A big climate change stress test is coming for Amazon sellers and suppliers

As Amazon and other big businesses ramp up efforts to reduce their carbon footprint, they’re putting pressure on their suppliers to do the same, and those who don’t may pay a big price.

Starting in 2024, Amazon will require suppliers to share their emissions data, set emissions goals, and report on their progress, the e-commerce giant said in its recently released sustainability report. With that move, it joins Microsoft, Walmart, Apple, and others in saying that suppliers must step up decarbonization efforts. 

The mandates come as big businesses face more demand than ever to adopt eco-friendly practices. Consumers, investors, regulators, and governments are pushing firms for more progress and transparency.

“The pressure is coming at companies, who are then putting pressure on suppliers,” said Bob Willard, a corporate consultant and author of six books on sustainability. 

And in a cascade, those suppliers are leaning on their suppliers.

Businesses typically track three levels of emissions. Scope 1 come directly from operations. Scope 2 are from purchased energy such as electricity. And scope 3 relate to a company’s activities but come from indirect sources such as supplier emissions and emissions from customers using their products. An analysis of major industries by the non-profit CDP found that, on average, scope 3 accounts for about 75% of all emissions. 

Companies have much more control over their suppliers than many other areas of indirect emissions, says Andrew Winston, author of several sustainability-related business strategy books.

For instance, while a consumer goods company can’t force a detergent buyer to wash in cold water, it can be selective in working with eco-conscious suppliers. 

“The supply chain is where there’s going to be continued rising pressure and transparency because companies have a direct impact over that,” Winston said.  

Decarbonization mandates are getting tougher

Salesforce now requires suppliers to disclose scope 1, 2, and 3 emissions, deliver products and services on a carbon-neutral basis, and fill out a supply scorecard each year. AstraZeneca suppliers are expected to annually report emissions data to the CDP and set science-based goals. 

While Amazon doesn’t include suppliers in its scope 3 accounting, it’s effectively dealing with this in the way many other firms have started doing, by forcing suppliers to report emissions to them and set goals which emissions levels can then be tracked against. “We know that to further drive down emissions, we must ensure those in our supply chain make the operational changes necessary to decarbonize their businesses,” Amazon said in the sustainability report. 

Third-party sellers and suppliers — especially smaller ones — face a paradox as the climate mandates arise and become increasingly tougher. Even if they’re eco-conscious, many say they don’t have the resources to meet the tracking and reporting demands. 

Eight in ten small and medium-sized business owners say reducing emissions is a high priority, yet 63% also say they don’t have the right skills, and 43% say they lack the funds, according to a survey from the non-profit SME Climate Hub. In a survey from Intuit QuickBooks, two-thirds of small business owners said they were taking steps to reduce their environmental impact, such as recycling and using renewable materials. Businesses that weren’t acting cited a lack of money, time, and resources. 

“Tracking emissions data is no easy feat,” says Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council. 

She says compliance costs can vary, but upfront expenses can be considerable, which is challenging for the many firms with a tight cash flow.

The information is out there to start getting a handle on the task. Yet, one of the first things that business owners will learn is that it is going to be time consuming, says small-business owner Chaitali Patel, who founded the sustainability advisory firm Evergood. She points to a 152-page document on scope 3 supply chain accounting and reporting from the Greenhouse Gas Protocol, which provides standards for measuring and managing emissions. 

“If you look at the process of data collection and recordkeeping alone to comply with these requirements, it will take up significant resources,” Patel said. 

Small businesses already under economic stress

Amid ongoing fears of recession, higher interest rates cutting into sources of capital, signs of weaker consumer demand, and labor market challenges, small businesses have focused more on employees and their bottom line than sustainability. When asked what issues matter most to them, nearly 40% said jobs and the economy, while 10% said the environment, according to the CNBC|SurveyMonkey Small Business Survey for the third quarter. 

Yet ready or not, suppliers big and small will have to step up soon. “This is coming,” he said. “The procurement arm of the business community is reaching into their supply chains and is starting to ask more pointed questions.”

In addition to the pressure from investors and politicians, another reason big companies will be looking farther down the supply chain is because they are currently coming up short in their emissions reduction goals. Amid the boom in consumer demand and global growth post-pandemic, many of the world’s largest corporations are producing more carbon emissions than they can reduce.

A recent review by the New York Times of climate documents for 20 major food and restaurant companies found that over half have made no progress in reducing emissions or are increasing emissions. The report found, as previous climate accounting has typically shown, that the majority of emissions come from suppliers.

A recent Just Capital report found that more companies than ever before are making carbon reduction commitments, but the results aren’t there yet in the disclosures. Of companies with existing science-based targets, only 26 out of 123 in the Russell 1000 disclosed emissions reductions. Meanwhile, among companies without specific targets — just general net zero targets — emissions have gone up.

Companies that want to retain high-quality suppliers are apt to help partners meet any sustainability requirements, says Mark Baxa, the present and CEO of the Council of Supply Chain Management Professionals.

Corporate giants are offering assistance that ranges from direct funding and better terms to training and access to clean tech.

For its part, Amazon said in its sustainability report that it will use its “scale, investment, and innovation to date to provide our suppliers with products and tools that will help them reach their goals — whether that’s transitioning to renewable energy or having more access to sustainable materials.”

But the retail giant also made clear that there may be consequences for partners that don’t measure up. “We will continue to look for suppliers that help us achieve our decarbonization vision as we select partners for business opportunities,” Amazon said in its report.

Amazon spokespeople declined to comment beyond its publicly available materials.

In the end, it comes down to suppliers choosing what works for their business.

“The suppliers themselves and the suppliers of suppliers have to come to their own independent decision on how they’re going to approach this,” Baxa said.

At the same time, companies have to address scope 3 emissions. “Often, they’ll go with a supplier who can comply,” he said. And for those that don’t, “Eventually, the hard conversation will take place.”

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Amazon Prime Day is coming. Here’s how sellers can prepare to boost their sales

Amazon Prime Day isn’t here just yet, but sellers need to act now to drive optimal results for the highly anticipated summer retail sales event.

While no official date has been released by Amazon, it’s been widely reported that the popular two-day event is most likely to return next month. Last year, it took place on July 12 and July 13 (and was announced by Amazon in mid-June.) That makes mid-July, on or around July 11 and July 12, a logical bet. 

There’s a lot at stake for sellers. Amazon has more than 200 million paid Prime members globally. Last year, Prime members purchased more than 300 million items worldwide during Prime Day — a record, according to company data. What’s more, sales traffic tends to be higher in the days leading up to and immediately following the two-day event, so it’s more like a week-long sales opportunity for sellers.

Of course, some of the biggest buys go to retail giants, from Apple products to Shark vacuums, which in the past year are among the most popular items purchased. The economy has softened, too, and demand is down in the retail sector. Nevertheless this year is expected to be another big year, with 68% of consumers likely to shop on Prime Day, according to a report from Jungle Scout, which provides software and research to Amazon sellers.

Sellers can start preparing by getting information directly from the horse’s mouth. Amazon offers videos from its Seller University on how to maximize profits on Prime Day. For example, it talks about the importance of concise, relevant titles, product listings with rich details and keywords that are likely to appeal to customers.

Here are some additional actions that Amazon ecommerce platform consultants say sellers should be taking now to proactively prepare:

Stay on top of inventory deadlines and available stock

Amazon recently told sellers to have their inventory for Prime Day at U.S. fulfillment centers by June 15, according to Chris Compean, co-founder and chief executive of Mayan, an inventory and advertising automation technology provider to Amazon sellers. Sellers can also consider fulfilling some of the orders themselves.

If possible, sellers should use data from previous years to determine the ideal amount of inventory. Absent data, a general rule of thumb is to plan to sell at least twice as much as usual during the two days, Compean said. Inventory is challenging to get exactly right in the current economic environment — even the biggest retailers have struggled after the pandemic boom, inflation and 2023 consumer weakening — but generally speaking, sellers should always have 60 to 90 days of product in stock. “As long as you are well-stocked in general, you’ll be okay for Prime Day,” Compean said. 

Begin your Prime Day marketing two weeks early

At least two weeks before Prime Day sellers should start building up their visibility, said David Hutchinson, vice president of marketplaces at NP Digital, a digital marketing agency. As part of that initial effort, sellers also need to determine how they are going to compete, whether that’s by dropping prices, offering Lightning Deals — a discount over a short period of time — or coupons on Prime Day, or running these types of promotions, possibly for a few days before and after the two-day event, he said. Lightning Deals, for example, can improve brand awareness and boost sales, but they can also flop. Couponing, meanwhile, can increase sellers’ visibility, but they must have enough inventory to be able to handle the potential sales boost.

Use Instagram, TikTok, YouTube, Facebook — and Amazon-provided URL links

Sellers should promote deals that they’re planning to offer on their various social media sites and their dedicated Amazon Store page.

“You want to prime customers to be ready to look for your brand on Prime Day,” Compean said.

Amazon allows sellers to create URLs to include in their Prime Day social media posts, so be sure to do this. “You want customers to be able to click directly on your Instagram post, go to Amazon and buy the product right then,” said Mike Scheschuk, president of small and medium business at Jungle Scout. “It’s the same with TikTok, YouTube or Facebook, or whichever social media platform you want to post on,” he said.

Using Amazon URLs ensures that your sales analytics will include a sufficient level of detail. “You’re not just tracking you got three hundred clicks as a result of a post. You can actually see what they bought as a result,” Hutchinson said. 

Don’t be stingy — offer deals across all products

Some of the best-selling items in the U.S. on Prime Day in previous years have included beauty items, pet products, kitchen essentials, children’s clothing, toys, electric toothbrushes, electronics and outdoor gear and apparel. Of course, small businesses are competing with some of the biggest brands as well for consumer dollars, with Apple products, Shark vacuums, and premium beauty brands also among top Prime Day sellers. Compean recommends sellers offer Prime Day deals on all their products to maximize potential sales. 

Don’t forget to advertise before and after Prime Day

Sellers should plan to spend more on advertising in the days ahead and immediately following Prime Day, when traffic tends to be higher. Last year, average ad spend per brand spiked 320% over “typical days” and rose by 11% from Prime Day 2021, according to Jungle Scout’s e-commerce data.

Budgeting can be tricky, especially for sellers that don’t have prior years’ data to compare, said Dan LeBlanc, co-founder and chief executive at Daasity, an e-commerce analytics platform. In this case, sellers should budget enough so that if the ads don’t generate a return, they won’t feel pinched. A general rule of thumb might be twice the amount of a normal day. “You don’t want to throw your whole marketing budget into this week,” he said.

Audit your customer reviews and product listings in advance

Sellers should use the weeks leading up to Prime Day to pay extra attention to reviews and ensure their products are easy to find. This could include using paid keyword research tools that help businesses determine which keywords are trending on Amazon, or were popular on Prime Day last year. 

Popular keywords aren’t always obvious, though they do fall into categories that are known to be Prime Day winners. Examples that were popular last year on Prime Day include “gel nail polish,” “baby clothes,” “wall clock” and “router,” according to data from Feedvisor, an intelligence platform for sellers.

Sellers can also test to see which product images resonate most with customers, Scheschuk said. That’s typically done by performing A/B testing to see which content, including product images, resonates most with customers using an Amazon-provided service, he said. Using A/B testing, one group of customers sees one version of the content, while a second group views the other. Sellers can then review which version had the best results and use that going forward.

It isn’t possible to provide precise advice on images — that is what case-specific A/B testing is for — but generally speaking, advice to Amazon sellers suggests that imagery used be clear and either product- or lifestyle-focused. It’s also best to keep the product as identifiable as possible as well — will shoppers immediately be able to tell what’s being advertised when seeing the creative?

Get a small business badge to stand out

Many small businesses haven’t applied for a small business badge, which identifies products from U.S.-based small company brands.

“Many people want to support small businesses,” Hutchinson said. “When all things are equal and there’s a few cents difference, as a consumer, you will likely side with the small business versus a large corporation. It’s another way to stand out on Prime Day.”

The small business badge is free, but there are certain Amazon-imposed restrictions, which sellers can learn more about by visiting Seller Central, Amazon’s management portal for third-party sellers.

Amazon uses the Gartner definition of small business to determine which sellers qualify. That means they must have fewer than 100 employees and less than $50 million in annual revenue. Additionally, a brand needs to register in the Amazon Brand Registry or participate in the company’s Handmade program for artisans, according to eComEngine, which offers software to support Amazon sellers.

Remember this is not Black Friday — stay focused on Amazon

For Prime Day specifically, don’t try to drive traffic to other shopping sites you may be listed on such as Shopify or Walmart because that’s not where the bulk of people are going to be looking for deals. “It’s not Black Friday,” Hutchinson said.

Already start thinking about next year’s deadlines

Amazon offers certain Prime Day promotional benefits to eligible businesses who meet its requirements, LeBlanc said. But the deadlines for these benefits are months in advance. Thinking ahead for next year can help sellers take advantage of these special promotional opportunities, he said.

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