The digital transformation can drive economic growth, create jobs and reduce poverty. But it also poses growing environmental challenges, while widening digital divides risk worsening existing inequalities.

As UN Trade and Development (UNCTAD) celebrates its 60th anniversary, it’s crucial to examine issues that will shape the future of trade and development.

The "Forward together" series explores pivotal topics for developing countries, such as e-commerce and the digital economy.

Digitalization is transforming how we live, work, learn, consume, recycle and do business. Technological advancements, widespread internet access and the proliferation of smartphones – annual shipments of which have more than doubled since 2010 to 1.2 billion in 2023 – have fueled exponential growth in online transactions.

In 2021, 2.3 billion people shopped online, a 68% increase from 2017. E-commerce sales across 43 developed and developing economies accounting for around three quarters of global GDP reached almost $27 trillion in 2022, up 10% from 2021.

The digital transformation is creating immense opportunities, but it’s also posing growing environmental challenges, while widening digital divides risk worsening existing inequalities.

“We must harness the power of digitalization to advance inclusive and sustainable development, while mitigating its negative environmental impacts,” UN Trade and Development Secretary-General Rebeca Grynspan says.

Immense potential for growth, job creation and poverty reduction

For developing countries, this transformation offers immense potential for economic growth, job creation and poverty reduction. For example, the Asia-Pacific region's digitally deliverable exports reached $958 billion in 2022, growing by 9% from 2015 and outpacing the global average of 6.8%.

E-commerce and digitalization enable new business models, reduce startup costs and improve access to regional and global markets for entrepreneurs and small businesses in developing countries. The transformation has particular potential to empower women and improve their livelihoods.

For consumers, digitalization offers access, convenience, lower prices and more choices. Mobile banking can cut the number of individuals without bank accounts, which stood at 1.4 billion in 2021. Digital platforms also enhance circularity and sustainability by connecting supply and demand, enabling individuals to reuse, resell, swap and rent products and services.

“The digital economy is not just about technology. It’s about people. It’s about creating opportunities for everyone, regardless of their location or background,” Ms. Grynspan says.

But widening digital divides risk worsening many inequalities

Many developing countries continue to face significant challenges to participate in and benefit from the digital economy. These include inadequate laws and infrastructure, limited financial resources, regulatory complexities and a lack of digital skills.

For example, only 35% of people in least developed countries used the internet in 2023 compared to 67% worldwide. A gender digital divide persists globally, with 65% of women using the Internet compared to 70% of men, according to the International Telecommunication Union. Underlying gender inequalities – such as lower incomes and limited access to finance, business networks and skills development programmes – limit many women’s opportunities in e-commerce.

UN Women estimates that gender gaps in the digital economy have reduced the GDP of low- and middle-income countries by $1 trillion over the previous decade. Widening digital divides risk worsening inequalities, both between and within countries.

The benefits of global data flows are unequally distributed, with the largest digital platforms controlling most stages of the data value chain – from collection and transmission to storage and analysis. Over 70% of global digital advertising revenue is captured by just five platforms.

This market concentration raises concerns about openness, fairness and potential abuse through exclusivity, discriminatory and self-preferencing practices. Online consumers also face challenges related to the accuracy of information and advertising, unsafe products, data privacy, and the lack of effective online dispute resolution channels and parcel returns when something goes wrong.

And digitalization poses growing environmental challenges

The rapidly evolving digital economy poses growing environmental challenges, particularly for developing countries lacking the necessary infrastructure, regulatory frameworks and resources to effectively manage these impacts.

Digital devices and infrastructure rely heavily on minerals, metals, plastics, glass and ceramics. The production and disposal of electronic devices, along with the energy consumption of data centres and blockchain operations, increase waste, pollution, carbon emissions and water use.

For example, waste from screens and small IT equipment rose 30% between 2010 and 2022, reaching 10.5 million tons. Improper disposal leads to environmental and health hazards.

According to the International Energy Agency, data centres and ICT networks supporting digitalization across all sectors account for 6% to 12% of global energy use, contributing between 1% and 1.5% of global greenhouse gas emissions.

Consumption patterns and reverse logistics in the digital economy also raise environmental concerns, from the impact of parcels to the adequacy of recycling information provided to consumers.

Critical minerals boom brings opportunities and risks

The digital transition is boosting demand for the critical minerals needed to manufacture smartphones, computers and other digital devices.

For example, estimates suggest that making a two-kilogram computer involves extracting 800 kilograms of raw materials.A smartphone, from production to disposal, requires about 70 kilograms.

Many of the minerals needed are abundant in developing countries, offering growth opportunities, especially with support for in-country value addition.

But there are significant risks. Mining these minerals can cause environmental degradation and disrupt local communities, leading to social conflicts and human rights violations if not properly regulated.

The booming demand for critical minerals also raises the risk of further entrenching commodity dependence in many developing countries, leaving their economies vulnerable to price volatility and external shocks. A staggering 85% of the world’s least developed counties are defined as commodity dependent. For example, in the Democratic Republic of the Congo, cobalt exports constitute over 70% of the country's total export revenue.

It’s therefore important that investment in critical minerals extraction is accompanied with measures to accelerate local processing and support diversification strategies in developing countries.

UN Trade and Development's role in supporting a sustainable and inclusive digital economy

Through research and analysis, technical cooperation and consensus-building, we are helping developing countries navigate the complexities of the digital economy and harness its benefits sustainably and inclusively.

Research and analysis

UN Trade and Development provides evidence and analysis on the policy options at the national, regional and global levels to ensure the data-driven digital economy supports sustainable development.

This includes the Digital Economy Report series, as well as thematic studies, technical notes and statistics related to markets, e-commerce and the digital economy.

Technical cooperation

We work with policymakers and stakeholders in developing countries to enhance their capacities to benefit from the digital economy – and to do so in a gender-responsive manner. Key initiatives include:

• Evaluating digital economy readiness: Conducting eTrade readiness assessments for developing countries to identify barriers and formulate effective e-commerce strategies and action plans.
• Empowering women: Supporting women digital entrepreneurs through the eTrade for women initiative and developing reports and e-learning courses to advance gender-sensitive e-commerce policies via the trade, gender and development programme.
• Strengthening regulatory frameworks: Building capacity among lawmakers and policymakers to address legal issues in e-commerce, including competition and consumer protection, cybersecurity and data privacy, and to establish effective national and regional frameworks.
• Reviewing consumer protection and competition laws and policies: Conducting voluntary reviews of competition and consumer protection laws and policies to ensure they are suitable for today’s digital markets, and helping countries to effectively implement policies.

Consensus-building and coordination

UN Trade and Development fosters international cooperation and knowledge-sharing to ensure best practices and successful models can be adapted and implemented across different contexts.

This collaborative approach addresses the transnational nature of digital economy challenges, ensuring all countries contribute to global digital economic governance. Examples include:

• Engaging intergovernmental groups of experts on e-commerce and the digital economy, competition law and policy and consumer protection law and policy.
• Hosting UNCTAD eWeek, a global multi-stakeholder dialogue.
• Collaborating through the eTrade for all initiative with stakeholders from all sectors of the digital economy.
• Supporting the work of the Panel on Critical Energy Transitions Minerals set up by the UN Secretary General to provide common principles to ensure these minerals are mined and processed in a sustainable, fair and just ways. Many of these minerals are also important components of digital technologies.

Additionally, we work with the Office of the UN Secretary-General’s Envoy on Technology and other parts of the United Nations, as well as the G20, the Organisation for Economic Co-operation and Development (OECD), the BRICS and other international organizations to explore ways to harness e-commerce and the digital economy for sustainable development.

Forward together towards a digital economy that works for all

The digital economy is a transformative force with the potential to drive sustainable and inclusive development.

Through strategic initiatives and unwavering commitment, UN Trade and Development will continue to help countries pave the way for a digital future that leaves no nation or community behind, ensuring progress doesn’t come at the expense of the planet.