Seven Ways Technology Will Lead the Way for Ethical Commerce in Retail and CPG
Ethical commerce and technology are essential to a company’s survival. In the retail and CPG spaces, a company’s commitment to its stakeholders is not just expected; if done well, it offers a competitive advantage. The adoption of technology makes a critical difference in whether a company thrives or simply survives. Technology can play a larger role in accelerating initiatives focused on doing good. Before I share how technology can lead retailers and CPG brands into the future, let’s define ethical commerce.
What Is Ethical Commerce?
There are many words used to express a company’s ability to do good. Although many seem to be expressing the same thing, each term has its own meaning and history. These terms should not be used interchangeably.
The first iteration of business ethics was corporate social responsibility (CSR), where companies develop initiatives to be socially accountable to their stakeholders. CSR can be hands-off, though, and not connected to day-to-day operations.
Environmental, social, and governance (ESG) is an evolution of CSR, but with a metrics-driven set of standards for a company’s operations. Environmental criteria protect the natural world; social criteria protect employees, suppliers, customers, and communities; and governance includes company leadership, executive pay, audits, internal controls, and shareholder rights. In this context, ethical commerce is a practice that focuses on both environmental and social issues directly related to companies’ operational and financial performances. In other words, it focuses on the E and S of ESG.
Ethical commerce is sometimes confused with sustainability, which focuses on meeting the needs of the present without compromising those of future generations. Although all-encompassing, the term is often used to describe environmental issues. Similarly, fair trade works to provide producers in developing countries a fair price for their products. The goal of fair-trade initiatives is to reduce poverty, treat workers and farmers ethically, and promote environmentally sustainable practices. The term is often used to describe social or human rights issues.
A younger generation of consumers is driving this new wave of ethical commerce; they’re demanding that the bar for company ethics be set higher. They expect brands to be transparent and authentic, and companies are responding by backing up their claims with concrete numbers. Calculating and aggregating ethical commerce metrics is easier said than done, however. As metrics become increasingly critical to ethical commerce initiatives, data and technology are the keys to embracing ethical change.
Here are seven ways that data and technology could be the future of ethical commerce in retail and CPG.
1. Calculate Carbon Footprint
Companies are helping to slow the effects of global warming by reducing their carbon footprints. Many are committed to a net-zero emissions target within the next 20 to 30 years, which is important because consumers increasingly shop online and the extra packaging, fulfillment, and transportation increase emissions. Addressing this issue can feel (and is) daunting, particularly for smaller companies, but the first step is clear. Companies need to calculate their current carbon footprint. After they create a baseline, they can take action. The challenge is that creating and selling a product is a long, complicated chain of transactions, and each link contributes to greenhouse gas emissions. IoT services help by connecting different systems and data from each player in the supply chain. By collecting, aggregating, and storing data points in one place, companies can make decisions with transparency across the value chain.
To learn more, visit AWS IoT.
2. Ensure Human Rights with Worker Voice Technology, Blockchain, and AI
Human rights violations, such as modern slavery, are a genuine concern in the retail and CPG industries. Still, they often go undetected because they are difficult to measure. Most companies monitor human rights issues through third-party audits. Although audits are helpful, they are simply a point-in-time snapshot, and they can lack the privacy workers need to provide honest feedback. For this reason, out of fear of retaliation, workers aren’t always honest about their workplace experience and conditions. Worker voice technologies (WVT) such as Ulula provide anonymous, technology-enabled surveys that can be used on an ongoing basis to gather worker complaints. These surveys continuously collect anonymous data to facilitate feedback and improvement.
WVT applications combined with Blockchain’s encryption capabilities can promote transparency and privacy. Because private keys in cryptography cannot be known to others, they provide an extra layer of security. Blockchain ledgers are almost impossible to tamper with, which increases trust in results. By giving workers confidence in their anonymity, you increase the likelihood you’ll uncover human rights issues. AI is another useful technology. It can detect patterns or warning signs that could be missed due to human error, bias, or opinion.
To learn more, visit Blockchain on AWS.
3. Provide Visibility Down to the Product Level to Support Ethical Commerce Efforts
After a company already has gathered data at the environmental and social level with a carbon footprint calculator and worker voice technology, it’s ready to trace data points down to the product level. Companies can use QR codes to tag the carbon footprint, fair employment score, water usage, and more of a product at each stage of production. These metrics could be shared with consumers to educate them on the process and increase demand for ethically produced and supplied products. Greenwashing—providing misleading information about the environmental benefit of products—is a threat to consumer trust. Providing transparency at the product level would be a revolutionary way to reestablish that trust. This level of transparency could lead to a consumer ethical commerce score, much like a credit score or Uber rating, that would help consumers evaluate the social and environmental impact of the products they buy.
4. Score Products on Ethical Commerce Metrics During Product Design
A company can use AI to forecast—through a computer-aided design program—an ethical commerce scorecard. As a designer creates a product in the program, the program generates a scorecard of ethical commerce metrics. The scorecard numbers change as the designer chooses materials, suppliers, or distances traveled. Even before sampling a product, a designer can make tradeoffs in materials and construction processes. The circular economy, designing out waste and pollution, including repairing, reusing, remanufacturing, recycling, and recommerce, can be top of mind from the start. This program could also optimize the amount of packaging required so that it makes it to the consumer safely with the least amount of waste.
For information about Amazon packaging, see The 2021 Frustration-Free Packaging Programs Incentive Expansion.
5. Produce Less with Augmented Reality, Preordering, Forecasting Tools, and 3D Printing
After the product has been digitally designed, a company can make it available for preorder before full-scale manufacturing begins. Augmented reality (AR) provides consumers with a virtual try-before-you-buy experience. If consumers see the ethical commerce scores for a product, they can make more informed decisions, vote, or provide feedback before the product leaves the virtual design phase. A company can fulfill preorders and use forecasting tools to estimate inventory needs more accurately, which reduces the inherent waste of markdowns. 3D printing can expedite lead times, so consumers don’t have to wait months for their order.
To learn more, visit Amazon Forecast.
6. Fixing Bias
With all this data collection, it’s essential to eliminate any unconscious bias that could seep into company processes. AI and ML can help humans assess large quantities of data, removing the shortcuts that can unintentionally perpetuate implicit biases such as prejudice, inequality, and stereotypes. It’s important to audit the AI and ML models built by humans to ensure the decisions truly reflect the company’s values and are not accidentally embedded with more bias. When companies use AI and ML models they can trust, they can ensure diversity, equality, and inclusion (DEI) in advertising and marketing, hiring, and brand and product offerings.
To learn more, visit Amazon SageMaker Clarify.
7. Data Exchange Collaboration Initiatives
In the spirit of “A rising tide lifts all boats,” companies that can gather ethical commerce data can make the biggest impact by sharing it. Consumers shop for different brands at the same retailers; retailers often use the same suppliers; suppliers often source materials from the same places. Offering noncompetitive data points through a data-sharing initiative helps companies across the supply chain get on board with a universal standard of ethical commerce.
Today’s consumers are demanding ethical commerce. Technology can not only meet these demands, but it can also drive a competitive advantage. By investing in doing good, technology, and data collection, the possibilities for retail and CPG companies are endless.
To learn more, visit AWS Data Exchange Sustainability.
If you’re ready to use technology to enhance your ethical commerce initiatives, AWS is here to help. Contact your account team today to get started or visit our Retail and Consumer Packaged Goods webpages.