Select Committee on European Union Minutes of Evidence


Memorandum by the Digital Futures Consortium

    "The increasing use of e-commerce could have a profound impact on our ability to be more sustainable, but it is important that we assess the benefits and problems in a systematic and balanced way. My Department, with the DETR, is supporting a year long inquiry into the environmental and social impacts of e-commerce."—Patricia Hewitt, e-Minister, DTI

    "I am delighted to be involved in the Digital Futures project. My role is to co-ordinate the Government's drive towards making the UK the best place in the world for e-commerce. This project gives us the chance to think about what the effects of that will be for our society, our environment and our daily lives."—Alex Allan, E-Envoy, Cabinet Office

A.  BACKGROUND TO THE DIGITAL FUTURES PROJECT

  1.  Forum for the Future welcomes the opportunity to contribute to this inquiry on behalf of the Digital Futures consortium. Digital Futures was launched on 1 February by e-Minister Patricia Hewitt, and is being backed by the DTI, DETR and the Cabinet Office. Its aim is to explore the social and environmental implications of the predicted explosion in e-commerce, and recommend ways in which the digital economy could evolve into a powerful ally of sustainable development.

  2.  The research for Digital Futures is being carried out by eight think-tanks, including Demos, Forum for the Future, New Economics Foundation and the Town and Country Planning Association (a full list of research themes is attached). The project will look ahead to 2010 to assess the impacts of e-commerce in several key areas:

    —  Energy use—Will e-commerce help to create a low-energy "weightless" economy? Can it help the UK to meet its climate change targets? How many products and services (such as records, banking, estate agency) will be dematerialised altogether?

    —  Transport—What will internet shopping mean for patterns of transport and distribution? To what extent will home delivery replace the need to travel?

    —  Planning—How will e-commerce shape the future of our towns and cities? Will the shift away from bricks and mortar towards "clicks and mortar" accelerate the decline of the High Street?

    —  Social inclusion—How do we overcome the "digital divide"? What will e-commerce mean for communities, neighbourhoods and relationships?

  3.  In February 2001, the Digital Futures consortium will publish its final report, which will include a set of recommendations as to how Government and business can maximise the wider benefits to society of the dot-com revolution.

  4.  The project is being supported by 11 companies with a stake in the digital economy: AOL UK; BP Amoco; BT; Ericsson; Kingfisher plc; Nationwide Building Society; NatWest; the Post Office; Royal and SunAlliance; Sun Microsystems and Unilever. These companies are becoming actively involved in the research process, as well as contributing financially to the research.

B.  SETTING THE CONTEXT

  5.  Two of the most powerful drivers of change in contemporary society are the explosion of digital technologies, and the shift towards sustainable development. Both require us to rethink the nature of goods and services. Both have the capacity to transform companies, markets and entire economies. Yet surprisingly few attempts have been made to assess whether the digital and sustainability revolutions will complement or conflict with one another.

  6.  In the past decade, internet use has grown at a phenomenal rate. There are now more than 150 million users worldwide, and each day 80,000 new users go on-line. Although the internet was originally perceived as a source of entertainment and information, and advent of electronic commerce means that it has evolved into the world's fastest growing marketplace.

  7.  E-commerce is still in its infancy, but most commentators agree that it is set to grow as rapidly as the internet itself. Conservative estimates suggest a near-quadrupling of e-commerce in Britain by 2002, from £200 million per annum to £720 million. On the more generous side, the OECD forecasts that the global market will be worth $1 trillion by 2005.[1] This will have far-reaching implications for all aspects of business: creating new brands and new markets; transforming product and service delivery; and forging direct links between companies and consumers.

  8.  The UK is well-placed to take advantage of the boom in e-commerce. The 1998 Competitiveness White Paper placed e-commerce at the heart of the Government's vision of a knowledge-driven economy, and set the ambitious goal of making the UK "the best environment in the world for e-commerce by 2002".[2] This goal was further reinforced by the publication of the Cabinet Office report [email protected], and is now being driven forward by the e-Envoy. But although much attention has focussed on the economic potential of e-commerce, far less research has been conducted in the UK or internationally into its wider social and environmental impacts.

  9.  A high-tech economy based on knowledge, skills and innovation should be a cleaner, greener economy. Foremost among the potential advantages of e-commerce are reductions in travel and material throughput. For example, some studies show that ordering groceries and other daily essentials on the web, and having them delivered direct, could cut four out of every five shopping trips. This could lead to a sizeable reduction in vehicle emissions, and fewer retail developments on greenfield sites.


  10.  In terms of energy and material flows, there are some sectors where dematerialisation is already taking effect as a result of e-commerce (eg books, records, banking). As the table below shows, the ratio of energy used per book sold in a traditional bricks-and-mortar store versus Amazon.com is 16:1. By far the biggest environmental savings will come from increased supply chain efficiencies through business-to-business e-commerce.


Traditional book shop
Amazon.com

Titles per store
175,000
2,500,000
Revenue per employee
$100,000
$300,000
Sales per square foot
$250
$2,000
Energy cost per square foot
$1.10
$0.56
Energy cost per $100 sales
$0.44
$0.03


  11.  There is growing interest internationally in the environmental impacts of the internet. In December 1999, the US Centre for Energy and Climate Solutions published a major report which suggests that e-commerce could reduce overall US CO2 emissions by 1.5 per cent per annum between now and 2007.[3] Another Swedish study published in January suggests that e-commerce could cut up to 5 per cent of shopping-related CO2 emissions.

  12.  But it is important not to under-estimate the rebound effect, which could see these environmental gains being outweighed by an increase in overall consumption. Freight transport could increase through inefficient distribution systems, and consumers might replace shopping trips with other, longer journeys. The ease of access to goods from across the world could increase air traffic, and might reduce the capacity of consumers to ensure that adequate social and environmental standards are maintained at the point of production.

  13.  On the social side, debates have focused on ways of closing the "digital divide", and the government has now set the admirable goal of ensuring universal access to the internet by 2005.[4] But looking more widely at the social consequences of e-commerce, there is great uncertainty about what it will mean for local communities. High Streets, which have already lost most food retailers, are likely to see the disappearance of many other service sector outlets. And with geographical remoteness little barrier, social dislocations could take place on a far larger scale. Much of British Airways' routine accountancy work, for example, is now conducted in Bombay.

  14.  At a broader cultural level, some have warned of the erosion of "social capital" that could result from the shift towards disembedded on-line communities. As e-commerce evolves, it raises important questions about the social function of shopping, and the nature of community in the digital age.

C.  TAKING THIS AGENDA FORWARD

  15.  Despite the opportunities for synergy between emerging policy on the knowledge economy, e-commerce, and sustainable development, there is currently little evidence of the joined-up thinking that is the supposed hallmark of Government policy-making. BT has pointed out that "technology is essentially neutral with respect to sustainable development—it is how people apply it that really matters.[5] If we are to harness e-commerce to maximise wider social and environmental goals, there is an urgent need for dialogue between policy-makers and the companies who will be driving the dot-com revolution. Our project is still at an early stage, but the Digital Futures consortium hopes to play a positive role in promoting this dialogue over the next 12 months.

  On behalf of the Digital Futures consortium (full membership listed at Appendix A).

James Wilsdon, Senior Policy Adviser

Forum for the Future

24 March 2000


1   OECD The Economic and Social Impact of Electronic Commerce: Preliminary Findings and Research Agenda, October 1998. Back

2   DTI Our Competitive Future: Building the Knowledge Driven Economy, December 1998. Back

3   Joseph Romm The Internet Economy and Global Warming: A scenario of the Impact of E-commerce on Energy and the Environment Centre for Energy and Climate Solutions (December 1999). Back

4   Tony Blair, Speech to the Knowledge 2000 Conference, 7 March 2000. Back

5   BT A Question of Balance (1997). Back


 
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