he e-commerce industry has a huge impact not only on the economy, but also on social life and the environment. Everyday, even small decisions about technology, materials or distribution methods have long-term consequences for our planet. In a growing climate crisis, following certain sustainability principles is no longer just a matter of choice, but a necessity. This is dictated not only by rising consumer expectations, but also by concrete legal regulations. In this article, we will present the key aspects of ESG strategy and the Digital Product Passport, proving that green transformation in e-commerce is beneficial both for the environment and business.
Sustainability, what does it really mean?
Sustainability is a concept that involves balancing three areas: economic, social and environmental, to ensure long-term benefits for future generations. Hence, companies that want to operate in line with this concept should aim to make profits in an ethical manner, taking care of employees’ wellbeing and minimising negative impacts on the environment. But how do you verify that a brand is delivering on these objectives?
Basics of the ESG concept
A way to change course towards a more responsible business is through ESG standards. This acronym refers to a category of factors that are taken into account when assessing and monitoring the performance of companies. Since January 2024, the CSRD has been in force, requiring companies to report their sustainability performance transparently. It takes into account three aspects of operations, such as environmental protection (Environment), social responsibility (Social) and corporate governance (Governance). This information is to be reported according to the Common European Sustainability Reporting Standards (ESRS). The directive aims to make sure that reporting of non-financial performance is as important as financial reporting and that certain quality standards apply to it.
From 2024 onwards, these provisions only apply to large companies that meet two of the following three criteria:
- employment of more than 250 employees,
- an annual turnover of more than €50 million,
- a balance sheet of more than €25 million.
The scope of the CSRD will gradually be extended to more companies. From 2026, medium and small listed companies will also have to disclose their ESG indicators in the report.
Examples of ESG indicators
ESG indicators can address both quantitative and qualitative aspects of doing business. Here are some examples:
Environment
- Greenhouse gas emissions
- Energy consumption
- Monitoring and reduction of waste, pollution
Society
- Equal pay index
- Staff turnover
- Amount and type of employee training provided
Corporate governance
- Board structure (on what basis are board members selected, their experience, competence)
- Company data protection policy
- Anti-corruption policy
Why are ESG standards important?
ESG standards play enable companies to pursue sustainability and achieve a range of benefits, such as:
- Investments: ESG standards enable investors to assess the practices undertaken by companies and thus encourage investment in companies that are concerned about sustainability.
- Brand image: Companies that comply with ESG standards build a better reputation among consumers, employees and communities, which can lead to increased loyalty from customers and colleagues.
- Regulatory compliance: In many countries, there is a growing number of regulations requiring companies to report and operate according to ESG criteria. Compliance is therefore key to growing business internationally.
- Competitiveness: Companies applying ESG standards can gain a competitive advantage through innovation, operational efficiency and better relationships with business partners.
Digital Product Passport - what is it?
As part of the European Green Deal, the Digital Product Passport (DPP for short) project has been introduced. The key legal document that underpins the implementation of the DPP is the EU Ecodesign for Sustainable Products Regulation (ESPR).
What is a digital passport? It is an electronic document that contains information about a product, such as its composition, sources of origin, environmental impact, as well as information about the product's life cycle - including recycling and disposal. Product identification is to be possible by means of a unique identifier, which will be electronically accessible via a data carrier (e.g. QR code, barcode or NFC tagging). Data will be collected not only for the finished product, but also for its components or intermediates. The aim of adopting the new legislation is to make it easier for consumers to choose organic products and to eliminate the practice of so-called greenwashing, i.e. the use of misleading declarations of a product's sustainable origin by companies, as well as to promote a circular economy.
DPP implementation
The implementation of the Digital Product Passport is planned for 2026. Product groups such as electronics, batteries and textiles will be covered first. In all likelihood, the regulations will also apply to the construction sector, with other industries to follow. The regulation, which introduces the idea of a digital passport, imposes a policy on manufacturers to design products in an environmentally friendly manner, including the following:
- product reliability
- the durability of the product,
- product reuse;
- identification of possibly hazardous substances in the product,
- identification of recycled materials used in the manufacture of the product,
- Determination of possible recovery or recycling of the produced product,
- the product's carbon footprint.
The entities that will be responsible for issuing the electronic document will be the manufacturer entrepreneurs themselves. However, the European Union is not compromising - this obligation will cover large corporations as well as smaller companies or one-person production activities.
Sustainability and business challenges
As the European Union implements numerous sustainability regulations, companies will need to prepare for new rules for running and reporting their business. This is particularly important in the e-commerce industry, whose operations have a huge impact on the environment - from production to packaging to delivery.
Following the rules laid down by EU regulations, will require businesses to collect and process very large amounts of data. Many of them will therefore face the challenge of digitising their processes in order to adapt effectively to the new requirements. Therefore, investments in new technologies such as blockchain and IoT are already required to enable supply chain tracking, real-time monitoring and management of assets and increased operational efficiency. It will also be necessary to integrate the current IT architecture with external systems, such as PIM (Product Information Management System), which are used to effectively manage product information. These facilitate the collection, updating and distribution of consistent product data across all sales channels, to the benefit of both business and consumers.
In order to make a smooth transition through the digital transformation process, it is recommended to get support of an experienced e-commerce agency to assist not only at the strategy stage, but also in the implementation and development of new technologies.
The future is green
Acting sustainably helps companies minimise the negative impacts of their operations, meet growing consumer expectations and build a positive image among potential business partners. With the implementation of the Digital Product Passport (DPP) and ESG standards, product information will be transparent and easily accessible, allowing verification of companies' actual actions. Consumers and regulators will be able to verify that sustainability claims are true, eliminating greenwashing and the promotion of false information about green practices. As a result, companies can gain a sustainable competitive advantage by contributing to protecting the environment and building a sustainable future.