Etsy Makes the Case for C-Suite Buy-In Around Carbon Neutrality

This article series is sponsored by 3Degrees and produced by the TriplePundit editorial team.

As the world’s largest logistics companies continue to incorporate electric and alternative fuel vehicles into their fleets, at first glance it may seem like technology is poised to propel shipping to carbon neutrality. But clean technology and zero-emissions vehicles are still many years away from transforming shipping as we know it.

Since the transportation sector is now the largest contributor to the United States’ overall greenhouse gas emissions, more urgency is needed while these technologies continue to scale. Some companies are taking the reins in their own hands to diminish the environmental impact resulting from transportation and shipping. Many are turning to carbon offsets, as an interim step, and winning over customers as a result.

Tackling shipping emissions in the e-commerce sector

E-commerce giant Etsy is one of those companies. For an online marketplace like Etsy, shipping is a crucial part of doing business. In fact, shipping and logistics account for 98 percent of Etsy's total carbon footprint.

Even though it doesn’t have direct control over the shipment of products sold on its marketplace—Etsy’s sellers ship directly to customers—the company decided to take action to address its carbon footprint and offset 100 percent of its carbon emissions from shipping earlier this year.

Etsy is the first major online shopping destination to offset all of its emissions from shipping, and customers won’t pay a penny for this perk. The move toward carbon-neutral shipping stems from a shared vision between Etsy’s sustainability department and C-suite leadership—and the results show that carbon neutrality does not have to break the bank.

C-Suite buy-in drives carbon neutrality at Etsy

Offsetting carbon emissions from shipping was Etsy’s next logical step in sustainability, Chelsea Mozen, Etsy’s sustainability lead, told TriplePundit. “We always knew the elephant in the room was our shipping footprint,” she says. “It’s been the key area of impact that we’ve needed to address after we got our operations in order.”

The company already achieved zero-waste operations two years ahead of its scheduled goal. It has also taken the necessary steps to be powered entirely by renewable electricity by 2020, part of which included securing a power purchase agreement that supports the development of two new wind and solar energy farms in Illinois and Virginia.

With support from CEO Josh Silverman, the online shopping destination teamed up with renewable energy and climate solutions partner 3Degrees to find offsetting solutions for shipping logistics, addressing that big elephant in the room.

Etsy considered two options: asking customers to pay for offsets at the point of sale, or covering the costs internally. Silverman agreed that the company should take full responsibility for its carbon footprint rather than requiring customers to opt-in.

“At the end of the day, we wanted to really say the full footprint was carbon neutral,” Mozen says. The company has offset its footprint from employee travel and commuting for years, so the sustainability team knew the cost wouldn’t be exorbitant. C-Suite leadership, however, was pleasantly surprised that investing in offsets to cover Etsy’s shipping footprint would cost less than a penny per package.

After doing his own research, Silverman started to understand the feasibility of addressing the company’s footprint. “In his mind, the question shifted from ‘Should we do this?’ to ‘Why didn’t we do this sooner?’” Mozen remembers. “It’s been wonderful having a CEO who is so invested and passionate about [sustainability] and so supportive of it.”

Shipping offsets pay off

If you’re wondering whether those pennies add up as packages ship across the country, you may be surprised to hear that the investment is actually helping, not hurting, the company’s bottom line.

When Etsy launched the initiative in February, it added a leaf logo in the checkout cart with information about carbon neutrality. Shoppers responded positively, and Etsy says it has seen a higher rate of conversions from the cart after advertising its commitment.

“The increase in conversion rate made this pay for itself,” Silverman told Jim Cramer of CNBC’s Mad Money. Mozen adds, “It really demonstrated that consumers are shopping their values and that they care about sustainability.”

And it appears to be paying off: In his appearance on Mad Money, Silverman referred to Etsy’s Q2 earnings as a “breakthrough quarter.” Gross merchandise sales grew by 21 percent, and revenue improved by 37 percent year-over-year.

It’s time to start thinking about Scope 3 emissions

As e-commerce companies proliferate and more people shop online while expecting one- or two-day shipping, or even same-day delivery, offsetting carbon emissions from shipping is more urgent than ever.

E-commerce sales rise steadily each year. Just last quarter, sales increased by 8.3 percent compared to the first quarter of 2019. Still, “companies aren’t accounting for [shipping] in their Scope 1 and Scope 2” emissions, Mozen says.

For most companies, including those in the e-commerce sector, greenhouse gases emitted during shipping are typically categorized as Scope 3 (supply chain) emissions, meaning they’re out of a company’s direct control. The vast majority of companies do not report on—or take steps to reduce—their Scope 3 emissions, and these emissions “haven’t been on the top” of many business leaders’ radar, Mozen explains.

But even for first-movers like Etsy, shipping offsets do not have to stand on their own—they can tie into other company objectives. For example, Etsy’s verified offsets tie into their goal “to build long-term resilience by eliminating our carbon impacts and fostering responsible resource use.” Offsets support bundled solar and wind projects in India, a forest conservation program in Minnesota, and an effort to reduce the impact of manufacturing lightweight auto parts, among other initiatives.

Yet when it comes to reducing the environmental impact of shipping, Mozen claims it can’t be done alone. “Etsy has a relatively small footprint for e-commerce compared to other companies. Us doing it alone isn’t going to solve the whole problem,” she says. “We claimed we were the first major global e-commerce company to offset our emissions from shipping, but we really hope that we’re not the last.”