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E-Commerce
Sorting Out the Environmental Consequences
Klaus Fichter

Keywords
business strategy e-commerce environmental management, information and communication technologies (ICT) innovation rebound effect

Summary
The environmental effects of e-commerce may be described in terms of rst-, second-, and third-order effects. Data for these effects are scarce, partly because research on environmental effects of e-commerce and e-business is still in its infancy, although it is evolving very rapidly. Until now, positive environmental consequences of ecommerce have generally been coincidental. Two crucial questions that must be addressed are (1) How do we improve our understanding and management of the environmental effects of e-commerce? and (2) Which approaches are best suited to the development of sustainable e-solutions? Three approaches to developing sustainable e-commerce solutions are discussed: the extension of environmental performance measurement and management to e-commerce activities, the use of new cooperative forms of innovation management, and the provision of customer choice. Finally, an outlook on future research demands is presented. The technology itself (information and communication technologies, Internet) does not determine sustainability, but rather its design, use, and regulation does.

Address correspondence to: Dr. Klaus Fichter Director Borderstep P.O. Box 37 02 28 14132 Berlin, Germany chter@borderstep.de

Copyright 2003 by the Massachusetts Institute of Technology and Yale University Volume 6, Number 2

http://mitpress.mit.edu/jie

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The First and Second Waves of the Internet Economy

Nineteen ninety-three is regarded as the year when the Internet economy was born with the breakthrough of the World Wide Web. Since then, the Internet has developed into a serviceintegrated global network1 with a diversity of multimedia uses (Picot et al. 2000). The initial euphoria over the new economy has in the meantime given way to more realistic market valuations after the failure of many Internet start-ups and the still low proportion of e-commerce in the overall trade turnover.2 E-business will not be the be-all and end-all in the future, but e-commerce will certainly gain in importance. In 2001, we already had over 300 million Internet users worldwide.3 According to forecasts of the European Commission, there will be more than 500 million users by 2003 and a rapid increase in ecommerce turnover, rising from US$500 billion worldwide in 2001 to more than US$3 trillion in 2004 (eMarketer 2001). More than threequarters of all on-line sales and purchases for the years 20002003 are in the business-to-business (B2B) sector. At present, a second wave of the Internet economy is approaching. Until now, Internet use has almost exclusively relied on a global network of stationary computers and terminal devices. With new standards in the eld of mobile telecommunication systems (for example, the Universal Mobile Telecommunications System) and Internet-compatible mobile devices (mobile phones, personal digital assistants), the number of users worldwide with mobile Internet access is projected to rise from 16 million in 2001 to almost 500 million in 2005 (NFO 2002, 27). Mobile e-commerce (known as m-commerce) will rapidly gain in importance. In addition, falling chip prices, novel access channels (e.g., Internet access via power lines), and mobile application technologies (e.g., smart tags 4 ) are expected to link everyday products such as refrigerators, cars, and clothing to the Internet and to relate them to Web-based services such as remote control, metering, measurement, diagnostics, and dynamic software updates to devices, appliances, and systems. The Internet revolution continues.
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What does the future hold for the Internet economy? Will Homo connecticus lovingly stroke over his computer touch screen, be beamed via the World Wide Web around the globe in a matter of seconds, and get all his work done effortlessly, cheaply, in real time, and of course using a minimum of energy resources and without any environmental side effects? Is that the new economy: clean, pollutant free, and gentle on resources? If you believe the advertisements, yes! The real world of the digital economy will probably look very different. The proclaimed paradigm shift from atoms to bits (Negroponte 1995) is only half of the story.

Denitions and Focus

Concepts such as e-business, e-commerce, Internet economy, digital economy, and new economy are relatively recent constructs. Therefore, they have no common interpretation as yet (Wirtz 2001). Their use and importance, however, reect rapid development in the use of the Internet and new information and communication technologies (ICTs). The concept of an Internet economy is based on three key characteristics: It is founded on digital technologies, intensively interlinked, and global (Kelly 1998; Wirtz 2001). The term Internet economy emphasizes the networking of economic actors and processes by means of electronic communication media and the related change in structures of value creation, mechanisms of market function, professional life, and consumption patterns. The following text uses the concept of Internet economy as an allencompassing notion, as it emphasizes the new quality of connectivity (Venkatram and Henderson 1998). The notion of Internet economy comprises both micro and macro perspectives and covers the whole range of economic transactions (prot oriented or not). E-commerce and e-business are application forms of the Internet economy. In this article, e-commerce is understood as part of ebusiness, which also includes, for example, video conferencing and teleworking. On the basis of denitions available so far,5 the term e-business can be dened as follows: business processes, commercial activities, or other economic tasks

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conducted over the Internet or computermediated networks (Intranet, etc.). E-business processes are carried out using ICT equipment and applications. In this respect, ebusiness and e-commerce are components of ICT use. Among all the different denitions of ecommerce (Wirtz 2001, 33; OECD 2001), that of the OECD is probably the most common, because it has been agreed on by all member countries.6 The denition is operational, that is, it is being used as a basis of statistics and indicators. The OECD is gives both a narrow and a broad denition of e-commerce: Narrow denition. An Internet transaction is the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over the Internet. The goods and services are ordered over the Internet, but the payment and the ultimate delivery of the good or service may be conducted on- or off-line. Broad denition. An electronic transaction is the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over computer-mediated networks. The goods and services are ordered over those networks, but the payment and the ultimate delivery of the good or service may be conducted on- or off-line. This article examines the environmental effects resulting from e-commerce, using the OECDs broad denition of e-commerce, and describes approaches for sustainable business strategies in the Internet economy.

The production and use of the ICT infrastructure cause material ows, use hazardous substances, and lead to energy consumption and electronic waste. Second-order effects. E-commerce is transforming economic processes and markets. E-markets, virtual business networks, and the digitalization of products and services entail environmental consequences, for example, for resource productivity, transportation, and land use. These effects may be either benecial or damaging to the environment. Third-order effects. E-commerce causes structural change of the economy and affects lifestyles and consumption patterns, which, in turn, indirectly affect the environment. If the rate of efciency improvements (e.g., the miniaturization of devices) is lower than the growth rate of consumption (e.g., more devices used), we have the so-called rebound effect. First-Order Effects: ICT Infrastructure Two crucial questions regarding the environmental effects of the ICT infrastructure are as follows: 1. What is the volume of energy consumption caused by this ICT infrastructure (PCs, servers, routers, etc.) over its life cycle? 2. What is the volume of material ows caused by the manufacture and disposal of this ICT infrastructure? Few assessments have been completed of the energy consumption associated with ICT infrastructure use and manufacture. Existing studies indicate that, in the United States, electricity used for all ofce, telecommunications, and network equipment (including electricity used to manufacture the equipment) is about 3% of total electricity use (Koomey 2000, 27).7 In Germany, the share of electricity consumption for Internet use (PCs at home and in ofces, Web servers, routers, etc.) is estimated at about 1%. This gure could rise to about 2% to 6% in 2010, depending on the extent of energy efciency measures (Langrock et al. 2001). The available
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Environmental Effects of E-Commerce

Three main categories of environmental effects of e-commerce can be distinguished (Fichter 2001; Berkhout and Hertin 2001), as presented in gure 1: First-order effects. E-commerce presupposes the availability of an ICT infrastructure (PCs, mobile phones, servers, routers, etc.).

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Figure 1 Environmental effects of e-commerce.

studies do not detail, however, how much of the energy consumption is attributed to e-commerce applications. Telecommunications in Germany (xed-line networks and mobile communication systems) are estimated to use 0.7% of the overall electricity consumption, similar to that used by the Internet. In 1996, annual telecommunications energy consumption was about 3.1 TWh,8 a gure that has probably increased because of the expansion of the mobile communication networks. Recent studies estimate the energy consumption of mobile communication to be as high as 0.4 TWh. Of interest in this context is the fact that the respective infrastructure (base stations, etc.) accounts for about 90% of this amount, whereas terminal devices account for only about 10% (Schaefer and Weber 2000). According to the network providers, the energy consumption of the infrastructure is largely independent of the number of users. Rapidly increasing numbers of participants in mobile communication therefore will have little impact on energy consumption as long as existing networks have the capacity to admit further users (Schaefer and Weber 2000).
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So far, the debate on pollution resulting from Internet use and e-commerce has largely focused on energy consumption, with little attention to the material aspect. Hence, only general data on material ows associated with ICTs have been ascertained (Behrendt et al. 1998), and their relation to e-commerce remains uninvestigated. The following general information is available: Only 2% of the material ows entering production (including those preceding production stages) go into the nal product, whereas 98% result in waste (Hilty and Ruddy 2000).9 In 1998, 6 million metric tons of waste electrical and electronic equipment (WEEE) were generated within the European Union (4% of the municipal waste stream). The volume of WEEE is expected to increase by at least 3% to 5% per annum (CEC 2000). Entertainment equipment accounts for about 25% and ICT for about 12% of WEEE. As more than 90% of WEEE is landlled, incinerated, or recovered without any pretreatment, a large pro-

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portion of various pollutants found in the municipal waste stream comes from WEEE (CEC 2000). For the remaining sets, material recycling prevails, whereas reuse is very rare. Fast innovation leads to a further decrease in average product lifetime, which aggravates the waste issue. Cellular phones even threaten to become a throwaway product: Dieceland Technologies has developed worlds rst disposable cell phone (www.dtcproducts.com/). Thus, a further increase in the waste volume must be reckoned with (Fishbein 2002). The relevant infrastructure includes the xed-line networks of Deutsche Telekom and other network providers, transmitting and receiving stations, large-scale computers, and cable connections. The copper long-distance cable net of Deutsche Telekom alone, with its weight of 5,000 kg/km and a copper content of approximately 1,800 kg/km, contains about 300,000 metric tons of copper (approximately one-third of the total annual use of copper in Germany). This corresponds to an ecological backpack of 150 million metric tons of waste and overburden from ore mining and processing (Behrendt et al. 1998).

Second-Order Effects Due to Changed Processes and Markets E-commerce presents opportunities to accelerate business processes, reduce costs, reach new customers, and develop new business models and markets. The general agreement is that electronic markets and digitalization of products will impact material ows. A clear identication of the extent and direction of effects, however, has not yet been achieved, and the issue remains controversial. Secondary effects due to changed processes and markets may show up in the following areas:

Whether the utilization of electronic media will increase or decrease environmental impacts is not yet known (Fichter 2001). As with life-cycle assessment (LCA) in general, results in this eld crucially depend on the underlying assumptions and dened system borders (Fichter 2001). Frequently, electronic media are not so much a substitute for as a supplement to printed or other media, thus tending to increase environmental impacts (Greusing and Zangl 2000). The risk exists for incomplete substitution and for the additional use of electronic media next to conventional media. The environmental prole of Internet use and electronic media heavily depends on the means of electricity production, hence on the respective shares of the generation technologies. For printed media, the extent of paper recycling strongly inuences the environmental outcome (Reichart and Hischier 2001). The network infrastructure (server, router, etc.) and terminals are of considerable relevance with regard to energy consumption and materials use (Behrendt et al. 2002). Important factors inuencing the environmental effects of ICT use are frequency and duration of media use, degree of utilization of individual devices/media (difference between professional and private use), multifunctionality of the devices/media, and utilization forms/behavior (Reichart and Hischier 2001). In a given circumstance, there is limited choice about using an information or telecommunications medium or not. Therefore, in the short run, the focus should be on optimizing the efciency of the respective medium. In the long run, there is more opportunity to choose between media, taking environmental concerns into account.

Digitalization of Products and Services The core insights of the available studies (Kortmann and Winter 1999; Greusing and Zangl 2000; Reichart and Hischier 2001; Quack and Gensch 2001) may be summarized as follows:

Effects on Production and Inventories Increased resource productivity is discussed as one of the major potential ecological advantages of e-commerce. Potential exists, above all, in the elds of demand and supply chain management, e-procurement, and mass customization. Poten29

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tials to increase resource productivity appear in outline particularly in the business-to-business (B2B) eld, where there may be, for instance, reduction in quantities procured or stored, surplus production, and error rates between supplier and manufacturer.10 Initial studies reveal positive effects on resource productivity due to e-commerce in the procurement and sales sector (Behrendt et al. 2002). Over the short and medium term, up to a 5% reduction of material use per unit of nal product sold seems possible, primarily because of a reduction in the scrapping of stocks for products subject to rapid obsolescence (such as information technology [IT] products). Yet the studies also show that no quantum leaps regarding the dematerialization of material and energy ows are expected. For the companies studied, environmental effects (positive or negative) resulting from the introduction of e-business solutions have not received much attention. Environmental monitoring is largely lacking and should be established in the future as part of environmental management and environmental control11 (Behrendt et al. 2002). Effects on Logistics Although few data exist on the effects on production and inventories, there are already some detailed studies of the effects of e-commerce on logistics. Major concerns of the new e-commerce business models include the energy and packaging materials used by the logistics networks for product fulllment and delivery. Most of the studies focus on business-to-consumer ecommerce, either comparing traditional versus ecommerce retailing of books (Caudill et al. 2000; Jo nson and Johnsson 2000; Kuhndt and Geibler 2001; Matthews and Hendrickson 2001; Williams and Tagami 2001;12 Reichling and Otto 2002) or traditional versus electronic grocery shopping (Murto 1996; Freire 1999; Cairns 1999; Orremo et al. 1999; Punakivi and Holmstro m 2001; Bratt and Persson 2001; Fla mig 2002).13 Studies comparing book retailing demonstrate the potential for environmental benets from ecommerce sales, but the overall message is that neither traditional nor e-commerce retailing per se show better environmental performance. The
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environmental performance depends on parameters such as shipping distances, return rates, shopping allocations, population density (and thus distance to retail stores), amount of packaging, and mode of transport. Studies of on-line shopping and home delivery of groceries, however, reveal a different situation. Electronic ordering of groceries and their joint distribution seem to present a denite opportunity to reduce the total transportation related to grocery shopping and its associated energy consumption and emissions. Simulations show that home deliveries could reduce trafc mileage by 2% to 19%, energy consumption by 5% to 35%, and CO2 emissions by 7% to 90%, depending on the context and assumptions (e.g., the car used for making shopping trips) (Heiskanen et al. 2001). These studies also emphasize that although certain direct effects of electronic grocery shopping, especially the effects on trafc, are already identiable today, the indirect effects (e.g., change of shopping habits and consumer mobility, rebound effects) might be of greater signicance with regard to overall environmental impacts. So far, however, little is known about those indirect effects. Thus, from an environmental point of view, the key question is not whether traditional or ecommerce retailing should be the rst choice, but how the environmental performance of each value chain can be improved, for example through improved volume utilization of vehicles, avoidance of express delivery by airfreight, or minimization of packaging. Market Transparency and Communication with the Customer The possibilities inherent in the Internet may lead to increased market transparency. Today, customers are able more than ever before to inform themselves about the range of offers available to them. E-commerce opens up new possibilities for imparting and propagating product information. Consumer information can be imparted in a more comprehensive, comfortable, and customer-specic way than before. Groupspecic mass communication made possible by the interactivity and individualization potentials of the Internet allows consumer education that is extensive, cost efcient, and at the same time

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custom tailored to the interests of the target groups. Information sources range from manufacturers and traders providing environment-related product information via the Internet, to established institutions of consumer protection, to new service providers managing Internet portals and on-line shopping guides for products and services. Product Use, Reuse, and Recycling E-commerce can also be used for the extension of product use to reuse and recycling. Reverse e-logistics covers the electronic support of take-back and recapturing of value from used goods (Sarkis et al. 2002). New business models are being enabled by the Internet: Entrepreneurs are creating e-markets and offering on-line services for extending the use of products and for recycling. A business example for the extension of product use and reuse is the car-recycling Internet portal of the Renet company (www.renet.de); eBay is a good example for the electronic trading of used goods in the businessto-consumer or consumer-to-consumer area. In the B2B market, Hewlett-Packard has founded a remarketing unit (www.b2net.co.uk/hp/ hp_remarketing.html) that sells as new refurbished products to provide a low-cost solution to customers. Another B2B e-marketplace example is www.GoIndustry.com, which offers all the services required for the purchase of used equipment and capital goods: technical surveys carried out by experts, help with queries on nance and insurance, and the completion of on-line sales. The managers of the B2B platform insist that the efciency of the services on offer would not be possible without the Internet. Numerous other examples of e-markets for surplus materials, waste, and recycling 14 all reect the fact that ecommerce offers win-win solutions, combining business opportunities with eco-efcient services. Third-Order Effects: Subsequent and Rebound Effects Third-order effects of e-commerce result from the response of business and consumers to increased productivity and saved time from the use of ICT products and e-commerce applications. Third-order effects may be either benecial or

damaging to the environment. The rebound effect occurs when the rate of efciency improvement becomes lower than the growth rate of consumption. The rebound effect is common in utility sectors such as water and energy and has been seriously studied since the 1970s (Plepys 2001). Decreasing prices for microchips and the rapid performance increase of ICT, constantly expanding the market potential of e-commerce applications, can eventually cause structural change in the economy and alter lifestyles. A positive macrolevel effect attributed to the Internet economy has been the apparent decoupling of total energy consumption from economic growth, as reported in the United States according to ofcial statistics and several studies (Romm et al. 1999; Laitner and Koomey 2000). Nevertheless, this will not prevent an overall increase of CO2 emissions of about 10% from 2000 to 2010 (Laitner and Koomey 2000). Recent history provides other interesting examples. Contrary to most expectations, ofce computerization did not create a paperless ofce. Between 1988 and 1998, as the computer became not only ubiquitous but also capable of storing far greater amounts of data, the average per capita consumption of printing and writing paper in industrial countries shot up by 24% (Cohen 2001). Consumer expenditure is one indicator of the rebound effect. If money is saved by energysaving equipment, where is this money invested? Or if people spend more on Internet bills, what do they save on? An alternative approach to studying rebound effects is to examine time use: If a consumption activity is downscaled or replaced with one requiring less time, what is done with the extra time? Models of time-use rebound effects indicate that services that save consumers time (even if eco-efcient in conventional terms) also create the potential for a time-related rebound effect (Heiskanen et al. 2001). The rebound effect of ICT use and ecommerce is a major challenge for national and international environmental politics. The rebound effect can be addressed by extended research on the lifestyle changes generated by ecommerce and, on the basis of this, by political measures such as command and control instruments (for example, bans on certain substances such as lead and brominated ame retardants),
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by regulations such as the European Union directive on WEEE, economic instruments such as energy or emission taxes, or information instruments such as eco-labeling. Environmental Effects of E-Commerce: Conclusions Facts on the environmental impact of ecommerce and Internet use are scarce. The available studies and examples of environmental effects of e-commerce, however, provide a diverse picture of positive, neutral, and negative environmental effects. The overall environmental effect cannot yet be predicted, but it is obvious that the Internet economy is not and will not be a weightless economy. Here there is no determinism: The technology (ICT, Internet) does not determine sustainability, but rather its design, use, and regulation does. This brings us to two crucial questions: How can we do a better job of understanding and managing the environmental effects of e-commerce, and which approaches are best suited to the development of sustainable esolutions?

erating business processes, lowering transaction costs, and opening new markets. From an environmental point of view, the growth in signicance of e-commerce for the economy and environment means that companies in the future should incorporate environmental demands as part of their strategies. The key question with regard to business is, Why should enterprises take aspects of the natural environment into account? Pivotal goals of strategic management are the gain of competitive advantages and maintaining competitiveness. Besides ethical requirements, there are strong strategic arguments for incorporating environmental issues, as they might inuence competitiveness (Porter and van der Linde 1995; WBCSD 2001). That is, environmental aspects are worth consideration if any of the following conditions apply: Costs can be lowered or avoided. A rm can differentiate itself from competitors and thus increase its sales. New business areas and markets can be accessed. Risk to brand image or liability of damage can be reduced. Markets can be secured through compliance with regulations and resulting acceptance on the part of stakeholders (license to operate). Investigation of the current practice of ecommerce implementation reveals that three crucial prerequisites are missing for the development of sustainable e-solutions. First, so far, barely any companies have been monitoring and assessing the environmental effects of their ebusiness activities. Even large companies with certied environmental management systems (ISO 14001, etc.) still limit their performance measurement to traditional processes and activities. Thus, neither rst-order effects nor secondand third-order effects are monitored. Second, in almost all cases, environmental and sustainability aspects are ignored in the development and implementation of e-commerce business models. This, again, counts for rst- as well as for secondand third-order effects. Third, until now, consumers and customers have not had access to information about the environmental performance of e-commerce applications and therefore have

Consequences: How to Develop Sustainable E-Solutions

The development of sustainable e-commerce solutions requires the contribution of all actors involved (government, companies, consumers, nancial sector, etc.). For example, political regulations and programs to promote higher environmental standards are well known to play a crucial role in initiating and implementing sustainable processes, as well as product, service, or system innovations (GSF 2001). The following section shows that the development of sustainable e-solutions very much depends on the cooperation and interaction of different actors and the development of new organizational settings and institutions. Because companies are a key player in this process, the following text specically focuses on their role. Until now, positive environmental effects brought about by e-commerce have generally been coincidental, because e-commerce is primarily used for business purposes such as accel32 Journal of Industrial Ecology

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had no opportunity to make an informed choice between different offers, even if they wished to do so. Taking these decits into account, there are three key business approaches to developing sustainable e-commerce solutions: (1) the expansion of environmental performance measurement and management to e-business activities, (2) the use of new cooperative and interactive forms of innovation planning and management, and (3) the provision of customer choice (see gure 2). Expanding Environmental Performance Measurement and Management So far, the environmental effects of e-business activities are neither monitored nor managed. The rst step toward developing sustainable esolutions, therefore, is to assess current e-business activities from an environmental perspective and establish a sustainability portfolio of these activities. LCA methodology, developed and standardized in recent years (ISO 14040 to ISO 14049), can be used to examine environmental impacts. The complexity, for example of com-

paring electronic grocery shopping with traditional shopping, recommends the use of methods that need less data and still produce reliable results. One less complex method is to focus on energy use. The cumulated energy use is suitable as a key indicator, and it correlates with relevant environmental impact indicators such as the greenhouse warming potential or the acidication potential. Because the collection of data is often too expensive for individual companies, open-access data banks must be developed for the future or existing data banks must be extended. The assessment of e-business activities reveals two crucial aspects that must be taken into account. First: the system boundaries. A lesson learned from recent studies is that LCA-type materials and energy analyses of individual activities are not the only, or perhaps even the best, indicator of how these activities contribute to dematerialization (Heiskanen et al. 2001). Environmental assessment of e-business activities may require a system shift from rst-order to secondand third-order effects. Also, it is necessary not to limit the assessment to direct energy and ma-

Figure 2 Strategies for greening e-solutions. Fichter, Environmental Consequences of E-Commerce 33

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terial effects. Because of network and threshold effects, some solutions may not be very efcient in their early stages, but perform better if applied on a larger scale (e.g., delivery services). In order to assess second- and third-order effects, it is necessary to study the change of shopping habits, daily travel routes, and so on. Questions that relate to second- and third-order effects can, for example, be included in customer questionnaires or focus group and lead client interviews. So far the available statistics are very limited, but they will grow rapidly, as more companies and research institutes are starting to collect data (Park and Roome 2002). To compile reliable databases, it is necessary that companies supporting virtual and physical value chains (suppliers of IT, operators of networks/on-line providers, ecommerce companies, logistic companies, etc.) cooperate closely, exchange data, and conduct joint research projects. Performance measurement is only the rst step in setting up environmental management and control15 of e-commerce. The next steps encompass the development of environmental targets, measures, and sector standards. A guiding example for this is the 3 G Greenbook initiative by large international carriers such as Deutsche Telekom and Vodafone (Greenbook Initiative 2001). The Greenbook Initiative was started in 2000 to establish harmonized environmental requirements for third-generation mobile communication networks (the Universal Mobile Telecommunications System, etc.). The rst draft, which covers the buildup, operation, and removal of third-generation communication networks, has been agreed to by various operators worldwide, and also agreed upon by suppliers of hardware for net infrastructure and mobile devices. The Greenbook gives detailed requirements for hardware suppliers concerning product design (e.g., improvements in energy reduction), materials and components selection (elimination of lead, cadmium, etc.), distribution, packaging, product use, and end of life (take-back, reuse, recycling, etc.). Requirements for operators will progressively be developed (e.g., concerning power consumption of base stations, antenna mast location, etc.). The bundled environmental requirements for the networks and products are intended to be binding both for suppliers and operators. This is perceived as a historical chance
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to optimize the coexistence between economical and ecological necessitiesand it can save money for all carriers and suppliers in the long run (Greenbook Initiative 2001, 4). The GSM Association, the worldwide umbrella organization for the industry, also supports the initiative (Deutsche Telekom AG 2001). Innovate Innovation: New Cooperative and Interactive Approaches Innovations, in particular in the sectors of IT and e-commerce applications, are characterized by high dynamics and rapid change. Controlling innovation in this eld is further complicated by the great complexity of environmental effects (second- and third-order effects). Against this background, novel cooperative and interactive forms of innovation planning and innovation management are required. With increasing complexity and dynamics, the focus must shift from planning and direct control to the creation of appropriate innovation contexts. The idea of context control suggests several approaches to initiating sustainable innovations and getting them accepted. First, the normative context must be created by anchoring sustainability within company policies (such as company objectives and guiding principles). Second, sustainability principles must be anchored as part of the mental context of innovation actors. To that end, these principles must be translated into tangible guiding concepts, such as factor X (von Weiza cker et al. 1998), waste as food(McDonough and Braungart 2002), and zero emission and UpCycling (Pauli and Hartkemeyer 1999), and become part of cognitive maps as new interpretative schemes. Third, standards (e.g., sustainability requirements in guidelines, grids of criteria for innovation projects) as part of the organizational context are also important, in particular the selection of innovation ideas or prototypes. And nally, the distribution of resources in the form of research or time budgets for specic innovation projects is of essential relevance. Apart from context control, interactions of actors are a second essential point of intervention. Interactions of actors are relevant because the very nature of innovation is not actually to generate ideas but rather to realize ideas and

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hence get new solutions accepted. In this context, the perception of opportunities and risks associated with innovative ideas as well as company, market, and social acceptance are issues of crucial importance. Regarding these issues, it is crucial to raise awareness of the structure of problems and opportunities, to create common views of problems and perspectives of chances, and to initiate the realization of ideas as well as ensure their continuation. This is only possible by means of interactions, that is, through information and communication processes. Therefore, networking and interaction among relevant innovation actors can be identied as a crucial driving force of innovation. Thus, with respect to sustainability innovations, shaping measures that emphasize interactions of actors such as stakeholder dialogues, debates with nonconformist thinkers, development of scenarios as interactive team processes, and innovation workshops and road-mapping projects at the sectoral level are important. A guiding example for integrating environmental and sustainability issues in innovation planning and management in the IT-, telecommunications, and e-commerce sectors is the road-map project Sustainable Information and Communication Technologies (NIK) (www.roadmap-it.de) initiated by the German parliament. The objective of NIK is to link development toward the information society with the concept of sustainability. A dialogue between the business world, the scientic community, and policy makers should produce paths of innovation for technological, economic, and social developments. NIK is not only aimed at developing consensus in industry forecasts and sustainability goals, but is also intended to stimulate initiatives and to set up business networks that commonly plan and implement process, product, and service innovations. The NIK project represents a contribution toward early coordination of the medium- and long-term developments in the ICT sector with the needs and demands articulated by politics and society. In addition to ecological challenges and paths of innovation, the road map should spell out concrete objectives and measures. For the implementation phase, commitments governed by time horizons will be sought from all parties involved. In the long run, this should

strengthen regional competitiveness in the global marketplace. Within the project, three priority areas have been identied: design for environment (DfE), end of life, and marketing and consumption. For each of these areas, focus topics have been selected. The rst priority area is dealing with sustainability and mobile communication (DfE for third-generation mobile communication devices). The objectives of this initiative include the determination and assessment of the inuences that all elements within the chain of mobile (wireless) communication exercise on the environment. All signicant players from the mobile communications sector in Europe are represented in the initiatives network. The second priority is to monitor recycling and display technologies (end of life). The manufacturers Schott, LG. Philips, and Samsung produce approximately two-thirds of all cathode ray tube (CRT) glass in the European Union at production sites in Germany. In a working group for picture-tube recycling, European manufacturers have agreed on a standardization of the glass used in CRTs. Today, discarded monitors are in large measure collected, but only 10% are presently recycled (Behrendt, Erdmann, and Wu rtenberger 2002). The partners in the NIK-project identied a potential for high-grade recycling.16 The third priority is public sector procurement (marketing and consumption). The public sector represents an important customer when it comes to purchasing PC systems (PCs and peripherals) and communication devices. The use of tendering procedures and the practice of granting framework contracts that then take effect in other departments often lead to longstanding cooperation between buyer and seller. The power of mass procurement can be utilized to ensure that only those systems that meet the dened criteria for sustainability are considered for purchase. Figure 3 gives an overview of the concerted action in the NIK project to develop a road map for the three focus topics.

Provide and Inform Customer Choice Customer choice in a transparent and competitive market economy can improve everyones
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Figure 3 Developing a road map for sustainable ICT in the NIK project.

quality of life. Providing choice is therefore a key part of promoting sustainable development (WBCSD 2001). Currently, consumers and customers cannot access information about the environmental performance of e-commerce applications and thus cannot make an informed choice between different offers, even if they wish to do so. Of course, customers decision making is mainly determined by such factors as convenience, speed, exibility, and price; however, there are some strong hints that sustainability issues will become a decision criterion, at least with regard to certain IT products and ecommerce services. For example, information about the electromagnetic radiation of mobile phones and antenna masts for mobile communication is relevant for consumers who are concerned about possible health risks. Already today, there are ways to provide consumer choice. The independent German environmental jury for the blue angel label has adopted a standard for lowexposure mobile phones (www.blauer-engel.de). The deciding factor for the award of the label is the specic absorption rate, which indicates the
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maximum exposure intensity of a mobile phone. Only mobile phones with specic absorption rates of no greater than 0.6 W/kg are eligible for the blue angel. The highest legally permitted level in Germany is 2 W/kg. In the future, producers of mobile phones can differentiate themselves from competitors by using the label. The development of individual IT products will not be enough in the future. Developing environmental standards and including respective data in reports about the virtual and physical value chains of e-commerce is also necessary. Besides the expansion of environmental performance measurement and control of e-business activities in brick-and-mortar companies, it is also necessary that media and e-commerce companies such as eBay and Amazon develop environmental management and reporting systems, dealing with rst-, second-, and third-order effects. Even if these companies have little direct impact on the natural environment, as is the case with banks or insurance companies, their indirect inuence (e.g., on logistics, shopping habits, lifestyles) may be substantial.

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For e-service companies that do not run their own logistics system, environmental data and emission calculations with regard to transport will have to be made available by the logistics company in charge. As one of the leading international providers of integrated logistics services, the Schenker company offers the on-line service of emission calculation.17 The application provides estimates of the environmental impact of individual Schenker land transports in Europe; it is possible to calculate the size of the emissions for one distance at a time. As the calculation is based on an imaginary goods consignment, default values are used for the load, fuel type, and vehicle class. The default values, however, are representative of the average situation and conditions in Schenkers European network. Emission calculation helps e-service companies to assess the environmental performance of integrated virtual and physical value chains and helps them in their sustainability reporting.

Conclusion and Research Outlook

As a future medium and form of market transaction, the Internet and e-commerce are of central importance for sustainable development. Research on the environmental effects of e-business is still in its infancy, but it is evolving very rapidly. The studies available so far make clear that e-commerce is inherently neither environment friendly nor environment hostile. Here there is no determinism: The technology (ICT, Internet) itself does not determine sustainability, but rather its design, use, and regulation does. The demand for future research in this eld is considerable: 1. The need for research on the environmental impact brought about by e-commerce and Internet use is substantial. In particular, there is a demand for the following: More case studies, especially on the effects of e-commerce on resource productivity (production, inventories, etc.), the marketing of green products, and eco-efcient e-services The identication of best practices for eco-efcient digital products and ecommerce applications

Empirical studies that encompass a large number of companies to deliver results of statistical validity National and international monitoring programs on the Internet economy and the environment that gather data and assess the environmental effects of the Internet economy 2. In spite of LCA and other methodologies, which have been developed in recent years, there are still quite a few methodical problems with research on environmental effects of e-commerce and the Internet economy that must be solved: A principal problem consists in dening a unit of use. The paradigm of functional equivalence is difcult to apply in comparisons between different media. LCA-type materials and energy analyses of individual activities are not the only, or perhaps best, indicator of how ecommerce activities contribute to dematerialization. It may require a system shift from rst-order to second- and third-order effects. This also relates to appropriate system boundaries. The (micro) product technology assessments or LCAs so far register neither consequences in the value chain nor rebound effects. Also, it is necessary to expand the assessment beyond direct energy and material effects. As a result of network effects and critical threshold, some solutions may not be very efcient in their early stages, but perform better if applied on a larger scale (e.g., delivery services). Data validity is often insufcient; the data inventories for ICT devices and facilities are outdated. Quality/test criteria for studies on environmental effects of e-business applications are still lacking. 3. In this article, three approaches for developing sustainable e-commerce solutions have been presented. More detailed research on the role of environmental issues for the competitiveness of digital products
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and services and the e-commerce business models is needed.

7.

Notes
1. The term service-integrated global net refers to the fact that, before the advent of hypertext mark-up language (HTML) and the graphical interface of the World Wide Web came into use, the main use of the Internet was simple and typically unrelated services such as le transfer (FTP, etc.) and e-mail. With HTML and extensible mark-up language (XML), Web-based services can easily be bundled and interlinked. Thus, the use of the term integrated. 2. Few countries currently measure the value of Internet or electronic sales. In Organisation for Economic Cooperation and Development (OECD) countries, total Internet sales in 2000 ranged between 0.4% and 2% of total sales, while electronic sales (including those over all computer-mediated networks) have reached almost 6% in the United Kingdom (OECD 2001). 3. Persons that use the Internet at least one hour a week (eMarketer 2000). 4. Editors note: For a discussion of the use of smart tags in environmental management, see the article by S. Saar and V. Thomas, Toward Trash That Thinks: Product Tags for Environmental Management, in this special issue of the Journal of Industrial Ecology. 5. The term e-business was rst used in an IBM marketing campaign (eBusiness) in 1997 and has been used increasingly since (Amor 2000). Other denitions have been given, for example by Cunningham and Fro schl (1999), Pricewaterhouse Coopers (1999), Amor (2000), and Wirtz (2001). 6. The OECD established an expert group on dening and measuring e-commerce with a mandate to compile denitions of electronic commerce that are policy relevant and statistically feasible. This expert group has worked on the three interrelated aspects of this problem: a framework for user needs and priorities, denitions, and statistical measurement. In April 2000, the OECD approved two denitions of electronic transactions (electronic orders), based on a narrower and broader denition of the communications infrastructure, and a core list of indicators to measure electronic commerce use and transactions in businesses and households (see www.oecd.org/EN/ about_further_page/0,,EN-about_further_page8.

9.

10.

11.

12.

13.

14. 15.

570-nodirectorate-no-no 29-no-no-1,00 .html). Editors note: For a discussion of electricity use for Internet services, see the article by J. Laitner, Information Technology and U.S. Energy Consumption: Energy Hog, Productivity Tool, or Both? in this special issue of the Journal of Industrial Ecology. One terrawatt-hour (1 TWh) 1012Wh; 1 kWh 3414 BTU; 3.1 TWh 10,583,400,000,000 BTU. Available studies generally differ in their parameters chosen, for example, primary energy consumption, eco-points, mass in tons, and CO2 emissions, so that they can hardly be directly compared. Equally, they heavily differ in their relative attribution of pollution shares to production and use. Furthermore, more recent studies report a considerably lower energy consumption during production. This seems plausible, as signicant progress in the efciency of production of electronic components has been made. Editors note: For a discussion of the impact of ecommerce on stock keeping and logistics, see the article by H. S. Matthews et al., The Economic and Environmental Impacts of Centralized Stock Keeping, in this special issue of the Journal of Industrial Ecology. Environmental control refers to the aspect of overall environmental management that deals with data collection (site-related characteristics, material and energy inputs and outputs, etc.), assessment of data, the development and implementation of improvement measures, reporting, and so forth. Editors note: A rened and updated version of the study by Williams and Tagami, Energy Use in Sales and Distribution via B2C E-Commerce and Conventional Retail: A Case Study of the Japanese Book Sector, can be found in this special issue of the Journal of Industrial Ecology. Editors note: For a discussion of traditional versus electronic grocery shopping in Finland, see Effects of E-Commerce on Greenhouse Gas Emissions: A Case Study of Grocery Home Delivery in Finland by Siikavirta et al., pages 83 98 in this special issue of the Journal of Industrial Ecology. A good overview is provided by the Berlecom B2B marketplace database, www.berlecom.de. Environmental control is the part of the overall environmental management that deals with data collection and assessment, the development and implementation of improvement measures, reporting, and so on.

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16. See www.roadmap-it.de/en/allginfo.htm. 17. See www.schenker.com/english/services/landTrans port/environment/Green_Logistics/EmCalc.html. See also the article by T. M. Shaft and colleagues (2001) on the use of interorganizational information systems to support environmental management efforts by the Swedish transport and logistics rm ASG AB.

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About the Author

Klaus Fichter is director of the Borderstep Institute for Innovation and Sustainability, in Berlin, Germany. Borderstep is a not-for-prot think tank, focusing on sustainable product, service, and system innovations and the sustainable design of the digital economy.

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