Introduction – Digital Futures

Introduction

Digital Futures: an agenda for a sustainable digital economy

James Wilsdon and Paul Miller

Living in a dot-com world

Predicting the future is a hazardous business. History is littered with prophecies that went awry. Take Charles Duell, the US Patent Commissioner, who in 1899 proposed shutting down the Patent Office on the grounds that ‘Everything that can be invented has been invented.’ Or Thomas Watson, the former CEO of IBM, who declared in the late 1940s that ‘there is a world market for maybe five computers’.1

Forecasting trends in information technology is particularly tricky. Who could have anticipated the white-knuckle ride of the e-commerce sector over the course of 2000? The year opened on a wave of dot-com euphoria, as high-tech shares soared to record highs. The merger of AOL and Time-Warner in January signalled that the internet had come of age, as an old-economy giant was swallowed by a new-economy upstart. E-commerce mania hit a peak in the UK on 15 March, when lastminute.com was floated on the stock market at a value of £730 million. A month later, the market crashed, and the lengthy comedown began. A string of high-profile dot-coms collapsed and many began to wonder what all the fuss had been about. Who can say where it will all go next?

Mindful of such pitfalls, this book steers clear of glib predictions. Its authors make no claims to be cyber-soothsayers. They have no digital crystal balls. However, they do try to make sense of emerging patterns in the use and application of e-commerce, and to assess how these will affect our economy, society and environment. By mapping the present, they seek to highlight the possibilities for creating a new economy that is cleaner, greener and more socially inclusive than the old.

The book is the product of the Digital Futures project, a collaboration between government, business and the voluntary sector. Its overarching aim is to examine e-commerce through the prism of sustainable development, to better understand the relationship between its economic, social and environmental dimensions. The project was born out of a recognition that two of the most powerful drivers of change within modern economies 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 the relationship between governments, companies, citizens and consumers. Yet there have been surprisingly few attempts to assess whether the digital and sustainability revolutions will complement or conflict with one another. Digital Futures has sought to build an intellectual and political bridge between the communities of e-commerce and sustainability, which have many things in common, but have not yet engaged in much dialogue.

Examining the social and environmental opportunities that are presented by e-commerce requires us to do more than simply describe the wonders of technology. If you're the sort of person who salivates at the prospect of your toaster being able to email your fridge, then this book probably isn't for you. Our interest lies not so much in the gadgets and techno-wizardry of the digital future, as in the potential that technology offers us to tackle the social and environmental challenges that we face.

An agenda for a sustainable digital economy

The central theme of this book is that there are more ‘e's than you might think in e-commerce. E is for electronic – the internet revolution that is transforming the way we live, work and do business. It is also for enterprise – the dynamism and creativity that drives the new economy. E is for environment – the scope to use new technology to reduce our impact on the natural world. And e is for equity – the possibilities that the net presents for new forms of social inclusion and interaction. Add all these together and you get the final e – the explosion of new opportunities to tackle the challenges of sustainability.

In this introduction, our research findings are summarized in the form of ten headline principles – what we might call our ‘ten dot-commandments’ – for sustainable e-commerce. Within the chapters that follow there are more detailed suggestions as to what government, business and the voluntary sector can do to take this agenda forward.

Definitions

Sustainable development

Sustainable development is all about achieving a balance between the economic, social and environmental dimensions of a society or an organization's activities. The UK government defines it in terms of four objectives:

  • social progress which recognizes the needs of everyone;
  • effective protection of the environment;
  • prudent use of natural resources;
  • maintenance of high and stable levels of economic growth and employment.2

E-commerce

There are ongoing debates about the best way of defining e-commerce. Within Digital Futures, we have followed the broad definition used by the Cabinet Office in its report ‘e-commerce@its.best.uk’:3

‘Electronic commerce is the exchange of information across electronic networks, at any stage in the supply chain, whether within an organization, between businesses, between businesses and consumers, or between the public and private sectors, whether paid or unpaid.’

Ten principles for sustainable e-commerce

1   Beyond the hype, there's hope.

2   The new economy can access all areas.

3   Community is alive and clicking.

4   E is for environment.

5   HTML = heavy traffic made lighter?

6   Trust me, I'm a dot-com.

7   Right now, matter matters more (not less).

8   Smart technology needs smart institutions.

9   We need to join the dots.

10 It's about time.

Digital Futures: the project

Digital Futures was launched in February 2000 as a one-year inquiry into the social and environmental impacts and opportunities of e-commerce. A consortium of 28 organizations participated in the project, including think-tanks, NGOs, companies and government departments. The project focuses on the UK, and so provides a case study of the relationship between e-commerce and sustainability within a particular national context, although many of its conclusions are more widely applicable.

Think-tank partners

  • Demos
  • Forum for the Future
  • Green Alliance
  • Local Futures Group
  • New Economics Foundation
  • SPRU – Science and Technology Policy Research
  • Town and Country Planning Association
  • UK CEED/University of Bradford

Government partners

  • Cabinet Office
  • Department of the Environment, Transport and the Regions
  • Department of Trade and Industry
  • Foresight
  • South West of England Regional Development Agency

Corporate partners

  • Amazon.co.uk
  • AOL UK
  • BT
  • BP
  • Ericsson
  • Kingfisher
  • The Post Office
  • NatWest
  • Nationwide Building Society
  • Royal & SunAlliance
  • Smart South West
  • Sun Microsystems
  • Unilever
  • WH Smith

Each of the eight think-tanks led research into a particular piece of the e-commerce and sustainability jigsaw – for example, impacts on planning, transport, or community. Throughout the project, the think-tanks worked closely with the corporate and government partners, through a series of workshops and meetings, discussing and reaching conclusions on each theme. This book contains the results of that research.

At the end of each chapter, we have invited a leading thinker or practitioner to respond. Many of these support our findings, some highlight certain areas of disagreement. Our aim in inviting the responses was to include a diverse mix of voices and opinions within the book, reflecting the fact that it is still too early in this debate for consensus to emerge.

Principle 1 Beyond the hype, there's hope

E-commerce creates new opportunities for environmental and social sustainability.

Despite the boom and bust of the dot-com start-ups, the underlying significance of e-commerce remains undiminished. E-tailers like Amazon and lastminute.com are the most visible tip of the e-commerce iceberg. Beneath the surface, a more profound transformation is taking place, as traditional sectors embed digital technologies within all aspects of their operations. Analysts bandy around ever-higher numbers in an attempt to convey the significance of this revolution. Take your pick: the OECD suggests that worldwide e-commerce will be worth US$1 trillion by 2005, whereas web research firm Forrester says it will be worth $3 trillion by 2003. Whichever of these statistics is closest to the mark, one thing is clear. Now, in the early stages of the e-revolution, is the right time to pose some IAQs (infrequently asked questions) about the potential of e-commerce to bring wider social and environmental benefits.

As Chapter 1 shows, the defining characteristic of the new economy is not technology but innovation. The internet helps creative minds to develop entirely new ways to deal with old problems. Combining new technologies with social and institutional innovation could mean a radical rethink of the way that companies, and governments, deal with their wider responsibilities. Unlike sectors such as oil and chemicals, which have had to retro-fit to accommodate social and environmental concerns in response to stakeholder pressure, e-business is uniquely well placed to incorporate them at the design stage. The trick is to address these issues now, before they become a burden or a challenge to the existing way of doing things. A young, fast-changing sector can adapt far more easily than one which is trapped in established mindsets. With a mixture of vision, imagination and intelligent policy, it should be possible to splice sustainability into the DNA of the new economy.

Principle 2 The e-economy can access all areas

The digital revolution could refresh the parts that other revolutions haven't reached, by spreading its benefits to all regions of the UK and all sectors of society.

As the digital economy takes off, increased emphasis is being placed on the need to bridge the digital divide by ensuring that the benefits of the internet are available to all, regardless of location, age, language, disability or income. The UK government has set an ambitious target in this area with its pledge of universal internet access by 2005. Yet as our research shows, the digital divide will not be solved through access alone. The roll-out of technical access – whether via PC, mobile phone, or digital TV – is the easiest part of the problem to address. A more fundamental challenge is to overcome the underlying forms of division that contribute to the digital divide: the skills divide, the regional divide, the social divide.

Our research has looked in detail at the regional divide. As Chapter 6 shows, in the UK's new economy, place matters. When the internet recruitment company Boldly-go.com researched the location of dot-com companies in the UK, almost 80 per cent were based in the south-east, with London accounting for almost 60 per cent. Outside London, Silicon Fen (Cambridge) and Silicon Glen (Edinburgh/Glasgow) accounted for just 3 per cent and 4 per cent respectively. There is a strong south-east bias and no intrinsic dynamic towards more equitable patterns of regional development.

E-commerce could be a vehicle for revitalizing marginalized areas and communities if we can find ways to spread the benefits around. There are new regional institutions and policies that could make this happen, but regional development authorities (RDAs) and local authorities need to strengthen the links between e-commerce, sustainability and governance. At the moment, sustainability is seen as an add-on, rather than being seen as central to the development of the new economy. Without active policy to create change, the new economy is more likely to reflect, rather than transform, the social, environmental and economic maps of the UK.

Another focus of our research is on what lies over the bridge across the digital divide; what impacts will far higher levels of internet access and usage have on local economies and communities? As Chapter 5 suggests, the low-income market, which many e-tailers shun, will become increasingly significant. There are millions of people in the UK who lack bank accounts or credit, and so are excluded from shopping online. In order to bring these people into the e-marketplace, companies will have to develop novel networks of producers and consumers, and different forms of electronic currency.

We also need to find ways in which e-commerce can strengthen local economies and keep local money and resources flowing. Access to global markets can be very positive for small businesses, but there is a danger that e-commerce will give impetus to the rise of the global at the expense of the local. In order to strengthen local economies, we need to take advantage of the exciting scope for alternative currencies – such as local exchange and trading schemes (LETS) and time banks – which can be supported through the internet.

Principle 3 Community is alive and clicking

Online relationships, supported by e-commerce, can add a valuable extra dimension to real world interaction.

Despite fears that the internet and e-commerce will contribute to the erosion of social relationships and undermine local communities, our research finds that the trend is in the opposite direction, towards the creation of online relationships as an addition to, not a substitute for, existing social networks. Historically, commerce and social networks have a long tradition of mutual dependency. Friendships ease commerce, from gentlemen's clubs to Tupperware parties. Commerce provides the infrastructure for friendship, from teenagers hanging out in shopping malls to the roads, railways and airports that have grown to service business, but which also enable us to visit friends and relations.

As Chapter 4 shows, e-commerce is no exception. All sorts of networks are being strengthened by the internet, and e-commerce is supporting the development of the technology, infrastructure and software that enable these new sources of social capital to flourish. For example, many people are gaining internet access through digital TV (DTV) at relatively low cost, largely because TV companies have signed lucrative deals with retailers to sell goods and services through the same channels.

In some instances, the internet generates new forms of virtual community. More commonly, though, it strengthens existing patterns of social interaction, or enables people with shared interests to exchange ideas and coordinate activity. Even if the initial contact with an individual or organization is electronic, it usually turns into a face to face relationship. To give three examples: internet banks in the US have recently started opening branches; the CompuServe police discussion forum now has an annual barbecue; and the Scottish community on AOL's Local Life channel have regular social get-togethers.

Principle 4 E is for environment

E-commerce could help to cut energy and resource use, and improve environmental productivity.

E-commerce leads to more efficient ways of doing business, and this can have important environmental benefits. A lot has been written about these environmental gains – Joseph Romm of the US-based Center for Energy and Climate Solutions, for example, suggests that e-commerce will create year-on-year reductions of up to 2 per cent in the energy intensity of the US economy. Romm points out that despite high levels of economic growth in the US between 1997 and 1999, energy consumption hardly increased at all. This points to the potential for significant gains in resource productivity, reducing the quantities of energy and physical material that are needed to provide a certain product or service.

Our research uncovers plenty of opportunities for such gains. Firstly, there could be gains from virtualization – the spread of entirely intangible products like entertainment, information and software, which can be delivered in the form of a computer file. Although this still requires computer equipment and energy, it cuts out the environmental costs of manufacture and transport. Virtualization is happening already: banking and accounting takes place online; MP3 music files are distributed in digital form; and the Encyclopaedia Britannica is now only available online, with one website replacing millions of leather-bound books. The potential for virtualization is discussed in more detail in Chapters 1 and 2.

Gains could also come from more efficient business practices, made possible by business-to-business (B2B) e-commerce. Re-engineering supply chains through B2B exchanges and centralizing procurement can lead to less warehousing, less transportation and less waste overall. A further example is the internet-based energy management systems being developed, which allow businesses to fine-tune their energy requirements and, again, cut down on waste.

There could be gains, too, from the new business models enabled by internet technology. Auction sites like eBay allow trading of secondhand goods, prolonging the useful life of products and reducing waste. As Chapter 1 shows, in the longer term, we may shift to an economy based on access rather than ownership as the short-term leasing of many goods and services becomes possible online. Leasing means that producers retain ownership and ultimate responsibility for their products, and have an incentive to make them robust, long-lasting, reusable and recyclable.

E-commerce could also support green consumerism. Online, it is easier to track down ethical products, and many environmental organizations are beginning to investigate e-commerce as a way of strengthening green consumer trends. Online consumer clubs, too, could allow green consumers to aggregate their buying power and increase their influence. A green search engine, or ecobot, could be developed to trawl the web to find products that meet social or environmental standards. Chapters 1 and 2 offer more ideas.

Principle 5 HTML = heavy traffic made lighter?

Virtual traffic can replace real traffic. With the right policy framework, e-business could create more efficient logistics and distribution systems.

Few people would disagree that our transport system is under increasing stress. Just look at the way the rail network trundled along at a snail's pace for the months following the Hatfield rail disaster in the autumn of 2000, or the way the fuel protests of September 2000 left supermarket shelves empty within days. According to the DETR, 6 per cent of major roads in England are at 100 per cent stress, and the average traffic speed in central London is the same now as it was at the end of the 19th century.

Changes in freight distribution over the last decade to just-in-time delivery, and a shift towards more environmentally damaging modes such as air and heavy goods vehicles, seem to have exacerbated the problem. And now e-commerce is changing things again. Will its overall effects be positive or negative? If we look at the direct impacts of e-business on transport, there is a fair amount to be cheerful about. It seems likely to make distribution more efficient, reduce waste, and improve the utilization of vehicle capacity.

Yet there is also potential for negative effects. E-commerce tends to make greater use of air freight in order to reduce delivery lead times, and of light goods vehicles to deliver products to consumers’ homes. Unless we take action now, the rise of e-commerce could lead to busier skies and residential streets jammed with half-empty white vans. E-commerce also has indirect effects on transport that are more difficult to predict. If home delivery of groceries increases rapidly, what will people do with the time freed up by not having to drive to the supermarket? Are they likely to jump into their cars, now idle on the driveway, and think of more places they want to go?

Our research finds that with the right blend of government policy and business action, e-business could help to make logistics more environmentally and socially sound. However, as we argue in Chapter 7, it's too early to give e-business transport networks the green light for sustainability. The current signal is amber, with some warning signs that the second-order effects of e-commerce may run counter to sustainability. Now is the time to take precautionary action to ensure that the digital economy contributes to wider policies for sustainable transport and distribution.

Principle 6 Trust me, I'm a dot-com

E-commerce is changing the relationship between companies and their stakeholders, and could usher in a new era of corporate transparency and accountability.

E-commerce changes the balance of power between companies and consumers. The most obvious benefit of this is cheaper products and services, as consumers learn to compare prices at the click of a mouse. Yet as Chapter 3 argues, consumers aren't the only stakeholders who could benefit from e-commerce. The internet is the ideal environment for new forms of cooperative ownership and management. It is not an organization that anyone can join, it is a set of relationships, and should therefore lend itself to more inclusive, employee- and stakeholder-driven models of capitalism.

Employees are like gold dust in the knowledge economy. Their intellectual capital is vital to building successful companies, as evidenced by the financial rewards that many dot-coms originally offered their staff. Now that share prices have taken a nose-dive, some employees are turning to more traditional forms of collective bargaining. For instance, both Amazon and eTown have faced calls for union recognition.

Suppliers too are in a stronger position. Most analysts agree that B2B e-commerce is where the real growth will happen over the next five years. Its basic selling point is that it cuts costs; estimates vary, but the scope for savings in some sectors is thought to be 20 to 30 per cent. The volume of transactions that will pass through these exchanges is mind-boggling. For example, the auto-industry exchange Covisint, born from an alliance between Ford, General Motors and DaimlerChrysler, is set to bring together 35,000 component makers with an annual trading volume of US$250 billion.

If suppliers box clever, they'll build up their reputation on social and environmental issues to compete in this market. The narrow focus on price in the purchasing protocols that govern many transactions, and the speed and volume of transactions through such exchanges, may make it difficult to know who you are dealing with. To avoid supply chain PR disasters such as those that hit Nike and GAP in the 1990s, ethical audit and compliance systems will need to enter the digital age. There are already systems, such as those offered by Clicksure.com, that provide online assurance on issues of quality. Our research argues that B2B exchanges will need to develop similar protocols to ensure that trading partners meet environmental and social standards.

Currently, debates about trust on the internet are focused on privacy and the security of transactions. As e-commerce becomes more sophisticated, purchasers – whether in business-to-consumer (B2C) or B2B transactions – are likely to want assurance on a wide range of issues, including the social and environmental credentials of products and services. Companies will have to capitalize on their reputation to offer that assurance.

Principle 7 Right now, matter matters more (not less)

Potential environmental gains won't be realized without a concerted effort from government and business to align e-commerce with wider sustainability objectives.

At a time when so much is changing as a result of e-commerce, the last thing we want to do is slip into a sense of complacency about the inevitability of positive environmental outcomes. The environmental benefits from virtualization, dematerialization and increased efficiency will not flow automatically; consumer preferences, and business practices, take a long time to change. The investment in capital, time and creativity needed to bring about these changes is considerable. We need to make sure that people have the information and incentives that they need to help them to shift systematically to more sustainable patterns of production and consumption.

Above all, we mustn't underestimate the rebound effect, whereby all the extra environmental ‘space’ created by new technology is instantly swallowed up by our insatiable appetite to consume ever more exotic products and services. Of course businesses can find more efficient ways to make their products, but if this just means that we buy more, then any environmental gains are cancelled out. Anticipating and attempting to mitigate such negative rebound effects poses a great challenge to policy makers and responsible companies. We also mustn't ignore the social and cultural factors that drive consumption; most of us enjoy shopping for reasons that have precious little to do with obtaining goods and services in the most efficient way.

Now – at this critical juncture in the development of the new economy – is precisely the time when we need to devote more effort to ensuring that technology and innovation are channelled in a direction that makes a genuine difference to sustainability. Many of the policies that the green movement has long advocated – such as environmental taxes and tighter regulation – will become more, not less, important. We need to reward those who innovate. We need to encourage businesses to break away from established models. We need a policy framework that provides incentives to business to think through, and enact, environmental gains. The scale of the challenge should not be underestimated if we are to make the most of this window of opportunity.

Principle 8 Smart technology needs smart institutions

Technology is developing at breakneck speed. Institutionally we're struggling to keep up. We need multiple forms of innovation if e-commerce is to become an ally of sustainability.

It's often the case that technology catches us by surprise. The e-commerce explosion is no exception. Governments and NGOs sometimes give the impression of being caught off-guard, without adequate tools or policy frameworks to make the most of the internet.

As Chapter 1 points out, if we look back 150 years, the extent to which the Victorians matched scientific and technological innovation with radical institutional innovation is striking. When we fast-forward to the revolution of the new economy, we appear to be timid and cautious where the Victorians were confident and innovative. We are scientific and technological revolutionaries, but political and institutional conservatives. We need to change the way our institutions are designed if we are to deliver a sustainable way of life.

The same applies to the business world. At the moment, much of the innovation in the new economy is devoted to creating faster computers, smaller gadgets or broader bandwidth. Far less effort is devoted to the kind of whole-system innovation that will be needed to move the economy onto a sustainable path. One example is the development of the car. Over the past 30 years, engines have become many times more fuel efficient, but carbon dioxide emissions from cars have still increased. While the technology has improved, we haven't managed to change the behaviour of consumers, or develop new models of ownership – such as car pooling – in order to reap the benefits for sustainability. The same applies to e-commerce; the focus needs to be on whole-system innovation that identifies how e-commerce can contribute to more complex webs of sustainable energy, transport, production and consumption.

We also need innovative social and environmental entrepreneurs from within the e-generation. Looking across the e-world, there are some encouraging signs. In the US, groups such as Silicon Valley Community Foundation have sprung up to direct entrepreneurs’ time and newly-acquired wealth into social and community initiatives. In the UK, fewer people had a chance to make their millions before the downturn in the market; but a handful have started to invest in social projects – including Tim Jackson, the founder of QXL, who recently established a £70 million charitable trust. Kate Oakley, a leading writer on the new economy, suggests that e-entrepreneurs will eventually make a contribution to the social fabric of our towns and cities equivalent to that of the great 19th-century industrialists. Just as the Victorians built museums, libraries and universities, so these new Victorians will seek to ‘channel their wealth into good works of all sorts, from soup kitchens to school programmes, AIDS hospices to playgrounds.’4

Principle 9 We need to join the dots

Partnership will be key to the creation of a sustainable digital economy. Dot-coms, dot-govs and dot-orgs will need to work together more often and in new ways.

The internet blurs traditional boundaries; it brings the high street into our homes, and brings government out of its Whitehall corridors. The web is becoming a natural meeting point for new partnerships and new alliances, and the barriers to these alliances are not as great as one might imagine. Dot-coms have a surprising amount in common with dot-orgs, especially with dot-orgs from the environmental movement. Both the new economy and sustainable development are creations of the last third of the last century. Both seek to challenge the established conventions of the old economy, and are prepared to take risks and push for change. E-businesses are no strangers to partnership; web success depends on forging alliances with suppliers, technology firms and content providers.

If we are to create a sustainable digital economy we need, literally, to join the dots. Dot-coms, dot-orgs and dot-govs need to share ideas and work together to embed sustainability in every area of the new economy. In a sense, the Digital Futures project is an experiment in these new ways of working, drawing different sectors together to explore the sustainability challenges and opportunities of e-commerce in a collaborative way. We believe such models will need to be replicated throughout the new economy.

We've found that building relationships between these sectors is not just a matter of asking business to adapt. NGOs and governments can both learn from the models of cooperation and fluid alliances that sustain the dot-com world. NGOs are good at pressuring companies, but they also need to build trust, identify common ground and support companies to get things right at the design stage. Government needs to work hard to counter its image as a barrier to be leapt over, an obstacle to innovation. It needs to seek out good practice and use its influence to encourage it elsewhere.

Principle 10 It's about time

A year in cyberspace is said to be four months. As the internet pushes us faster and faster we need to think about our attitude to time and long term responsibility.

Time: no one seems to have enough of it, and with the rise of the internet it seems we have less and less. Back in 1965, Gordon Moore noted that in the previous six years the number of transistors that could be fitted on a chip had doubled every year. He predicted that this trend would continue, leading to an exponential rise in the power of computers. He was right. Although the doubling of power has taken place once every 18 months, Moore's Law means that by 2015 there will have been a 137-billionfold increase in the power of microchips in a little over half a century.

In the new economy, speed is critical to success. Technology moves fast, and because first-mover advantage is so powerful, internet companies have to move even faster. Yet slowness can also be a virtue. The e-business community does sometimes need to think in longer time-horizons, which encompass not just the next investment decision, but also the social and environmental changes that those decisions will bring about. In thinking about e-business and sustainability, we need to cope with several different time cycles: cycles of investment and innovation on the internet, which are measured in weeks and months; cycles of investment in the physical infrastructure of energy systems, roads and towns, which are measured in decades; and cycles of change in the natural environment and the biosphere, many of which are measured in centuries or millennia.

The way we view time is key to creating a sustainable digital economy. It doesn't mean abandoning the hectic pace of e-life, but it does require us to switch lanes occasionally. Things look different from the slow lane. There is time to pause, reflect, and consider the long-term issues that really matter.

Notes and references

1 Margolis, J (2000) A Brief History of Tomorrow, Bloomsbury, London

2 DETR (1999) A Better Quality of Life: A Strategy for Sustainable Development in the UK, HMSO, London

3 Performance and Innovation Unit (1999) e-commerce@its.best.uk, Cabinet Office, London

4 Oakley, K (2000) The New Victorians, unpublished article