Transportation produces more emissions than any other segment of our economy. And a lot of those emissions come directly from burning fossil fuels to get people and things from one place to another. There are millions – if not billions – of dollars’ worth of fuel to save if online retailers could encourage consumers to use less carbon-intensive delivery options, not to mention the little publicity bump they might enjoy after announcing an X% reduction in their operation’s emissions.
While massive subsidy superstructures, like the Inflation Reduction Act, signed this August, make it look like green investment costs a small fortune, retailers might be able to improve their supply chain efficiency with little to no investment. Retailers can nudge their customers to choose slower, greener delivery options by simply disclosing the difference in the amount of greenhouse gas emissions different shipping options produce.
University of Arkansas professor, Rodney Thomas studied how these sustainability disclosures influenced consumers. Thomas and his co-authors, Monique Murfield and Lisa Ellram, found that retailers can significantly change their customers’ choices with a small change to the check-out page in their online stores. “Leveraging sustainable supply chain information to alter last-mile delivery consumption: A social exchange perspective” demonstrates that retailers can simply share sustainability information in plain English with their shoppers.
Many online retailers have experimented with offering customers monetary rewards for selecting slower delivery options. For example, Macy’s offered shoppers a $10 coupon for choosing their no-rush delivery option. But these tactics reduce profit margins. Instead, Thomas, Murfield, and Ellram suggest that retailers can use behavioral prompts that do not undermine a company’s profitability.
The Rise of Online Shopping and Home Delivery
People are increasingly shopping online. Some research does suggest consumers value reliability more than the speed of delivery, but most shoppers say they do not want to forego the convenience of immediacy.
Supply chains are struggling to keep up with consumer demand. The conditions caused by the COVID-19 pandemic were an acute example of our overtaxed, just-in-time economy, but there were failures in the supply chain’s ability to fulfill quick delivery promises before 2020. Amazon, for instance, infamously reneged on its one-day delivery promise just in time for the 2019 holidays.
Retailers have tried offering their shoppers monetary rewards for choosing slower delivery options, but that comes with an opportunity cost. Even though Thomas, Ueltschy Murfield, and Ellram found that monetary rewards do successfully encourage shoppers to use less carbon-intensive delivery options (about as much as the simple behavioral nudges they tested), those kinds of incentives cut into companies’ bottom lines.
Instead, Thomas, Murfield, and Ellram say companies may not need to compromise their profits at all, while still reducing the demand placed on their supply chains. Consumers seem to be convinced by a simple alert explaining the differences in carbon emissions between the two options. Prompted by the pro-social cue embedded in lower emissions, customers tend to choose the greener shipping method.
Nudges and Green Behavior
The relationship between disclosure and green behavior seems to arise from the fact that while consumers like faster transit times, they would prefer greener last-mile delivery options – there is, as some researchers describe it, a ‘green gap’ between consumer values and their behaviors. Some customers may need help to get over some behavioral inertia, while others merely need to be educated on the hidden emissions and costs associated with faster shipping options.
Thomas, Murfield, and Ellram work from the observation that most exchange actors enter into transactions intending to obtain positive outcomes. Cultural norms dictate what actors consider to be positive outcomes, and pro-environmental behaviors are starting to become the norm. More and more consumers want to behave sustainably, but they don’t always know how their current behaviors are not sustainable or how to make greener choices.
The researchers found that consumers selected the greener option more frequently with just a little prompt about the difference in the emissions between different shipping methods. Sharing the information at check-out works as a nudge, a noncoercive communication vehicle that encourages desirable behavior. Nudges are a way for managers to alter the behavior of end-user consumers. At their best, they function as reminders, which bridge the gap between behaviors people say they want to do and what they actually do.
A nudge could be as simple as your bank reminding you to save 5% of your wages after you deposit a paycheck, or they could have several steps – a cheap trial subscription nudges you to subscribe that then requires a phone call to terminate nudging you to remain subscribed. For this experiment, the researchers tested three nudges: a personal impact statement (i.e., how much a particular shipping method would grow or reduce the consumer’s own carbon footprint), a social comparison (i.e., text explaining how other customers choose to ship their orders) and a simple comparison in carbon output.
Without any nudges, consumers in the researchers’ experiments always preferred the quicker air shipping method. In comparison, whatever type of nudge consumers were shown in the experiment, more people opted for the greener option when nudged to select no-rush ground delivery.
In their analysis, Thomas, Murfield, and Ellram found that an individual impact statement increased the rates of selecting the greener delivery option fivefold. When prompted with a social comparison nudge, on the other hand, no-rush shipping uptake increased a ‘mere’ threefold.
As noted above, the researchers also found that a price discount could also nudge a consumer to select the greener delivery option four times as often, but as they note, this comes at a cost, whereas the individual impact nudge is essentially free and encourages the greener choice at higher rates.
A Greener Future
The big takeaway from Thomas, Murfield, and Ellram’s findings is that there is a degree of greening up companies can do without massive investments. Some of our emissions come from ingrained habits, not just inefficient technology and equipment. In this case, the greener delivery options may even be cost-saving over the long term since retailers would have more flexibility to consolidate deliveries if more consumers chose no-rush shipping methods.
According to the researchers, many customers and businesses are increasingly interested in sustainability. Consumers say they want greener, more sustainable products, but most people are not willing to pay a premium for sustainability. Greening up the supply chain is unique among the stages of manufacture, delivery, and use. More sustainable delivery options can be offered to consumers for free, or at least for no more than the cost of rapid delivery. On the other hand, more sustainable manufacturing and use tend to create more expensive products due to the costs of greener materials, higher wages, etc. (not that those aren’t admirable values to strive for).
Thomas, Murfield, and Ellram say this means there’s a lot of unsustainable functions in supply chains that could be taken out with appropriate changes to consumer behaviors. But despite this opportunity, many businesses put almost no focus on the sustainability of shipping practices – even companies that market their brand with sustainability. Instead, consumers and suppliers alike pay more attention to the environmental impact of the manufacture and use of a product even though they are often not the most efficient way to become more sustainable.
In the short term, managers of e-commerce businesses can include some of these nudges to help reduce their shipping costs and their customers’ carbon footprints. More generally, Thomas’s research should encourage all business owners to consider the simple solutions they can implement to make their companies more environmentally sustainable and help their customers make greener decisions, which they often want to do anyway.
