“Shallow” And “Deep” Decarbonization: Amazon’s Climate Pledge

Companies are under pressure to reduce their carbon footprints. They can decarbonize without fundamentally changing their core technologies, products, and systems. We call this “shallow decarbonization.” Or, they can pursue “deep” decarbonization that requires companies to adopt radical low carbon technologies, discontinue the production of energy-intensive products, and change internal processes. This sort of decarbonization is “disruptive” because it “displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. It is at once destructive and creative.”

Shallow decarbonization is not a pejorative term. For one, it reveals that the company is taking climate issues seriously enough to stake out a public position on them. We suspect that most companies tend to start at the shallower end of the decarbonization continuum. Assuming deep decarbonization is the desired societal goal, the challenge is to figure out how to move companies from the shallower end to the deeper end of the continuum. If companies with substantial carbon footprint and global presence were to embrace deep decarbonization, we would make more progress in climate protection.

This is where Amazon comes in. As a recent article in The Atlantic notes about Amazon: “At any moment, its website has more than 600 million items for sale and more than 3 million vendors selling them. With its history of past purchases, it has collected the world’s most comprehensive catalog of consumer desire, which allows it to anticipate both individual and collective needs. With its logistics business—and its growing network of trucks and planes—it has an understanding of the flow of goods around the world. In other words, if Marxist revolutionaries ever seized power in the United States, they could nationalize Amazon and call it a day.”

Decarbonization Potential of Amazon’s Climate Pledge

On September 19, Jeff Bezos announced Amazon’s Climate Pledge. He declared: “We’re done being in the middle of the herd on this issue—we’ve decided to use our size and scale to make a difference… If a company with as much physical infrastructure as Amazon—which delivers more than 10 billion items a year—can meet the Paris Agreement 10 years early, then any company can.”

Inspiring words indeed. The good news is that Amazon has identified concrete decarbonization goals and strategies to accomplish them. The not-so-good news is that these initiatives probably do not disrupt Amazon’s core business model and that Amazon will probably continue to remain in the middle of the herd on climate issues.

Let us explain. To meet the energy needs of the physical infrastructure of its cloud computing and retail/logistics businesses, Amazon has pledged to use 80% renewable energy by 2024 and 100% by 2030. It will install solar rooftops on fulfillment centers and launch utility-scale wind energy projects to power its cloud computing infrastructure. For its logistics business, Amazon is going to purchase 10,000 electric delivery vehicles by 2022 and 100,000 by 2030.

Is this Disruptive Change?

The move to renewables does not change Amazon’s business model. Disruption would happen if, say, Amazon was to radically redesign its servers so that they dramatically increased their energy efficiency. Or, Amazon’s entry into utility-level wind or solar projects would lead to a radical technological improvement making the existing technologies obsolete.

While Amazon’s fleet acquisition is not fundamentally changing its business model, it has an element of disruption. Electric cars are no longer a novelty (at least in the luxury segment), but electric pick-ups, SUVs, and trucks are rare. Amazon’s move will jump-start the electrification of the trucking industry, which accounts for about one fourth of greenhouse gas emissions of the U.S. transportation sector.

Should Amazon Help in Oil Exploration?   

Amazon is criticized for pitching its cloud computing expertise to fossil fuel companies. It wants to help them search for new oil reserves. For Amazon, this is a legitimate opportunity – after all, other cloud computing companies in its herd are also pursuing the oil business. Its statement posted on October 10 noted, “We will continue to provide cloud services to companies in the energy industry to make their legacy businesses less carbon intensive and help them accelerate development of renewable energy businesses.”

This complicates how we assess the sincerity of Amazon’s Climate pledge. Amazon claims it has aggressively embraced the 2015 Paris Agreement, but at the same time, it contributes to its failure by supporting the fossil fuel sector. This is coming across as Bezos’ double-speak of Amazonian proportions.  

Greening the Supply Chain

In addition to not supporting fossil fuel business, what should Amazon do next? Amazon should think hard about how to reduce the climate footprint of the retail business, both in its forward and backward linkages. Forward linkages mean that Amazon provides information about the climate footprint of the products sold on Amazon’s website. Backward linkages mean that Amazon requires its suppliers to meet the state-of-the-art climate guidelines.

Motivating suppliers to reduce their carbon emissions is probably the toughest aspect of deep decarbonization. Amazon, the self-professed leader, could learn from its competitors, especially Walmart.  

In 2005, Walmart embraced supply chain sustainability as a corporate strategy: “If we had  focused on just our own operations, we would have limited ourselves to 10 percent of our effect on the environment and eliminated 90 percent of the opportunity that’s out there.” Walmart started with a phased plan, first “identifying areas of maximum environmental impact” and then inviting stakeholders to join 14 “sustainable value networks” – such as the seafood network and the packaging network – to work toward business and environmental sustainability in each area.

Amazon needs to overtake Walmart and radically alter how its suppliers account for their climate impact. It could work with organizations such as the International Organization for Standardization to develop standards. For some product categories, it should explore collaborating with NGOs, as Unilever did with the World Wildlife Fund to establish the Marine Stewardship Council that formulates standards for sustainable fishing.

Enforcing climate standards will be challenging, as the recent debates on the failure of private standards to stop the forest burning in Brazil and South East Asia reveal. Amazon could create an in-house global enforcement system. In the apparel industry, companies such as Nike employ monitors to ensure that overseas suppliers are following Nike’s Human Rights and Labor Standards. Alongside this, Amazon could also collaborate with prominent NGOs for monitoring help.

Amazon should exploit the leverage with its suppliers located across the world. This sort of a direct hands-on approach to reduce carbon footprint will constitute a real institutional disruption. As The Atlantic article notes: “To sell through the site is to be subjected to a system of discipline and punishment. Amazon effectively dictates the number of items that a seller can place in a box, and the size of the boxes it will handle. (To adhere to Amazon’s stringent requirements, a pet-food company recently reduced its packaging by 34 percent.) Failure to comply with the rules results in a monetary fine. If a company that sells through Amazon Marketplace feels wronged, it has little recourse, because its contract relinquishes the right to sue. These are just the terms of service.”

Providing Climate Information to Customers

Amazon customers are probably value shoppers. Yet, some may want to incorporate climate considerations in their purchase decisions, but do not have the tools to do so.

Amazon could create something like a “5-leaf climate rating system” (similar to its 5-star customer rating system). However, rather than based on customer reviews, the leaves would be based on an objective measure of carbon emissions related to the product: its inputs, manufacturing, distribution, retail, energy efficiency, and disposal. The Energy Star program and Walmart’s Sustainability Index may offer some insights on how to obtain and quantify these data.

Amazon, the serial disruptor, has the power and expertise to shape the practices of its global supply chains. Whether it will deploy these resources to save the planet remains to be seen.