Alibaba’s Single’s day sales hit $38 Billion in 24 hours. The US Black Friday Online sales was $7.4 Billion and Cyber Monday sales were even stronger at $9.2 Billion. Do we know the impact of this mindless consumerism on our planet?
We will, and soon, thanks to Mastercard’s investment and collaboration with Doconomy.
Only last week I wrote about Climate change and how Fintechs should wake up to the changing global landscape and act. We are witnessing and combating the biggest crisis that humanity has ever faced. It is critical that we come together and address it.
On that note, I proposed a few solutions that financial services and fintechs could come up with to track climate impact of business decisions.
One of the solutions was to track the carbon footprint of businesses using alternative data and disclosures. Firms will be provided a rating on how green their business models are, and banks could price their product and service offerings based on the ratings.
In essence, a greener firm could have a lower interest rate when they borrowed versus a high carbon footprint company. As a result, banks risk management will also be based on these methodologies, where their capital allocation will be higher when they do business with high carbon footprint companies.
This would create top down pressure on the entire business community and the markets to ensure they are acting in the best interest of the planet. We would also need a clear auditing mechanism to ensure firms don’t exaggerate metrics in their favour.
Now, that’s a top down approach for businesses. However, something similar can be done at the consumer end too. One of the fundamental mindset changes I would like to see is what is called “conscious consumerism” – of their carbon footprint when they splurge money in mindless shopping spree.
If we captured the Carbon footprint of purchases at the transaction level, that would be an important dataset to fix the mess we are in. This data can help gamify the process of capturing carbon scores for customer transactions.
If I did my Christmas shopping and came up with a Carbon score X and if my friend or colleague did their Christmas shopping with a carbon score Y, that could be gamified using a simple app and a leaderboard. The person with a lowest carbon footprint could be rewarded.
When we capture transaction data, and score customer behaviour, it makes them more conscious of their action on the planet. This would take time to scale, but it would start changing behaviours of customers.
As customer behaviour changes at scale, businesses have to pivot their approach to everything from sourcing the right raw materials, following sustainable manufacturing practices, using logistics with the lowest possible carbon footprint, and using the right packaging. This will have its feedback effect on competition as businesses that embrace sustainable practices quickly will have a competitive and a first mover’s advantage over their peers.
If it was China, I would even go one step further to ensure that the consumer’s social credit score includes climate points based on their spending. This would show results in a shorter span of time, and would help change business behaviour quickly.
Now, what if I did buy something which increased my carbon footprint? You should be able to compensate for that by spending money on environment friendly projects across the world, or investing the money into green assets.
So what are Doconomy doing and why are they special? First of all, DO is how they call themselves.
DO have two cards on offer, a white and a black credit card. The white card allows you to track and measure your carbon footprint as a consumer. The Black card has a built-in CO2 emissions limit – helps you become a conscious consumer (as they call it).
Behind the scenes they use an index called Aland to track the CO2 footprint of every single transaction. The index can categorise your transactions and identify its impact on the environment.
They also have a partnership with a firm called Trucost, which is a part of S&P. Trucost are experts in assessing risks relating to climate change and ESG factors. I have gone through Trucost’s clientele, and they have several big names like AXA investment managers, RBS, and several funds listed there. So clearly, they are all using Trucost to understand the climate risks of their portfolios.
In my last week’s article I discussed about rating agencies who acted at climate bureaus for corporates. This is a very similar idea too.
“We all have a responsibility to contribute to the solutions for the climate emergency we are experiencing. Time is running out. Many individuals are willing to do their part, but in many cases they find it difficult as they don’t know what else they can do. Through our collaboration with Doconomy, we hope to provide clear, effective channels to support these individual’s daily climate action.” –
Niclas Svenningsen, manager, Global Climate Action, UN Climate Change Secretariat
Coming back to DO’s offering, they are also providing compensation schemes should you break bad from time to time. Customers can cleanse their guilt by investing into green bonds or projects approved by the UN and aligned to their Sustainability development goals (SDGs). Thanks to all their efforts, DO are also a named partner to the United Nations Framework Convention on Climate Change (UNFCC).
For more information please do check out their website, I have added myself to their credit cards waiting list!