Sustainability key performance indicators (KPIs) show your business where it can become more sustainable. Whether you’re seeking to reduce your carbon footprint through transportation KPIs, minimize plastic waste with sustainable packaging, or decarbonize your supply chains, sustainability KPIs will help you measure the success of your efforts.
But which KPIs are most important for ecommerce businesses, and how can you implement them? Here’s our guide to key performance indicators for sustainability.
What Are Sustainability KPIs?
Sustainability KPIs are specific and measurable metrics used by brands to measure their environmental, social, and economic impact. These KPIs help businesses understand the impact of their operations on the environment and society, and they provide a framework for setting and achieving sustainability goals.
As ESG reporting becomes mandatory in many countries and states, it’s important that companies collect their own data surrounding their sustainability programs to ensure that they are reaching certain goals. ESG scores are essential; poor scores could result in losing investors and customers, and they could even garner a fine. Sustainability KPIs will take the guesswork out of your ESG reports and ensure that your scores see improvement.
What is ESG?
ESG stands for Environment, Social, and Governance—the three pillars of sustainability. It’s a way to measure your company’s overall impact. While CSR (corporate social responsibility) refers to your company’s sustainability strategies, ESG will determine how well those strategies are working.
You can use your sustainability KPIs to achieve your CSR goals and improve your ESG scores. While ESG has historically been a voluntary report, regulations in the U.S. and abroad are making them mandatory in many cases. Because of this, companies should start developing solid sustainability strategies with feasible targets in order to improve their ESG scores.
Why Your Business Needs Sustainability KPIs
It’s clear that the future of ecommerce is sustainable. As a rapidly growing sector—the global ecommerce market is projected to reach $7.4 trillion by 2025—it carries a lot of weight in terms of global sustainability goals. On top of this, consumers demand that the ecommerce companies they support showcase environmentally friendly actions.
In our State of Sustainability Report, we found that two-thirds of consumers check to make sure that a brand is eco-friendly before making a purchase. Similarly, PDI Technologies discovered that 66% of consumers will pay more for sustainable products. If ecommerce companies wish to stay relevant, then they need to start implementing sustainable business strategies.
To avoid greenwashing and ensure that your strategies result in a positive impact, your sustainability goals need to be clear, quantifiable, and science-backed. The benefits of corporate social responsibility and environmental sustainability can only be reaped through effective strategies measured by clearly defined KPIs.
Key Sustainability KPIs For Ecommerce
Sustainability KPIs are defined through clear metrics that measure things like carbon dioxide output, energy consumption, recycling rates, water usage, and more. Within ecommerce, the biggest areas of impact surround carbon emissions from shipping and packaging waste.
Take our quiz to get an idea of where your business stands on each of these KPIs before we dive in:
Here are some major key performance indicators to track your sustainability performance and achieve your environmental, social, and governance goals.
Greenhouse gas emissions, like those associated with transport, can greatly impact ecological systems. Mismanaged plastic waste, like that associated with packaging, litters waterways and becomes marine plastic, adding to the environmental impact of online shopping.
Waste management and reduction
Sustainable inventory management is all about minimizing waste and identifying ways that you can be more sustainable at the item-specific level.
Here are some examples of KPIs for waste management and reduction.
- Have recycling areas available in all office spaces by the end of the quarter.
- Eliminate plastic from all packaging by the end of the year.
- Invest in projects to offset 30% of your plastic footprint by a certain date.
Green ecommerce seeks net zero carbon emissions. According to the Corporate Net Zero Standard, in order to claim carbon neutrality, at least 90% of carbon emissions must be eliminated, while the remaining 10% or less can be offset with carbon offset projects.
In order to achieve this, everyone needs to do their part to reduce their carbon footprint. There are three types of carbon emissions to measure: Scope 1, 2, and 3.
What is the difference between Scope 1, 2, and 3 emissions?
- Scope 1: GHG that comes directly from the company, e.g. from company facilities and office spaces.
- Scope 2: Indirect GHG emissions that come from purchased electricity from your utility provider.
- Scope 3: Indirect GHG emissions that come from your value chains.
Set KPIs that address all three scopes. While scope 1 and 2 can be fairly easily addressed through investing in renewable energy, participating in carbon offset initiatives, and technology like Direct Air Capture, the third scope is a little more difficult to control. You can analyze the impact of your supply chains through a supplier environmental sustainability index, which will help you determine where your suppliers stand, then either work with your current suppliers to help them reduce their carbon footprint or switch to a more sustainable supplier.
Here are some examples of KPIs to reduce carbon emissions.
- Reduce scope 1 carbon emissions by 25% by a certain date.
- Transition 30% of your energy use to renewable sources by a certain date.
- Invest in offsetting projects to take responsibility for 40% of your supply chains’ carbon emissions by a certain date.
Water usage and conservation
Although it may seem as though water use isn’t a huge area of impact for ecommerce, data centers actually use quite a bit of water to cool their systems. Ecommerce companies can minimize this area of impact by switching to green web hosts that minimize their water usage or use recycled water.
Your products will likely also require water somewhere along the way, from the way the material is grown and harvested, to how the product is manufactured.
Here are some examples of KPIs for water usage and conservation.
- Invest in water offset programs to reduce your water footprint by 30% by a certain date.
- Reduce your water usage by 20% by the end of the quarter.
- Complete three employee workshops on water management by the end of the year.
Energy consumption is another perpetrator of greenhouse gas emissions. In fact, it is responsible for over 30% of carbon dioxide emissions in the United States. By switching to renewable energy sources and reducing energy consumption as much as possible, ecommerce companies can minimize their carbon footprint immensely.
This can be done by switching to a green web host that uses clean energy to power its data centers and even turning down the brightness of your computer monitors.
Here’s what to keep an eye on:
- Overall energy consumption (kWh / year)
- Energy use in offices (kWh / m2)
- Energy saved due to implemented improvements by percentage
The social pillar of ESG covers social concerns, such as employee welfare, the treatment of workers along supply chains, and how your company impacts the communities it touches. Although consumers usually take environmental impact as their top point of consideration, social issues aren’t far behind. When developing sustainability KPIs, you should not forego this piece. Here are some areas where you can improve your social sustainability.
Employee welfare and happiness
When your employees enjoy working for your company, they’ll do a better job. Besides this, you’ll attract top talent. Ensuring the prosperity of your employees will improve ESG scores, boost your reputation, and create a more productive working environment. You can enhance your employees’ experience with your company by offering training and development opportunities, providing excellent healthcare, investing in high-quality safety programs, and more
Here are some examples of employee welfare KPIs.
- Improve employee satisfaction by 25% by the end of the year.
- Host five training sessions each quarter.
- Increase warehouse safety standards by 30%.
Community engagement and impact
Wherever your company has offices, factories, or distribution centers, you need to do what you can to make sure that your presence is welcomed. You can do so by donating resources to support community development, ensuring that you aren’t causing pollution in the area (such as contaminating local water sources), and hiring a certain percentage of people from that community.
Here are some examples of community engagement KPIs.
- Improve community satisfaction by 20% within a certain timeframe.
- Within a year, 10% of employees must come from the local community.
- Donate $10,000 to community projects each quarter.
Supply chain responsibility
Sustainability doesn’t stop at your internal operations. You must also do what you can to ensure that you are supporting responsible supply chains, too. Within the social sustainability realm, this means regular audits of your supply chains to ensure that their employees are treated fairly and compensated well. This is especially important for historically problematic sectors like fashion, jewelry, or coffee.
Here are some examples of supply chain KPIs.
- Ensure that 20% of your suppliers carry free trade certifications by a certain date.
- Transition from suppliers that do not align with your ESG goals within two years.
Governance refers to your business operations. Are you making a profit? Is there corruption within the company? Is your company diverse? Although this is the least important metric from the consumer perspective, this area is highly important to investors, so it should not be ignored. Here are some areas to consider.
Board and employment diversity
How diverse is your staff? Do you have programs to recruit in marginalized communities? Does your company represent a wide range of employees? Diversity is incredibly important in today’s environment. As your company grows, you need to ensure that you have programs and policies in place to encourage diversity.
Here are some examples of employment diversity KPIs.
- Ensure that at least 20% of your staff are people of color by a certain date.
- Send recruitment officers to marginalized communities to receive a certain number of applications from these areas.
Is there a significant wage gap between your highest-paid and lowest-paid employees? Do men get paid more than women on average? Sustainable companies consistently analyze their wages and ensure that everyone enjoys fair compensation.
Here are some examples of pay equity KPIs.
- Bring the gender pay gap to a certain amount by a certain date.
- Bring the pay range between the highest-paid and lowest-paid employees to a certain range.
Longevity of business operations
While this area isn’t important to consumers, this is an area of great interest for investors. You must ensure that your business strategy will result in continued growth and success. None of your sustainability plans matter if they run your business into the ground. As you’re developing your sustainability program, make sure that you still project a profit.
Here are some examples of business operations KPIs.
- Raise profits by 20% within two years.
- Increase employee numbers by 25% within three years.
- Improve sales by 10% every month.
Integrating Sustainability KPIs Into Your Business Strategy
When developing a sustainability program, it goes like this:
- Learn where you stand.
- Develop feasible targets to improve your stance.
- Create KPIs to help you achieve those targets.
- Implement your sustainability program.
- Continuously assess and adjust.
Your KPIs will be the factor determining whether or not you are on track. When developing your KPI strategy, make sure that your KPIs are quantifiable and easily measured. Every quarter, check your KPIs to see where you’re ahead and where you’re behind. Then, you can adjust your KPIs to ensure that you will still reach your larger goals, even if you’re a little off track.
Sustainability KPIs are the only way to keep your heading. This makes them imperative when it comes to ESG. Don’t simply throw out arbitrary targets. Take some time to thoroughly develop your KPIs and strategies to achieve them in order to reach goals set forth by your company and global entities, like the UN.
Now how do you put those KPIs into action? Read through our guide to sustainability initiatives to get some ideas. Most sustainability initiatives will address some of the biggest concerns in the sustainable ecommerce space, which are outlined below.
5 Ways Brands Can Improve Their Sustainability KPIs
Sustainable ecommerce is a long-term game, but there are a few quick ways that your business can become more sustainable today. Here are five ways your brand can improve its sustainability KPIs, starting with the easiest to implement for immediate benefits.
1. By using carbon offsetting projects
Brands today have the unique opportunity to offset their emissions and contribute to a greener planet. One effective way is through carbon offsetting apps, like EcoCart.
Here are some key ways that EcoCart can help your business achieve its environmental goals.
- Carbon neutral checkout: EcoCart’s carbon neutral checkout feature allows your customers to join you in your sustainability goals. By neutralizing their order they can help minimize your carbon footprint and invest in projects that make a difference.
- Sustainable shopping experiences: Our other features include resources to educate your customers on the importance of sustainability and how your company is making a difference.
- In-depth sustainability insights: Measure your impact and gain insights into how you can do better with our analytics dashboard.
Interested in learning more? Reach out to our team for a demo today.
Read more: What Are Carbon Offsets?
2. By improving the supply chain
McKinsey & Company reveals that over 90% of a consumer goods company’s environmental footprint stems from its supply chain. Ecommerce businesses can make a significant difference by optimizing this area.
- Twenty-nine percent of US GHG emissions come from transportation alone, highlighting a key area for supply chain improvement.
- Given that 11% of US warehouses are over fifty years old and only 4% are built post-2008, ecommerce businesses have a prime opportunity to modernize their supply chain. Investing in newer, energy-efficient warehouses can significantly reduce CO2 emissions, enhancing sustainability.
- Packaging and waste management is a huge area of impact for ecommerce companies, too. In fact, shipping boxes make up the majority of supply chain waste, according to the EPA.
By minimizing supply chain waste, encouraging your suppliers to use eco-friendly packaging, and offering carbon neutral shipping options to your customers, you can improve your overall supply chain performance. Learn more about sustainable shipping practices.
3. By recycling products
According to the EPA, Americans discarded over 21 billion pounds of textiles in landfills in 2015, a sharp rise from 12.5 billion in 2000 and 4.6 billion in 1980. Ecommerce businesses can play a pivotal role in reducing this waste by promoting sustainable fashion and recycling initiatives.
A 2016 Nordic Council of Ministers report highlighted that reusing and recycling textiles from Nordic countries saves an impressive 425 million pounds of CO2 and 19 billion gallons of water yearly.
By encouraging your customers to recycle products, making use of recycled materials, and investing in recyclable packaging, your ecommerce company can minimize its use of raw materials and help make the planet a cleaner place.
Want some inspiration? Here are 12 brands with a recycling program.
4. By using sustainability assessment scorecards
Sustainability measurement must be quantifiable. A sustainability assessment scorecard provides a simple way to track and measure your environmental improvements. These cards use established and science-backed metrics that your company can follow to ensure that it’s headed in a meaningful direction.
Take our sustainability quiz to find out where your business stands:
5. By tracking products at the item-specific level
As you research and develop your products, it’s important to keep the environment in mind. Remember, customers are willing to pay more for sustainable products, so sustainability needs to be included in the discovery process.
Here are a few areas to keep an eye on:
- Materials: Prioritize sustainably sourced or recycled materials.
- Production: Use energy-efficient methods with minimal waste.
- Supply Chain: Ensure transparency and sustainable practices throughout.
- Packaging: Choose recyclable or minimal packaging.
- Longevity: Design durable, long-lasting products.
- End-of-Life: Plan for recycling or repurposing.
- Certifications: Seek third-party validations like Fair Trade or Organic.
For more details, read our guide on product life cycle analysis (LCA).
FAQs About Sustainability And Ecommerce Metrics
You might have some questions. Don’t worry, that’s what we’re here for! Here are some of our most frequently asked questions surrounding sustainable ecommerce.
What are the KPIs for sustainability?
KPIs for sustainability include things like:
- Energy use
- Carbon footprint
- Waste production
- Water use
- Recycling rates
What are the environmental indicators of sustainability?
The environmental indicators of sustainability include things like:
- Life cycle of a product
- Carbon footprint of transportation
- How much energy is used to make a product
- The environmental impact of raw materials sourcing
What are the metrics of sustainability?
The metrics of sustainability include things like:
- Energy consumption
- How much carbon is emitted during shipping
- The amount of plastic waste (in weight) associated with each packaged order
- The carbon footprint of your supply chains
Sustainable ecommerce is imperative for the planet and the success of your business. Companies that want to implement sustainability strategies need to develop quantifiable metrics to ensure that they are on track to achieve environmental goals. It’s not easy, but you don’t have to do it alone. If you’re serious about sustainable growth, then reach out to our team for a demo today.