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How to Finance Sustainability Initiatives in Ecommerce

finance sustainability

There’s no two ways about it; modern companies of all sizes need to invest in a sustainable future. But with so many opportunities to invest in sustainability and sustainable growth, it’s challenging to know where to begin. 

Here’s our guide to finance sustainability and how you can make it work for your ecommerce business.

What Is Green Financing?

Green financing is the investment into projects, products, and activities that promote environmental sustainability development. While some may refer to this as “climate financing,” the two terms carry slight but important differences—green financing covers all sustainability goals whereas climate financing refers to the sustainable finance of projects and products that are designed for climate change mitigation. In this article, we’re sticking to the umbrella term “green finance” or “sustainable finance.”

Within ecommerce, sustainable finance might look like the following.

We need sustainable finance because sustainability projects need financial resources. By allocating funds to internal sustainable goals—like reducing the impact of their supply chains, minimizing their greenhouse gas emissions, and switching to renewable energy sources—ecommerce businesses do their part to ensure that the environmental cost of their operations stays low

Companies can take additional action to take responsibility for their environmental impact by investing in sustainability projects, like carbon offsetting projects, to help mitigate the environmental impact that they cannot yet remove from operations.

Though ecommerce businesses have a responsibility to ensure that their impact on our planet is minimal, partaking in sustainable finance is more than an ethical choice. Ecommerce companies reap plenty of economic benefits from making such investments.

How Ecommerce Businesses Can Benefit From Green Financing

Sustainable finance provides a way for ecommerce companies to reach their corporate social responsibility goals. By allocating funds to improve internal sustainability and support projects outside of your company, you can illustrate to your customers that sustainability isn’t just a marketing term but a key tenet of your business operations. 

Even though sustainable finance requires upfront investment, companies that participate in sustainable finance often enjoy increased revenue and improved customer loyalty. Here are some of the biggest benefits of sustainable finance.

  • Increased revenue: Products with sustainability claims, such as “100% recycled content,” “carbon-neutral production,” etc., see a 6.4% higher revenue than products that don’t carry such claims.
  • Improved customer loyalty: Seventy-seven percent of retail and consumer product organizations claim that sustainability leads to improved customer retention.
  • Entice new customers: Sixty-eight percent of customers say that they have chosen a product based on its sustainability credentials.
  • Gain green certification: ESG certification can only be achieved after third-party audits prove your sustainability. If you’re already investing in sustainability initiatives, then you’re on the right track to gaining top-level certification.
  • Cost savings: Although investing in sustainable action, like transitioning to renewable energy, requires upfront costs, it eventually leads to cost savings. While the cost of fossil fuels has remained roughly the same over the last 140 years, the cost of wind and solar power continues to drop by around 10% annually.
  • Compliance: Government agencies around the world, notably in the E.U. and the U.S., have introduced legislation and regulations to place the burden of responsibility for sustainability and climate change on companies and manufacturers. To remain compliant with current laws and ensure continued compliance as proposed legislation becomes stricter, forward-thinking companies must explore sustainable finance options.
Capturing the attention of Gen Z

Understanding The Cost Of Sustainability In Ecommerce

Although sustainable finance is important for business growth, it also requires considerable funding and action. It calls for more than setting aside 5% of your profits and sending it to a charity. You must strategize your sustainability initiatives, determine your end goals, and prioritize the areas of your greatest impact. Sustainable finance, like all areas of sustainable business, needs to permeate all levels of operation. We’re talking about fundamental change rather than pet projects.

Before you start financing sustainability initiatives, here are some of the costs to consider.

  • Supply chain modifications: A large portion of a company’s impact comes from its suppliers. In fact, when it comes to carbon emissions, as much as 90% of your footprint can come from your supply chain. When investing in your sustainable development, you must include supply chain strategies, such as supplier assessments, logistics optimization, switching to more sustainable suppliers, and more.
  • Packaging changes: Packaging constitutes another big portion of ecommerce’s impact. Transitioning to recyclable packaging requires research and development alongside the transition to the packaging change. Furthermore, packaging that’s more climate-friendly is often more expensive than other options, like plastic, so you may have to increase your packaging budget overall.
  • Initial investment costs: Sustainability initiatives often require upfront costs to facilitate the transition. This includes things like switching to green-certified web hosts, developing employee training programs, installing motion-sensor lighting, switching to renewable energy sources, and more. Often, these changes later result in cost savings, however, the initial investment may be significant.
  • Product redesign: Companies that are serious about sustainability financing and becoming more sustainable should reanalyze their products and invest in more sustainable designs where necessary. For example, if your products have many plastic parts, you should consider using more sustainable materials, like recycled post-consumer plastic. This will require hiring experts to identify areas where you can improve, investing in new materials, marketing the new products, and more.
  • Compliance: As much-needed legislation surrounding sustainability emerges, it carries new costs for companies. To remain compliant, companies need to identify areas where they can improve and make certain changes to adhere to climate regulations now and in the future. This may include investing in sustainability management software to track and measure impact, creating a team dedicated to sustainable operations, conducting a sustainability audit, obtaining relevant permits and permissions, and more.
  • Training and education: As you make sustainability a foundational piece of your business operations, you must ensure that your company culture aligns with your goals. This will include employee training and education on topics like recycling in the office, energy and water usage, and more so that their daily habits help your organization achieve its sustainability KPIs.
  • Opportunity costs: Although sustainability financing is an essential business strategy that benefits environmental sustainability and business growth, it still diverts funds from other areas of operation. As you consider all of the costs associated with sustainability, remember to include the areas where funds will be taken. As you create your green financing strategy, consider your long-term goals and determine where it makes the most sense to divert funds in favor of your sustainability strategy.

Although effective sustainability strategies often require considerable investment, the return is substantial. Businesses with high-performing sustainable development enjoy energy cost savings, improved customer loyalty, logistics efficiency, and more. 

Want to know where your business stands? Get your sustainability scorecard with our quiz:

How Ecommerce Businesses Can Finance Sustainability Initiatives

Now that we’ve covered green financing and why it’s important, it’s time to discuss how you can finance sustainability initiatives. After all, you need funds to participate in green financing, and you don’t want your sustainable development goals to fall short just because you can’t find the funding. Here are some ways that e-commerce companies are financing their sustainability initiatives.

Internal funding

Perhaps most obviously, green financing can come from internal funding. As your company begins its sustainable financing journey, it should first determine how much financing it needs to achieve its sustainability goals and how much of its budget can be allocated. To help improve your internal funding, prioritize areas of sustainability that will ultimately result in cost savings, such as investing in energy efficiency.

Public and private grants

If your company is eligible, public and private grants may be available to help finance your sustainability initiatives. There are a variety of grant opportunities available to companies large and small, and it may be worth it to seek any applicable grant to help you achieve your overall sustainability goals.

Green loans and finance

Some financial institutions provide loans to businesses and projects dedicated to sustainable development. If your company does not have the budget to achieve its sustainability goals, it could consider taking out a loan specifically to hit its sustainability KPIs.

Invest in green projects while generating financing for green certification

If your company invests in green projects, like carbon offsetting projects, it can alleviate costs associated with green certification, minimizing the budget needed for sustainable finance.

Let’s take a look at a case study. One of our customers, Rumpl, implemented our checkout widget to encourage customers to invest in climate projects as part of their goal to gain Carbon Neutral Certification through Change Climate. As a result, 67% of their customers opted in to supporting carbon projects, with 31% of those contributions alleviating costs that contribute to their Carbon Neutral Certification. By partnering with EcoCart, Rumpl was able to kill two birds with one stone: they mitigated a portion of their greenhouse gas emissions associated with their supply chains and alleviated costs associated with their goal of becoming certified. 

rumpl checkout example

This goes to show how investing in external green projects can help your company attain its environmental objectives, too.

Funding Sustainability Initiatives In Ecommerce With EcoCart

If you’re serious about your sustainability initiatives and funding green projects, then EcoCart can help. With our checkout widget, sustainability dashboard, marketing toolkit, and more, we’ve helped ecommerce companies like yours achieve their sustainability goals, improve customer loyalty, and attain green certifications. Interested? Reach out to our team for a demo today.

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