This chapter presents some ideas about how e-commerce could develop in the UK over the next 10 to 20 years, and the social and environmental implications that may follow. A number of alternative futures are possible – all futures depend upon the choices made now. If the right choices can be made at this early stage in the development of the digital economy, greater benefits will result and potential dangers can be avoided.
However, looking at the future is never easy. We need to be both creative and modest. Some social and economic development will continue along the traditional lines, but the unexpected will occur, especially when a radical technological innovation like the internet begins to have an effect. In this study we have been faced with two particular sources of uncertainty. The first concerns the future of e-commerce itself. With technologies, services, markets and regulation still undergoing rapid innovation, it is difficult to identify the paths of future change. The second source of uncertainty is over the impacts of e-commerce on sustainability. There is a lack of knowledge, as yet, about what the wider impacts of e-commerce on society and the environment might be.
We are faced with the difficult problem of seeking to make better decisions in the face of deep uncertainties about the course and impacts of future change. The strategy adopted here is to project pictures of future worlds, or storylines, that describe a ‘possibility space’ – a set of plausible futures that span a range of conceivable outcomes. These e-commerce storylines are used to deduce possible impacts, illustrated with a set of quantitative and qualitative indicators. Differing patterns of impact reflect differences in the storylines.
The storylines and indicators together make up the four scenarios: CyberSpace, DigitalIslands, CyberSociety, and NetworkedCommunities. These scenarios are designed to stimulate analysts, policy makers and strategists to question their own assumptions about how e-commerce might develop. They are conceptual vehicles for framing ideas about the future. They are expressly not predictions, but are designed to inform choices today that will shape future outcomes.
In building these scenarios, we have taken as a starting point the social and political make-up of possible future worlds. Technology is seen not as an autonomous force of change, but as being embedded in social, political and economic settings. These settings shape its use and diffusion. Technology makes things possible, but whether or not these new opportunities are seized depends on whether service providers and consumers see some clear benefit in doing so. The patterns of incentives and obstacles to innovation are largely determined by the way in which markets, regulations and consumer preferences develop.
The scenarios approach
Scenarios are planning and communication tools that are used to explore complex, uncertain and sometimes disputed futures. The scenarios presented in this report have three main objectives:
- to illustrate broad socio-economic contexts within which e-commerce may develop;
- to identify specific features of internet technologies and e-commerce markets under these different socio-economic contexts; and
- to provide a basis for a preliminary assessment of the social and environmental impacts of alternative e-commerce futures.
The scenarios consider the development of e-commerce and its impacts primarily in the UK, but set within a European and global context. We have adopted two time horizons: 2010 and 2020. While the 2020 horizon is highly speculative with respect to the development of information and communications technologies, it is included to take account of much slower changes in infrastructures, like roads and digital networks, on which e-commerce depends.
A recent review of futures studies identified five main dimensions of change:1
1 population growth and settlement patterns;
2 the rate and composition of economic growth;
3 the rate and direction of technological change;
4 the nature of governance; and
5 social and political values.
We have taken the last two dimensions as our starting point. Social and political values and the nature of governance are seen as critical determinants of future change. This means that the scenarios have been generated from a set of conceptual associations, rather than from an empirical model of the real world (see Figure 2.1). The strength of this approach is that it provides an intellectual coherence. But ‘values’ and ‘governance’ are not simple or easily definable concepts, and we have had to make a number of simplifying assumptions about what they mean. We take values to mean contemporary tastes, beliefs and norms, and governance to mean the way in which authority and control are exercised in societies – whether local, national or global. While there are obvious connections between values and governance (a democratic society can only function if democratic values prevail), we take them to be independent in this scenarios framework.
Values and governance both reflect and shape social and economic changes. Values, the horizontal dimension, captures alternative developments in core social and political values. At one end of the spectrum – ‘Individualism’ – values are dominated by a desire to satisfy individual aspirations for personal freedom. The rights of the individual and the present are privileged over those of the collective and the future. Resources are distributed through free and competitive markets, with the function of governance limited mainly to guaranteeing free markets. At the other end – ‘Community’– values are shaped by greater concern for the common good. The individual is viewed as part of a collective, with rights and responsibilities determined by broadly defined social goals. There is greater concern about the future, equity and participation. Civil society is strong and highly valued, and resources are allocated through more managed markets.
The vertical governance dimension shows alternative structures of political and economic power and decision making. With the governance axis we identify different ways in which political authority may be distributed. At one end of the spectrum – ‘Globalization’ – the power to govern is distributed upwards, downwards and outwards away from national governments. National political and economic boundaries fade, and greater interdependence is fostered. Locally-based decision making takes place in the context of global economic, trade and environmental regimes. At the other end of the spectrum – ‘Localization’ – economic and political power is retained at national and regional levels. The process of globalization is weakened, and governments have greater autonomy. National and regional development is based on local capabilities and resources.
These two dimensions are used to describe a possibility space containing four alternative futures scenarios (see Figure 2.1). Through telling the scenario storylines, we trace the implications of a particular association between values and governance. Through imagination, expert judgement and, sometimes, intuition, a picture of a future world emerges.
This is a world of consumerist values, a highly integrated world trading system, and significant economic expansion, with 3.5 per cent average growth in GDP year on year. Liberalized, open markets are sustained and regulated through international governance institutions. Regulatory controls at both the national and global level are weakened. Global oligopolies flourish. Sovereignty over economic policy is increasingly lost by national governments, whose function becomes the implementation of common codes and rules.
The development of a global convergent information and communication technology (ICT) environment, probably based on mobile devices, is accompanied by maximum migration of commerce to the digital domain. E-commerce makes up 25 per cent of UK GDP by 2010. Leading-edge technology is increasingly oriented towards delivering high-value consumer services. There is no formal access or content regulation for digital services, and self-regulation predominates. Growing disparities develop in the extent to which digital services become embedded in business, educational, health and leisure activities, with the benefits going mainly to the affluent.
Rapid growth is experienced around metropolitan centres, but extensive exclusion persists. This is a high-mobility, transport-intensive future. By 2010, 11 per cent of the UK road network is at 100 per cent stress. Greenhouse gas emissions increase, rising to 780 MtC equivalent in 2010 compared to 773 today. Equity declines.
Economy and e-commerce
Liberalized and open markets, an integrated world trading system, buoyant consumer demand, and the adoption of new technologies like ICT and biotechnology, bring high levels of economic growth – 3.5 per cent of GDP year on year. E-commerce is viewed as a catalyst of economic integration, which extends the scale and scope of markets, provides more transparency, and enables a reduction in the burden of regulation. Countries, firms and consumers who adapt to and exploit the new e-economy prosper. Large global businesses drive the development of global networks with structured access. As a result of an innovative and entrepreneurial culture, small businesses also flourish, servicing specialized international markets.
The digital economy becomes increasingly dominant across the European Union (EU), accelerating the decline of manufacturing and agriculture. Particularly high growth is seen in the ICT and logistics sectors that underpin the new economy. There is high migration to the virtual economy across all sectors, and the total volume of e-commerce is very high. As a proportion, business-to-business (B2B) transactions become less significant over time, with the growth of stable business-to-customer (B2C) e-relationships. E-money and e-banking become the norm, promoting common global currencies.
National government's ability to collect tax revenues is curtailed by the growth of the e-economy. Tax avoidance becomes easier as a result of e-banking and the elimination of import duties. Attempts to tax internet transactions fail through lack of enforcement. By 2010, the outcome of the 2005 UK referendum on joining the European currency union is seen as increasingly irrelevant, due to the emergence of global cyber-currencies.
Economic transformation is pioneered by the rapid expansion of B2C e-commerce in the finance, retailing, logistics, travel, media, education and health sectors, and in personal services offering advice, security, privacy and pleasure. Routine consumer purchases become increasingly automated as intelligent intermediaries are developed to scour the web for goods and services. This stimulates further rapid growth in global logistics and transport services. Customized marketing and strong relationships with high-income customers become increasingly critical for service providers. Retail space is transformed, with an emphasis on leisure and entertainment and high-value purchases.
Tighter supply-chain control and major efficiency gains are achieved from the automation of B2B transactions. International electronic exchanges facilitate the continued globalization of production and retailing. Integration and efficiency gains lead to substantial innovation in the logistics sector, with an emphasis on greater scale, speed and quality. However, strong anti-trust controls limit the development of purchasing and supply-chain management tools.
Administrative reform continues in government, in part enabled by the use of the internet to perform many functions. Cost savings, the continued privatization of public services, and the emergence of public-led policy making (through referendums and so on) all drive the development of e-government and electronic voting.
Regulation and governance
There is a convergence of political cultures and policy styles. Governance becomes internationalized, multi-level, and less accountable. The role of national government shrinks. Regulation is transferred to regional and global bodies in which business interests play a key role. Social and environmental objectives are not integrated into economic policy and trade regimes. Economic instruments such as green taxes and tradeable permits are used to control acute environmental degradation. Global environmental issues are addressed only where they are recognized as business issues by powerful corporate interests.
Deregulation in all markets is underpinned by a powerful global trade regime committed to the continued removal of trade barriers and enhanced competition. A WTO e-directorate is established in 2003 to set standards for international e-commerce. Its remit expands rapidly as it takes on the role of policing global anti-trust regulation, transactional security and e-taxation. Content regulation is very limited and largely happens through service providers’ self-regulation and the sale of blocking software. Pornography, gambling and new forms of commercial e-exploitation flourish.
This is a consumer-driven future in which rapid economic growth and strong intellectual property rights (IPR) go hand in hand with high private investment in research and development. Innovation is driven by the provision of customized, interactive services to global markets. A convergent ICT environment is based on open global networks coexisting with closed private networks. Inter-operability is achieved through industry-set standards. Mobile satellite-based networks grow rapidly, although major new investments are also made in enhancing optical fibre networks. The costs of access fall, but remain high for broadband services.
Many user devices become mobile and location-independent. By 2010, wearable computers and plug-in devices begin to replace conventional personal computers (PCs). Encryption and identification technologies become increasingly sophisticated, and user devices become personalized. Online access underlies many home-based goods and services, including health, security, leisure and education. Interactive digital television (DTV) achieves rapid market penetration and provides another entry point to e-commerce. User interfaces develop rapidly for premium markets; voice control, video and universal language translation all achieve significant market penetration between 2005 and 2015. High-capacity search engines deal with information overload. Personal digital assistants (PDAs) filter information, make routine decisions and create leisure time for the affluent.
User access and control
User access is mediated by the market, with premium services targeted at an affluent global elite. E-commerce markets are segmented through customized advertising and the price of services. The digital divide takes a new form, with near-universal access to e-commerce being achieved through DTV and PDAs by 2010, but with access to online services becoming limited by cost and capability.
This is a high-mobility scenario. Energy prices are generally low, but periodic price hikes occur due to oligopolistic behaviour and concerns over resource security. Car use grows rapidly, as does road and air freight; congestion increases. Hybrid cars are introduced from 2010 and in-car telematics improve the efficiency of road use. There is major investment in global infrastructure, including airports, ports and railways.
There is slow population growth in the UK, but a global market for many skills leads to an increasingly mobile labour force. The greater openness of borders encourages labour migration. The trend to smaller households intensifies, bringing high demand for housing near to centres of growth. A weak planning system promotes relatively unconstrained development for housing, commercial and leisure uses.
The state's role in the provision of education, welfare and health services declines, resulting in deepening inequalities of access and standards. State provision increasingly targets only the very poor and most disadvantaged. For the middle classes, private sector provision becomes the norm. There is a major increase in demand for both high-tech curative healthcare and more holistic health promotion services.
This is a world of consumerist values, with governance systems primarily located at the national level. Markets in the UK are liberalized, but the process of economic integration and globalization is constrained. The benefits of retaining some degree of economic and political independence are viewed as outweighing the benefits of further integration. There continues to be high political and economic diversity in the international system. National government structures and processes are preserved with little change. There is moderate but unstable economic growth – on average a 2 per cent growth in GDP per annum – and relatively little structural change in the economy.
There is limited technological convergence of ICTs. ‘Walled gardens’ are the norm. There is rapid but unstable migration of business and consumer activity to the digital domain, hampered by inadequate integration and common standards. E-commerce makes up 15 per cent of UK GDP by 2010. This growth reinforces already powerful business and commercial interests.
This is a car-dependent future, with 13 per cent of roads at 100 per cent stress by 2010. It is characterized by weak planning controls, except in wealthier areas that are able to defend their interests. Carbon emissions are high – 845 MtC equivalent in 2010. Equity declines, resulting in substantial social tension.
Economy and e-commerce
This future is defined by a combination of consumerist values, and the retention by the UK government of substantial power in key policy areas like money, tax and defence. The UK pursues an independent economic and political path, separated from the EU and the US. The more restricted scope of the UK market dampens economic growth, and limits the potential of e-commerce. The rate of decline in manufacturing slows, but export-led sectors still face lower growth rates.
The rate of e-enabled structural change in the economy is slower than under the CyberSpace scenario. The digital economy tends to reinforce the power of incumbent producers and service providers. Commercial ‘walled gardens’ and trusted brands predominate. A limited number of integrated global and regional networks compete through technical differentiation and price. There is unstable migration to e-commerce, driven by the search for efficiency gains and cost reductions rather than the rapid innovation of web-based services. The absolute volume of e-commerce is moderate, reaching a plateau as established markets become saturated and opportunities for efficiency gains dry up. ‘Pirate islands’ emerge as a base for hacking, e-fraud and cyber-terrorism. These continue to be a threat to the integrity and viability of e-commerce.
Tax revenues remain secure, with tax collection undergoing incremental change. E-commerce transactions are taxed effectively, and a ‘byte tax’ is introduced. Sterling is retained as the UK currency, mainly due to public mistrust of the euro. Financial services become mainly web-based, but there is only limited development of e-money.
After a period of experimentation, B2C e-commerce settles down and focuses on finance, entertainment, travel and some retail markets. The uptake of e-commerce remains confined primarily to the young and the affluent. For other groups, the costs of access and the lack of perceived advantages of ‘clicks over bricks’ subdue demand. Routine consumer purchases are increasingly automated for the affluent time-poor. High-value mobile broadband services are targeted at a narrow and slowly growing market. Buyers’ clubs emerge, seeking bulk discounts for communities in less affluent areas.
In value terms, B2B remains the primary focus of e-commerce. Opportunities for greater control and cost reduction lead firms to transfer purchasing and supply chain management to the internet. Smaller-scale UK manufacturers exploit the efficiency gains offered by the greater integration of supply chains. In some sectors producers are able to use their market power to raise margins through B2B auctions.
Regulation and governance
The Westminster model of government in the UK remains more or less intact. The process of devolution is curtailed, and there is a return to greater centralization, primarily as an attempt to improve management of the economy. Political discourse becomes more populist and fractious. Social and environmental issues remain a low priority. Environmental policy undergoes more experimentation with voluntary and market-based instruments.
Trade continues to grow, but the liberalization of global markets is hampered by the lack of political convergence at an international level. The WTO system is maintained more or less in its present form. National governments seek to balance the promotion of genuine competition with a desire to protect domestic capabilities in key sectors. National incumbents in the telecoms, financial services and retail sectors remain strong. Price regulation for digital services is ineffective. Transactional security and consumer redress are handled at a national level, and little progress is made in establishing an enforceable international regime. Patchy content regulation is exercised through national courts and self-regulation, though the affluent and well connected can buy their way around these controls.
Innovation is driven mainly by the needs of B2B transactions, except in high-value niche markets for consumer services. This is a less consumer-driven future. Moderate economic growth and weaker antitrust regulation go hand in hand with lower private investment in research and development. Limited convergence and inter-operability are the result as the small band of global service providers and national ICT incumbents exploit technical differentiation to preserve their market share. Terrestrial cable networks continue to be the primary vehicle for digital communications, and there is limited development of broadband mobile networks. Business and private networks develop, controlled by vertically-integrated infrastructure and service providers.
Leading edge technologies – voice recognition, language translation, and so on – are marketed primarily to businesses. Innovation and diffusion of advanced technologies are limited by market constraints. DTV and webphones achieve rapid market penetration as the cost to the user of the hardware falls. DTV dominates the entertainment market and is the major point of access to the internet.
User access and control
The ‘digital divide’ comes to describe the gap between those who have restricted access and are passive consumers of new web-based media, and those who actively control their cyber-interactions, and have the resources to obtain universal access. By 2010, rival service providers will give away DTVs and webphones to even relatively poor UK consumers. However, these basic units will only provide access to the franchised portals offered by the service provider, giving limited choice to consumers. More affluent and educated consumers will buy proper universal access to the web.
This is a car-dependent scenario, with steadily rising fossil fuel prices and relatively low levels of investment in infrastructure or public transport. ‘Not in my back yard’ (NIMBY) objections and public finance restrictions limit the building of new roads, and congestion increases. Despite this, experiments with congestion charging prove unpopular and are scrapped. Telematics begin to play a role on many major routes, as efforts are made to improve the utilization of the motorway network. Road freight predominates and grows. Air traffic increases more slowly.
The UK population grows slowly, with household numbers remaining approximately stable. There is an erosion of the green belt for new high-income housing. The planning system is weakened, but new developments attract strong protests. There is a steady shift towards the private provision of education, welfare and health services. State provision becomes more uneven, primarily because of lower economic growth and fiscal conservatism.
This is a world in which social and ecological values shape global markets, and international political institutions predominate. Sovereignty over many areas of policy is relinquished by national governments in pursuit of economic stability and political convergence. Strong global and regional governance is underpinned by partnerships between governments, industry and non-governmental organizations (NGOs). Moderate-to-high economic growth – 2.75 per cent average GDP growth per annum – is maintained, with low levels of inflation. Innovation continues at high rates and is shaped by sustainable development objectives.
Convergent global ICT environments facilitate the shaping of the new economy to a ‘one world’ ethos. Open networks, shareware and mediated access prosper. There is selective migration to e-commerce, which rises to 20 per cent of UK GDP by 2010. Universal service obligations, transactional security, consumer redress and content regulation are all effectively policed under global regimes.
Rapid technological change coupled with high investment in public transport decouples energy and transport intensities. This is a relatively low emissions scenario, decreasing to 625 MtC equivalent by 2010. However, some road traffic congestion problems remain, with 9 per cent of the UK road network at 100 per cent stress by 2010. Issues of equity and development impact on all decision-making processes, reshaping the global distribution of environmental and technological resources.
Economy and e-commerce
This is a radical future of social, economic and technological transformation towards a more managed global economic and trading system, which aims to reconcile economic growth with equity and fairer trade. The emergent e-economy is shaped by a prevailing one-world ethos, in which e-commerce is harnessed for both economic and social goals. The internet is viewed as a means of building more sustainable economic and social networks, improving the accountability of governments and business, and encouraging access to goods and services. The UK economy is export-led, with continued growth in services and the new e-economy. Resource-intensive manufacturing and agriculture decline.
Commercial network infrastructures are dominated by a small number of global providers, licensed on a supra-national basis, who provide a level playing field for the international development of e-commerce. Migration to e-commerce is high, but the pace is slow due to the need to meet broad access objectives internationally. The absolute volume of e-commerce is high. Government-to-business and government-to citizen transactions are particularly important in this scenario, while B2B transactions become less significant over time.
EU monetary union is strengthened by the UK's adoption of the euro in 2003. European tax harmonization is achieved in 2005 and a complementary currency, the e-euro, is introduced in 2010. A global digital bank is established to collect and distribute taxation on global e-commerce in 2010.
With strong consumer protection regulation in place, there is rapid growth in B2C e-commerce across retailing, travel, banking and leisure. High public and private investment in sustainable transport infrastructure also boosts retail e-commerce. There is widespread utilization of common logistics services for consumer deliveries. Government support is given to consumer services that bring sustainability gains (for instance, web-controlled energy services). There is high growth in virtualized services. Trusted web intermediaries, agents and buyers’ clubs flourish. Service providers develop much closer and more interactive relationships with consumers on a global scale, with a strong emphasis placed on quality and customization.
There is growing penetration of B2B e-commerce in all sectors, permitting the more efficient transmission of purchasing, legal and other information, and allowing greater transparency along supply chains; such transparency is now required under tough producer responsibility obligations. Manufacturers across all sectors are transformed into service providers selling value rather than units.
Integrated supply chain and life cycle management is adopted by business both to reduce costs and manage social and environmental impacts. Internet conferencing and virtual reality tools are widely used to reduce business travel.
The web is used extensively to develop more open and participatory policy-making processes. All public services are moved onto the web, improving the efficiency of service delivery. Active policies for universal access are implemented.
Regulation and governance
Strong partnerships between governments, industry and NGOs aim to achieve sustainable development at a global scale. Global coordination of sustainability policy begins to take shape. New environmental treaties and regimes are formed and given real authority. Regulatory, market-based and producer responsibility instruments become more important. Global equity of access to resources becomes a significant constraint on economic policy in the industrialized world.
Competitive global markets are managed by powerful, but politically accountable, global regulators. Agglomeration continues in many sectors – such as auto manufacture, telecommunications and banking – and is managed by international agreements and price regulation. Collaborative self-regulation and covenants become more significant at a regional and global level. There is little formal regulation of network standards, but strong legal guarantees with respect to transactional security and consumer redress. A weak IPR regime promotes the use of open source software. Both positive and negative content regulation is established by international agreement and enforced by new agencies. However, minority activists claim a loss of cultural diversity and freedom of expression.
Public investment in research and development is an important driver of technological development, while social and environmental drivers play a key role in shaping innovation in companies. Fiscal, regulatory and information policies encourage the adoption of technologies with a small environmental footprint. A strongly convergent ICT environment is based on open global networks. Access from fixed broadband cable networks dominates, with mobile networks complementing these.
There is less differentiation of user technologies, with integration of multiple functions into a limited range of standardized units. Devices are leased to the consumer to ensure wide access. A development programme sponsored by the Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN) releases universal language translation shareware for both text and voice.
User access and control
Universal access provisions promote a stable and uniform environment for the development of services to mass markets. Governments require businesses to provide access for all to networks as a condition of entry into the market. Mass channel broadcast media grow and move onto the web.
Major investments in transport infrastructure (road, rail, sea and air) are made, increasing access and reducing the environmental impacts of mobility. Much of this infrastructure involves international public–private partnerships. There is high penetration of low- or zero-emissions vehicles and transport telematics. Heavy freight is encouraged to shift to rail and water through a combination of pricing mechanisms and regulation. The substitution of virtual transactions like teleworking and teleconferencing for mobility has some impact on transport demand. However, the growth of tourism and global business operations results in a rapid growth of air traffic.
There is a stable population and reduced internal migration within the UK. Household numbers increase at average rates with a higher turnover of the housing stock. A strong planning system aims to achieve high environmental quality and low resource use. Public expenditure increases as a proportion of national and global income. Public education, welfare and health systems are maintained and improved.
This is a world of communitarian values exercised through local participatory democracy. The power of global institutions is checked through stronger accountability mechanisms, and there is greater emphasis on community self-reliance and autonomy. As a result, there are fewer opportunities to develop economies of scope and scale. Markets are more fragmented and international trade is lower than in the other scenarios, as is GDP growth, which averages 1.25 per cent. However, some localities do foster political and economic links with other regions across the world, enabled in part by the digital economy. There is a tension between the social and political importance attached to localization, and the more open nature of virtual space.
Regionally-specific digital solutions emerge, often built around legacy systems, with little technological convergence; closed networks predominate. Management and ownership of networks is community based, governed by rules and democratic structures. E-commerce plays a limited role, totalling 5 per cent of UK GDP by 2010, and is used primarily to encourage shorter and more efficient supply chains. Nevertheless, new forms of local electronic exchange and e-money flourish, and the use of the internet for information and public services also grows rapidly. Lower economic activity and demand for mobility make this a low-emissions scenario. Equity also improves, although tensions arise over reconciling social and environmental objectives.
Economy and e-commerce
Communitarian values coexist with governance that is increasingly exercised at a local and regional level. Global institutions play a lesser role; the local is highly valued. Local and regional markets become more important, in part enabled by the greater use of ICT. International trade and regional economic growth slow in comparison with long-term trends. This is a relatively low-investment economy, with greater reliance placed on communities’ knowledge and resource base. Economic policy is dominated by the need to encourage efficient small-scale production, while also meeting ambitious social objectives of equity and participation.
The internet is viewed as an asset in building community self-reliance. There is local ownership of digital infrastructures and control of network standards. The web is maintained through regional collaborative agreements, underpinning new models of economic development. The smaller scope of markets and the focus on local demand brings advantages to small-scale production of goods and services. There are fewer opportunities for economies of scale, and a greater emphasis is placed on customization and a rich information environment. Stable producer–consumer relationships are managed to facilitate the growth of local markets and exchanges. There is more limited migration to e-commerce and the absolute volume of e-commerce is low. C2C, B2C and government-to-consumer (G2C) transactions are particularly important in this scenario.
A greater proportion of tax is raised at regional and local levels. Revenue collection moves onto the web. The UK does not adopt the euro, which is seen as impinging on national autonomy. However, new forms of local exchange flourish, as e-barter and e-LETS (local exchange and trading schemes) sites facilitate the electronic exchange of goods and services for B2B, B2C and C2B (consumer-to-business) transactions.
The main growth areas of B2C e-commerce are in retailing and information services. Strong trust-based relationships between local producers and consumers are highly valued, and facilitated via mobile digital devices and PCs. There is greater supply chain transparency and a revival in the home delivery of many goods. Barter and information exchange also play a role in economic relationships. Buyers’ clubs emerge, aggregating demand for the benefit of producers and consumers alike. International e-tailing on the web is limited to specialist goods and services not available through local markets.
B2B e-commerce is rapidly adopted as a way of making shorter supply chains more flexible and responsive, and also as a way of driving down costs. Producers and retailers form procurement networks to purchase materials and goods not available regionally. Local web cooperatives, bringing small-scale producers together, become more common. email and internet conferencing are widely used to substitute for business travel.
The internet is widely used in the provision of public services such as welfare, health and education. Voting in elections and referendums is increasingly online, and greater participation in local decisions is encouraged through accessible web interfaces. Government becomes far more open and transparent through a network of electronic town halls.
Regulation and governance
Government is carried out through a devolved participatory democracy. Emphasis is placed on the principle of subsidiarity, which states that policy should be enacted at the lowest level of governance. In environmental policy there is an emphasis on behavioural and structural economic changes that protect natural resources.
Competition policy aims to stimulate new ventures and safeguard competition within more geographically constrained markets, while also supporting well-defined sustainability goals. There is patchy regulation of network standards. International regulation of transactional security and consumer redress is relatively ineffective. Together with weaker transport links, this constrains the international potential of e-commerce. Weak IPR regimes promote the use of open source software. Mechanisms are developed for strong community-based content regulation on the web.
Innovation is constrained by low levels of investment in research and development, and focuses on low-cost devices and applications. Where local solutions are developed, they tend to be diffused rapidly, sometimes with public sector support. There is little convergence of network technologies, mainly due to a persistence of legacy systems and reduced availability of capital. Inter-operability remains limited and barriers between local and regional systems and networks persist. Emphasis is placed on the adaptation of existing infrastructure. This leads to the development of mixed networks – local broadband in urban communities and telephone lines in rural communities. There is also scope for local experimentation with novel technologies such as strip aerials and helium balloons. Public health concerns inhibit the development of mobile networks and technologies.
For end consumers, PC-based systems continue to dominate access to the web and e-commerce. There is slower market penetration of DTV, and mobile devices are less significant as a vehicle of e-commerce. High-growth digital services include information and public service delivery, teleworking and virtualized leisure services.
User access and control
There is variable private access to closed networks of diverse quality, but very high access to public services on the web. Community intranets with limited access to specified services become important.
This is a low-transport-intensity scenario as a result of declining trade, lower mobility and higher energy costs. Regulation, incentives and investment in public transport reduce demands for personal mobility. By 2010, car sharing and leasing, traffic management, and home deliveries result in declining absolute car ownership. By the 2020s, zero-emission vehicles become the norm for shorter trips, and mass public transport the norm for longer journeys.
Overall, UK population is stable, although there is a slight decline in household numbers, coupled with migration from larger cities to small-and medium-sized towns. A strong planning system protects against urban sprawl and encourages denser housing and better managed commercial developments. There is a high level of public provision of education, welfare and health services, with an emphasis on equity and open access, financed primarily from taxation.
E-commerce impacts on sustainability
Research into the potential environmental and social effects of e-commerce faces a number of difficulties: the complexity of the issues, the pace of development, and a lack of reliable data. All limit the validity of current studies. Many of the decisions and investments in technologies, transport and logistics systems have not yet been made. These decisions will greatly affect whether the beneficial potentials of e-commerce can be realized.
The qualitative evaluation of the impacts presented here aims to provoke a debate rather than to provide answers. It offers a framework for analysis to enrich the current discussion, which often appears to be dominated by a controversy between e-commerce optimists and pessimists. Drawing on research carried out within and outside the Digital Futures project, the scenarios highlight at least three important aspects of e-commerce and sustainable development:
- the scope and shape of the new economy are not yet determined – diverse pathways are possible;
- the sustainability impacts are likely to be mixed and trade-offs will be necessary; and
- forward-looking and well-targeted policy measures can influence future social and environmental impacts.
In most scenarios, access is not an issue of cost, IT skills or the availability of online devices. In CyberSpace and DigitalIslands, intense competition has brought down the price of internet-enabled mobile phones and other personal devices, and many are available free of charge. Simple hand-held devices and DTV also increase online access for people with lower technical skills. However, in NetworkedCommunities most online access is still PC-based. Due to slower technological development, lack of skills, and costs, a quarter of the population remain excluded from online access.
However, other – often more subtle – obstacles to equal access arise. In CyberSpace, sophisticated systems analysing credit rating and buying records will prevent the poorer population from using many services. In DigitalIslands, the dominance of digital television gives the main service providers far greater control over content and access to certain services.
Under all scenarios, a significant percentage of less skilled or poorer people remain offline, and those who do not have a bank account are excluded from online shopping.
This is particularly problematic in CyberSpace and CyberSociety, in which online services increasingly replace traditional goods and services. For the majority of the population, however, shopping opportunities and free, advertising-funded information services improve greatly.
More broadly, participation in the knowledge-based economy is far from equal. In all scenarios, the capability to use information and communication services becomes more important in all areas of life: education, the job market, shopping and leisure. Excluded sections of the population, such as the homeless, become even more disadvantaged.
Consumer protection and security
The level of consumer protection varies greatly between the scenarios. In CyberSpace and DigitalIslands, standards are based on industry self-regulation. Large e-commerce companies are eager to ensure trust in online transactions, and so implement high voluntary standards. Many dot-com companies trade consumer data to enable the targeting of product information and marketing. In CyberSociety and NetworkedCommunities, personal and consumer information is protected through stringent laws. Enforcement of these rules is more difficult in the CyberSociety scenario because more international transactions are made. International privacy law is negotiated and implemented, but may be difficult to enforce.
Fraud on the supply side, for example the online sale of dubious products and services, flourishes in CyberSpace due to relatively open, globalized networks and weak regulators. This is partly offset by new encryption technologies. The commercial ‘walled gardens’ of the DigitalIslands scenario are less vulnerable to manipulation from outside. However, some companies intentionally exploit the weakness of consumer protection regulation to do fraudulent business, leading in turn to a drop in confidence in e-transactions. CyberSociety and NetworkedCommunities insist on strong legal guarantees and security for consumers through transaction guarantees and toughened product warranties.
The nature of public services like health, education and social services under the different scenarios is largely determined by factors other than the use of ICTs. Nevertheless, online technologies will have an effect on the quality and accessibility of these services. As the drive for cost efficiency in the public sector intensifies, online technologies play an increasing role in supporting public provision. Most public services will be online by 2010; advice is given on the internet, appointments are made via email, courses taught online. This trend is particularly strong in CyberSpace, in which the digitally excluded will have difficulties in accessing some basic services. Even if a large majority of the population is online by 2010, this does not imply that everybody knows how to make full use of the available services. This problem is much less marked in NetworkedCommunities, in which online services supplement rather than replace traditional services.
ICTs affect the political system, although in very different ways. In all scenarios, new technologies are used in political decision making to achieve greater transparency and accountability. In Cyberspace, online voting is introduced and increases voter turnout at elections. In NetworkedCommunities and CyberSociety, the internet is used to encourage greater participation. This is especially important in CyberSociety, in which internationalized governance structures suffer deep democratic deficits. In NetworkedCommunities, local communities experiment with ICT-supported, participatory decision-making processes.
In CyberSpace, and to some extent in DigitalIslands, rapid growth in retail e-commerce closes down some local shops, banks and services. High streets tend to decline as banks, department stores, travel agencies, bookshops and electronics stores close less profitable branches. The impacts are much smaller in the other scenarios because the internet and other networks are dominated by non-commercial uses.
In CyberSpace and DigitalIslands, the new economy widens the gap between poorer and richer parts of the UK. The south-east of England benefits most from new dot-com business and the growth of the communications sector. In CyberSociety, regional development is more evenly distributed through public provision of ICT infrastructure, active programmes of government support, and stringent service obligations on providers. NetworkedCommunities is generally less affected by this trend. Here, ICT contributes to strengthening the identity of local communities, connected through local networks.
In all scenarios, the extended use of ICTs will improve resource efficiency. This trend will be particularly strong in CyberSpace, in which technological development is most rapid. Price signals, including the introduction of higher taxes on resource use, reinforce these effects. Increased ICT use in production reduces the use of energy and materials, as well as the generation of wastes. Similar, but less marked effects will occur in private households. More efficient energy and lighting services, which grow rapidly in the CyberSociety and Networked-Communities scenarios, bring important reductions in the energy intensity of buildings.
B2B e-commerce will lead to better-managed supply chains. Here, cost efficiency and environmental efficiency will go hand in hand. ICTs will also reduce the need for inventories of goods, reducing energy and materials use. Less space will be required for warehousing and retailing. The NetworkedCommunities scenario will benefit from these developments only to a limited extent because economic growth and investments are low and B2B e-commerce increases slowly. Equally, DigitalIslands will not be able to realize the full potential of these efficiency gains due to moderate economic growth and a lack of tax incentives. The main counter-trend will be experienced in the CyberSpace scenario, in which the scope of supply systems becomes increasingly global, and the value of physical resources tends to fall.
A number of products and services will be obtained in digital rather than physical form. All scenarios will see some virtualization of services like banking and billing, as well as products like music and books. Over the period to 2010, the environmental benefits of this shift will be small. In CyberSpace and CyberSociety, sales of virtual products and services grow rapidly. But as in the case of the ‘paperless office’, the expected environmental benefits are not met – digital products often supplement rather than replace traditional ones. In DigitalIslands and CyberSpace, the small environmental gains are offset by a steep rise in the purchase and use of internet phones, DTV sets and PCs.
The use of ICTs will lower the costs of many products and services. Impacts on resource use and pollution will depend on how consumers choose to reallocate the extra time and money. In the market-oriented scenarios, people will consume more goods, most of them tangible. The environmental outcomes of this will be diverse and difficult to assess. The current experience with the fuel consumption of cars, whereby efficiency gains are offset by the trend towards larger cars, will be repeated in other areas. In CyberSociety this effect will be avoided through strong economic incentives and regulation to use less energy and materials.
E-commerce also increases the power of consumers. Shoppers are able to choose between a large number of suppliers, compare prices, and specify requirements. In the NetworkedCommunities and CyberSociety scenarios this will promote green consumerism. New websites will link consumers with suppliers of green goods. It is likely that locally produced organic food will be sold online in the Networked-Communities scenario. Strong environmental awareness and low incomes will also lead to a boom in secondhand websites like eBay, where consumers can buy, sell and exchange a variety of goods.
In transport, the efficiency improvements of e-business tend to have positive environmental impacts under all scenarios. In the scenarios with relatively strong B2B e-commerce, ICTs will stimulate logistics to be more efficient, compress supply chains and optimize the flow of goods through the supply chain. The potential for e-commerce to dramatically reduce the number of vehicles will be fully exploited only in CyberSociety. Here, high fuel prices and planning controls encourage the emergence of sustainable distribution systems.
In all scenarios, light goods vehicle (LGV) traffic will rise, especially in residential areas. In CyberSpace, and to a lesser extent in DigitalIslands, rapid growth of competing distribution systems increases road traffic considerably. This effect is reinforced by consumers’ expectations of rapid delivery. By 2010, e-commerce distribution does not yet replace individual shopping trips to a very significant degree, except in CyberSpace.
The digital economy will contribute to a rise in air transport, especially air freight and business travel, which is a major issue of environmental concern. This trend is due to the extra international trade facilitated by B2B and B2C e-commerce. In addition, more leisure time and global communications will increase the demand for long-distance travel.
In all scenarios except DigitalIslands, online services increase the transparency of corporate environmental performance. Large companies are under pressure to disclose environmental information about their products and production processes. In CyberSociety and CyberSpace, NGOs use the internet to lobby for stringent and enforceable environmental laws.
Comparing scenarios and impacts – UK in 2010
The scenario storylines are matched to quantitative and qualitative indicators that illustrate the magnitude of change, allow a quick and systematic comparison, and aim to make the scenarios more accessible. Indicator values should not be interpreted as predictions or forecasts. They are based on statistics and expert judgement. No formal modelling has been undertaken, but consistency checks have been applied to ensure that different indicators are telling the same story.
Robust strategies for policy
Common themes for the development of robust policy strategies
There are different pathways to securing more sustainable outcomes for the development of the internet and e-commerce. These will be influenced profoundly by the outcomes of larger political debates and conflicts about the rights of the consumer, the role of the state, and the future of the world economy. The virtual social and economic space of the internet cannot be separated from the real socio-economic space in which governments, corporations, markets and people continue to exist and interact. The virtual is embedded in the tangible, and the tangible shapes the virtual world. As Saskia Sassen has argued,
‘There is no purely digital economy and no completely virtual corporation. This means that power, contestation, inequality, in brief, hierarchy, inscribe electronic space. And although the digitized portions of these industries … have the capacity to subvert the established hierarchies, new hierarchies are being formed, born out of the existing material conditions underlying power and the new conditions created by digital space.’2
|GDP growth per year||3.5%||2%||2.75%||1.25%|
|Private car use||85%||90%||78%||75%|
|GHG emissions (million tonnes)||780||845||625||600|
|Waste (million tonnes)||250||200||175||125|
|Dominant device for online access||mixed||digital TV||PC/mixed||PC|
|Dominant use of networks||commercial||commercial||mixed||private|
|Dominant form of e-commerce||B2C||B2B||mixed||B2B|
|Potential Social Impacts of the New Economy|
|Low cost access to online services||X|
|Access without IT skills||XX||X|
|Equal access to all online services||X||XX|
|Equal opportunities for offline population||XX||XX||X|
|Strong consumer protection||XX|
|High efficiency of public services||X||XX|
|Improved political participation||X|
|Balanced regional development||XX||X|
|Potential Environmental Impacts of the New Economy|
|Resource-efficient supply chains||X|
|Dematerialization of products||X|
|Sustainable consumption patterns||XX||X||X|
|Less heavy goods transport|
|Less light goods transport||XX||X||XX|
|Fewer individual shopping trips||X||X||X|
|progress towards objective|
|some progress towards objective|
|X no progress towards objective|
|XX movement away from objective|
Robust policy requires that e-effects are disentangled from other drivers of change
ICTs are co-evolving with social and economic changes.3 However, this does not mean that the impacts of e-commerce on society and the environment cannot be examined. The challenge for impact assessment is to disentangle the sustainability impacts of the digital economy from the effects of broader economic, social and technological drivers of change. All the scenarios suggest that these relationships will not be linear – that is, that the causes of impacts will not be the e-commerce facilities alone, but the way in which these facilities are used by organizations and people who may or may not be motivated by sustainability objectives. E-commerce is at best only a small part of a sustainability solution, and e-commerce policy cannot substitute or compensate for lack of policy action on other fronts whose relationship to sustainability issues is already well defined.
Claims about the environmental benefits of e-commerce need to be treated cautiously
Many commentators have begun to speculate about the potential impacts of e-commerce on sustainable development.4,5,6 On the whole, these assessments present positive accounts of the opportunities for environmental gains. They argue that the efficiency gains in production and logistics lead to a less wasteful use of resources, and that the dematerialization of goods and services allows economic development to be decoupled from environmental damage.
Yet many of these arguments seriously underestimate the close interactive relationships between material and non-material environments. Although services now command a substantial and increasing portion of the value created in industrialized economies, most service markets relate to physical products. Many of the economic indicators of e-commerce may turn out to work against the goals of environmental sustainability. For example, if online procurement were to reduce unit costs in an industry, we would expect this to lead to increased sales – a positive economic indicator. The question would still remain whether the environmental gains from making buying more efficient would instantly be swallowed up by new, additional forms of consumption.
Many internet pioneers saw cyberspace as a free and open space in which to exchange knowledge and ideas, unencumbered by the kinds of regulation and control applied to previous generations of communication networks. However – as the scenario analysis seeks to draw out – the internet is not one community, but a complex of communities, each with its own objectives and expectations. Stakeholder interests are likely to conflict in many areas.
There is a need for ways of governing the internet that ensure reasonable equity in the digital space for the needs of many different stakeholders. Informal systems are not always enough. Pressure is emerging for more formal protection in areas like fraud, privacy and security. The process of institution building has only just begun, and the role of government is not entirely clear. Each of the scenarios would benefit from effective and transparent governance, with clear rules and norms established for redress and consumer protection. The borderless nature of the internet makes institutional development an even greater policy challenge.
Governments should encourage network diversity
The scenarios reveal very different outcomes in the development of technologies and markets for services. A proliferation of new devices can be linked to an expanding range of services. Some services will have general applications, whereas others will be oriented to the needs of particular user groups. As internet services diversify, there is no guarantee of consensus as to what will constitute public and private spheres of network activity. A fundamental question for governments is to determine how much of this new milieu will be defined as a public network, to which equitable access and use should be guaranteed.
As the internet evolves, the distribution of access will be a key policy problem – with different outcomes possible. The social diffusion of technologies that could support broader access is not guaranteed. A major influence will be how the development of network infrastructures affects the cost of the bandwidth available to users. New standards and economic regulation are likely to be needed to prevent some consumer groups being prematurely locked into redundant technologies. The scenarios suggest that aiming for maximum network diversity is the safest policy.
A holistic approach needs to be taken to service obligations
Historically, service obligations on network providers have been a strong policy tool for ensuring wide access to network services. Most existing service obligations have operated across stable and exclusive networks with single service packages, like the Post Office and the BBC. This approach does not fit today's digital environment in which different network facilities can be used to provide many of the same services – television over telephone lines, telephony via digital television, and so on. Service obligations need to be rethought. The market provides suppliers of network infrastructure with huge incentives to get people connected, but the same is not true for traders who buy and sell commercial products and services online.
Some companies choose their customers and partners carefully. As electronic transactions generate more information about buyer and seller behaviour, exclusivity may actually increase. In an internet environment characterized more by commercial motives, the lines between the services that are open to everybody and the services that are exclusively available to a few may blur. As a result, policies that concentrate on access only – for example, putting a computer in every home, or putting all government services on the web – address only a small part of the problem. Many services, even some that are deemed ‘essential’, are liable to be highly unevenly distributed on the web. Access and content must be treated as part of the same policy problem, and content is where the bulk of investment – whether public or private – is likely to be required.
Dematerialization needs to be enabled by investment in modern transport and energy systems
ICTs provide opportunities for a step-change transformation in the way we consume materials and energy, but these opportunities cannot be achieved by digital networks alone. They depend on heavy investment in the built environment and the modernization of transport and energy infrastructures. Large-scale energy savings as a result of e-commerce are only achievable if market and regulatory developments keep pace. Similarly, the economic potential and environmental benefits of e-commerce under all scenarios will depend on the available transport infrastructure and logistics systems. The future success of the e-economy will depend upon progress towards a clean, efficient and integrated transport system. It will not be a substitute for it.
Greater transparency and better environmental and ethical information is critical to changing behaviour
In the knowledge economy, information plays a more central role in environmental governance. Traditional environmental regulation is being complemented by voluntary and market-based policy instruments; the consumer is critical. All these new developments, many of which are underscored across all the scenarios, depend on greater environmental transparency and reporting. The internet can become a primary vehicle for the delivery of tailored, appropriate and authoritative environmental information to consumers, businesses and government alike. To achieve this will, in many cases, require government support, funding and regulation.
Notes and references
1 Berkhout, F, Eames, M and Skea, J (1998) Environmental Futures Scoping Study, SPRU, Falmer
2 Sassen, S (2000) ‘Digital Networks and the State: Some Governance Questions’, Theory, Culture and Society, vol 17, no 4, August, pp19–33
3 Mansell, R and Steinmuller, E W (2000) Mobilizing the Information Society, OUP, Oxford
6 Romm, J (1999) The Internet Economy and Global Warming: A Scenario of the Impact of E-commerce on Energy and Environment, Center for Energy and Climate Solutions, Washington
|From||Amory B Lovins <firstname.lastname@example.org>|
The SPRU team's scenario exercise is an insightful and valuable contribution. The scenario technique, pioneered by Group Planning at Royal Dutch/Shell, is a valuable vehicle for story-telling that helps us to understand the unfolding of events and to learn faster. It becomes essential when events are moving with such explosive and accelerating speed.
The Moore's Law doubling of microchip performance every 18 months is making natural-language interfaces and even virtual presence feasible. Yet this is sedate by the standards of some other technologies. Optical-fibre technology is evolving at least ten times faster, and in the US, fibre is being laid at a speed of Mach 3 – some 3200 kilometres per hour. Wireless technology is evolving faster still. Internet traffic has lately been doubling every hundred days; it won its first fifty million in four years, compared with 38 for radio and 13 for television. By the end of 1998, IT industries constituted 8 per cent of the US economy and 29 per cent of its growth. With a speed that historians will doubtless describe as breathtaking, the web is rapidly spreading round most of the world; its majority language will soon be Mandarin, not English. It is already changing many of our daily habits – though not, ironically, academic authors’ citation of references only in their hard-copy form, not with online URLs!
A surprising implication of e-commerce, which I interpret less cautiously than do the SPRU authors, is that e-commerce sets in train structural changes that save much energy, and may even save net electricity. (Contrary to the US coal industry's disinformation campaign, computer equipment and the internet use at most 2 per cent of US electricity with little observable growth – not, as claimed by some, 8–13 per cent heading rapidly for 50 per cent.)1
At www.cool-companies.org/energy/, my colleague Dr Joe Romm, former US Acting Assistant Secretary of Energy, asks why during 1996–99 the US reduced its primary energy use per dollar of real GDP at a near-record pace, averaging 3.2 per cent per annum, despite record-low energy prices. Citing other government agencies’ findings, he assembles a compelling case that as much as a quarter, perhaps even a third, of those recent US energy savings can probably be ascribed to structural changes driven by e-commerce. A simple example is the displacement of retail shops, and of a projected 5 per cent of all US office space by 2008, as a result of direct shipment from warehouses. A square metre of warehouse holds far more merchandise than a square metre of shop, yet uses 16 times less energy. A more subtle example is that better matching production to the products, qualities, and timing people want could readily trim a quarter off business inventories and free up capital to be reinvested more productively.
The argument is too rich and complex to summarize here, but one example gives the flavour. Compared to a physical book superstore, online bookseller Amazon.com carries 14 times more titles, earns treble the revenue per operating employee, turns inventory 20 times faster, and uses half the energy per square metre, cutting energy use per dollar of revenue by 15-fold. Different and possibly more transport might be employed, but with highly uncertain net effects. These would certainly tip to the favourable side if the best existing technologies and operating techniques were meanwhile introduced – as both market and technical logic would urge – to improve the energy efficiency of aircraft and automotive systems by factors of roughly three and ten respectively (for example, see www.hypercar.com).
Not surprisingly, a 60-year Shell scenario shows gross world product growing at 3 per cent a year, while world energy use rises fourfold more slowly, due to a 1.7–2.0 per cent per annum drop in energy intensity, reinforced by dematerialized production. The even more radical changes in resource productivity and business models implied by our recent book, Natural Capitalism, could make even that change seem conservative.2
The SPRU scenarios rightly emphasize that, though important, such resource savings probably matter less than social changes. These, I suspect, will emerge not from single, simple driving forces but from intricate, unpredictable, ecosystem-like co-evolution. For example, as information becomes free, privacy becomes infinitely dear; yet unbreakable encryption – a profound strengthening of the weak against the powerful – is already ubiquitous. Likewise, IT can still empower tyrants, spreading darkness with the speed of light. Yet so far at least, it is empowering civil society, so that more people have been liberated by the microchip than ever were by the sword. The web can and does spread myth, hate, noise, and merely unhelpful information; yet it is also reinforcing the sweeping social changes that are starting to give most of the world's people – women, the poor, and the politically oppressed – a voice, and with it their first opportunity to contribute to the global conversation.
This more than anything gives me hope that our species may yet pass its A-levels. The web is a bit like the nervous system that enabled multicellular organisms – symbioses of cells each made of bacteria and other bits of early life stuck together in tentative community – to start evolving into far more complex organisms with specialized organs and functions. This led to social organization and speech, then to writing and broadcasting, and perhaps soon to the beginnings of a sort of light-speed planetary nervous system. If that next step can indeed make our species smarter, better-coordinated, perhaps even wiser, it may yet help to show that this odd experiment of combining large forebrains with opposable thumbs could be rather a good idea. For as far as we know, there is nothing in the universe so powerful as six billion minds wrapping round a problem.