosures are relevant and complementary in achieving a better sustainable business. Amazon seems to agree that both these numbers matter and the company remains fully committed to reaching net zero carbon by 2040.

Aside from making its own business more sustainable, Amazon is engaging in partnerships across industries and investing in innovation to maximize its impact on the planet.

Driving Collective Impact

The Climate Pledge, that Amazon co-founded in 2019, added 253 companies in 2021 alone, now bringing the overall number of companies committed to reaching net-zero carbon emissions by 2040 to over 300.

In 2021, Amazon joined buyers’ alliances to signal market demands, like the Sustainable Aviation Buyers Alliance, becoming one of the group’s founding members to drive investment and educate the market on the importance of sustainable aviation fuel (SAF). Aviation is one of the fastest-growing sources of GHG driving global climate change. SAF made from renewable biomass and waste resources can potentially deliver the performance of petroleum-based jet fuel but with a fraction of the carbon footprint. Not all SAF is created equal, though. Depending on the feedstock and technologies used to produce it, SAF can reduce life cycle GHG emissions compared to conventional jet fuel. However, the increased uptake of SAF has some people worried as they see the potential for SAF to drive deforestation and pressure crops critical to food production. Others are criticizing airlines for not moving fast enough, a strong criticism that came out of the recent Britain’s Farnborough International Airshow. The five-day trade exhibition has seen thousands of attendees gather in southern England to discuss the future of aviation. Of course, SAF adoption is only part of what needs to happen for the aviation industry to achieve net-zero carbon by 2050. Given commercial service airports are large landowners and major consumers of energy and water reaching that goal will require airports to convert their ground fleets to electric vehicles, renewable energy on-site and generate improve energy and water efficiency, none of which is moving particularly fast.

Investing in Innovation

Through the $2 billion Climate Pledge Fund, Amazon invested in 13 companies in 2021 to accelerate sustainability progress across transportation, freight, packaging, farming and aviation technology. As of today, Amazon has invested in a total of 18 companies, including Rivian, that just a couple of weeks ago parted the curtains on the first electric delivery vans that will start to deliver orders in Baltimore, Chicago, Dallas, Kansas City, Nashville , Phoenix, San Diego, Seattle, and St. Louis to reach more than 100 cities by the end of the year.

Engaging Consumers

When it comes to consumers, Amazon wants to make it as easy as possible to make sustainable choices when they shop, starting with a goal to make 50% of Amazon shipments net-zero carbon by 2030. Since 2015, Amazon has been investing in materials , processes and technologies that have reduced per-shipment packaging weight by 38% and eliminated over 1.5 million tons of packaging. For example, in the US, Amazon expanded the use of recyclable paper-padded mailer, replacing nearly 70% of its mixed material bubble mailers in 2021.

Amazon also helps customers pick sustainable products through the Climate Pledge Friendly program. Since its launch in 2020, the number of products included in the program has grown from 75,000 to more than 250,000 by the end of 2021. In 2021, more than 370 million Climate Pledge Friendly units were shipped to Amazon customers. These products are identified through external certification processes and labeled in shopping results with additional sustainability information on their product pages. In 2022, Amazon joined the Climate Pledge Friendly program with its own line of everyday essentials called Amazon Aware.

Design, packaging and recycling are three key components of a product’s journey to sustainability. For third-party items, Amazon created its own certification called Compact by Design, which identifies products designed in such a way as to eliminate excess air, water and packaging. This adds to the Frustration-Free Packaging (FFP) programs, where items are shipped using more sustainable packaging that is easy to open, fully recyclable, and without additional packaging protection. In 2021, Amazon started offering incentives for vendors to adopt FFP reaching more than 2 million products by the end of the year. More efficient packaging translates into more efficient shipping, leading to significant carbon-emission reductions at scale.

When it comes to its line of electronic products, Amazon was the first consumer electronics company to commit in 2020 to address the electricity used by its devices through renewable energy development, starting with its Echo devices. Amazon has also invested in additional wind and solar farm capacity that, by 2025, will be equal to the energy use of Fire TV and Ring devices worldwide. In addition to the renewable energy component regarding devices, Amazon became the world’s largest corporate purchases of renewable energy in 2020 and in 2021 the company reached 85% renewable energy across the business.

Investing in renewable energy is one way of addressing the consumer electronic energy footprint. The other is to make devices more energy efficient. Amazon rolled out Low Power Mode, a feature available out of the box on any new device and to devices already in use. By the end of2021, over 50% of all Echo and Fire TV devices in customers’ homes had Low Power Mode. In addition, several new Fire Tablet, Fire TV, and Amazon Smart Home devices launched in 2021 were designed for energy efficiency and earned the Energy Star certification. As more homes are getting connected and smarter, Amazon is also leveraging Alexa to help consumers monitor their smart devices in the home. Through its Hunches feature, Alexa can lend a helping hand to customers who want to conserve energy by automatically turning off a light when Alexa has a Hunch that there is nobody home and the light was left on.

Finally, Amazon is focused on shifting from sending material to landfills to sending them into the circular economy loop. Most of the waste Amazon produces comes through the customer fulfillment operations, from surplus inventory, materials that become obsolete in the supply chain, overstocked items and returned or damaged items. Amazon Second Chance offers the choice to customers in several countries to recycle, repair or trade in items as well as purchase refurbished and like-new items.

“With great power comes great responsibility” has never been a more accurate statement than in the case of Amazon and sustainability. The size, power and impact of its business call for a level of accountability to do better and help others do more. Kara Hurst, Vice President, Worldwide Sustainability, makes it clear in a post accompanying the report that she and the rest of the leadership are very aware of what was asked of them: “The journey to become more sustainable is not simple or straightforward for any organization. For a company of the size and broad scope of Amazon, it’s a big challenge. But at Amazon, we don’t shy away from big challenges. believe in the need to act now.”

Disclosure: The Heart of Tech is a research and consultancy firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this column. The author does not hold any equity positions with any company mentioned in this column.

.

Leave a Comment

Your email address will not be published.