UN Trade and Development (UNCTAD) launched The Digital Economy Report 2024, highlighting the global digital sector’s environmental impact and the disproportionate burden on developing countries.
The report underscores that digitalization drives global economic growth and offers unique opportunities for developing nations, but its environmental repercussions are increasingly severe. Developing countries are unevenly affected economically and ecologically due to existing digital and development divides, yet they can leverage this digital shift for development.
UNCTAD Secretary-General Rebeca Grynspan emphasized the need for a balanced approach: “We must harness the power of digitalization to advance inclusive and sustainable development while mitigating its negative environmental impacts. This requires shifting towards a circular digital economy characterized by responsible consumption and production, renewable energy use, and comprehensive e-waste management. The digital economy’s growing environmental impact can be reversed.”
Environmental cost: global supply chains
The report stresses the urgent need to address the environmental costs of rapid digital transformation. Key concerns include the depletion of finite raw materials for digital and low-carbon technologies, escalating water and energy consumption, and the growing issue of digitalization-related waste. As digitalization progresses at an unprecedented rate, understanding its link to environmental sustainability becomes increasingly critical. Developing nations bear the burden without reaping the benefits, but this can change. Developing countries play a pivotal role in the global supply chain for transition minerals and metals, which are highly concentrated in a few regions. Africa’s vast mineral deposits, essential for the global shift to low-carbon and digital technologies, include cobalt, copper, and lithium.
According to the World Bank, demand for minerals required for digitalization, like graphite, lithium, and cobalt, could surge by 500% by 2050. This increased demand presents a development opportunity for resource-rich developing countries if they can add value to extracted minerals, utilize proceeds effectively, and diversify within the value chain and other sectors.
Amid current global crises, limited fiscal space, slow growth, and high debt, developing countries should maximize this opportunity through domestic processing and manufacturing. This would help them secure a larger share of the global digital economy, generate government revenues, finance development, overcome commodity dependence, create jobs, and raise living standards. Rising global demand for clean energy commodities is already driving foreign direct investment in Latin America, accounting for 23% of the region’s greenfield project value over the past two years.
ICT footprint
The environmental footprint of the information and communications technology (ICT) sector is significant. It encompasses the entire lifecycle of digital devices and infrastructure—from raw material extraction and processing to manufacturing, distribution, usage, and disposal. This process consumes vast amounts of transition minerals, energy, and water, significantly contributing to greenhouse gas emissions and pollution. In 2020, the ICT sector’s CO2 equivalent emissions were estimated to be between 0.69 and 1.6 gigatons, accounting for 1.5 to 3.2% of global greenhouse gas emissions. This figure is expected to rise with the growth of the digital economy. The development of artificial intelligence and cryptocurrency mining is of particular concern. Between 2018 and 2022, the electricity consumption of 13 major data center operators more than doubled, highlighting the urgent need to address these technologies’ energy and water footprints.
E-commerce: online shopping
Due to existing digital and development divides, developing countries are unevenly impacted economically and ecologically, yet they hold the potential to harness this digital shift to promote growth. People and businesses are increasingly using the Internet to purchase goods and services. E-commerce is a crucial application of digital technologies, significantly impacting domestic and international trade.
Since the early 2000s, online shoppers have skyrocketed from under 100 million to approximately 2.3 billion in 2021. The value of sales on the top 35 global e-commerce platforms has dramatically increased, rising from $2.6 trillion in 2019 to over $4 trillion in 2021, with Alibaba, Amazon, JD.com, and Pinduoduo leading the market.
According to UNCTAD, the total value of e-commerce sales by businesses in 43 developed and developing countries increased from $17 trillion in 2016 to $27 trillion in 2022. While most of these sales are domestic, the proportion of international e-commerce is growing. Nonetheless, the shift to e-commerce is still in its early stages in many developing countries, especially in least-developed countries (LDCs).
E-commerce is reshaping economic activities and consumption patterns, with positive and negative environmental sustainability consequences. Precise assessments of its environmental impact are challenging due to limited data, but the overall effect hinges on how businesses manage warehousing, transportation, logistics, packaging, returns, and consumer behavior.
The rise of e-commerce has increased consumption by providing greater accessibility and convenience, lower prices, a wider variety of products, and more extensive online marketing. This has led to more frequent purchases and impulse buying, contributing to overconsumption, higher transportation emissions, and increased waste.
To make e-commerce more environmentally sustainable, there needs to be a stronger focus on circular business models, ethical sourcing and production, energy-efficient logistics, renewable energy adoption, eco-friendly delivery solutions, sustainable packaging, and promoting sustainable consumption.
Policymakers can support these changes by implementing a balanced mix of legislative and regulatory measures and tax mechanisms to reduce CO2 emissions in transportation and minimize e-commerce waste. Achieving this will require collaborative efforts among governments, businesses, platforms, logistics providers, and consumers.
UNCTAD calls for a strategic shift to sustainable and inclusive digitalization
UNCTAD advocates for innovative business models and robust policies to enhance the sustainability of digital growth. Recommendations include:
- Adopting Circular Economy Models: Prioritize recycling, re-use, and recovery of digital materials to reduce waste and environmental impacts.
- Implementing Resource Optimization: Develop strategies to use raw materials more efficiently and reduce overall consumption.
- Strengthening Regulations: Enforce stricter environmental standards and regulations to mitigate the ecological footprint of digital technologies.
- Investing in Renewable Energy: Promote research and development of energy-efficient technologies and sustainable digital practices.
- Promoting International Cooperation: Foster collaboration among nations to ensure equitable access to digital technologies and resources and to address the global nature of digital waste and resource extraction.
UNCTAD calls on the international community to implement comprehensive policies fostering a circular digital economy, minimizing environmental impacts, and bridging the digital divide. Most developing countries need further digitalization to participate effectively in the global economy. Immediate and coordinated efforts from governments, industry leaders, and civil society are essential for sustainable and inclusive digital development.
Bron: UNCTAD