How sustainable payments innovation can enable climate action

With sustainable spending and fintech innovation now high on the environmental agenda, Mastercard’s chief sustainability officer explains how payments technology can empower everyone to act on climate change

The world is waking up to the importance of embedding sustainable practices in every part of society and business, from the start of the supply chain to the consumer. It’s no longer enough to display a few token environmental efforts – whether you’re in fashion or finance, every industry is under sustainability scrutiny. Everyone wants to do their bit, and the financial sector has a crucial role to play.

Mobilising finance is listed as a vital step towards reaching the crucial COP26 goals of securing global net-zero by 2050, limiting global warming to 1.5 degrees, and adapting our behaviour to protect communities and natural habitats. The COP26 official agenda states “to achieve our climate goals, every company, every financial firm, every bank, insurer and investor will need to change.” It’s a tall order, but one which innovation in payments technology can help with. So how exactly?

Satisfying the increasingly conscious consumer

“Companies first need to address their own operations and reduce their emissions. But beyond that, we can’t reach the targets that governments are suggesting without consumer participation as well,” explains Mastercard’s chief sustainability officer, Kristina Kloberdanz. “It’s about taking these big country and company-wide commitments down to an individual level.”

Evidence suggests that consumers are not only onboard and ready to make this shift but actively driving change through a desire to make better choices. The Covid-19 pandemic has given consumers an increasing understanding of the environmental impact of their purchases. 

Research from Mastercard found that across 24 countries 58% of adults are now more mindful of their impact on the environment, and 85% say they’re willing to take personal action to combat environmental and sustainability challenges in 2021. This signals a growing trend toward eco-conscious spending and consumption, explains Kloberdanz. People want to turn their purchases into meaningful action for the planet.

It’s not just talk. Consumers are watching brands to see how they address sustainability issues. Mastercard’s research found that 35% of consumers globally now have increased expectations of companies to act with greater purpose and are placing increased value on brands that make ethical choices. And 24% of consumers are likely to stop shopping from brands with no sustainability plans for the future. Understanding the urgency to act, Mastercard has recently accelerated its own net-zero commitment by a decade from 2050 to 2040.

Joining the dots with payments innovation

So where does financial innovation come into this? With governments globally working towards ambitious targets and organisations feeling the pressure to develop more sustainable practices, the intent is clearly there to make changes. Meanwhile, consumers are increasingly inclined to put their money where their mouths are and spend ethically and sustainably. An organisation such as Mastercard, specialising in payment technology with over 20,000 banks and issuers around the world and the ability to reach out to billions of people worldwide, is in a prime position to mobilise its partners and customers to act on climate change together.

To help consumers understand more about their spending, and its potential environmental impact, Mastercard has developed a carbon calculator in collaboration with the Swedish fintech Doconomy. It uses different categories, such as food and drink, and transport, to show people the carbon footprint of each transaction. The estimates are based on the Åland Index, which measures carbon impacts.

The calculator has already been adopted by several of Mastercard’s banking partners, from traditional financial institutions to emerging fintechs, who are integrating it into their own consumer-facing apps. As Oli Cook, CEO of debit card company ekko, explains: “Together with Mastercard we will help our customers live more sustainably and become more aware of the carbon footprint of what they consume by doing nothing other than using their ekko card.”

As well as monitoring the carbon footprint of their spending, the app can also be designed to suggest ways consumers can counteract their carbon impacts, using comparisons such as the number of trees required to absorb the same amount of CO2. Users could then make donations toward tree planting projects, or use their card’s loyalty points. 

“Can this alone change everybody’s behaviour? No, but it starts to shift the culture of awareness,” says Kloberdanz. “It gives people new insight and then the ability to compensate for their own impact; it’s starting to empower individuals.”

Collaborative, sustainable thinking 

The next iteration of the carbon calculator, and other product innovations like it, will be top priorities for Mastercard’s new Sustainability Innovation Lab. Based in Sweden, the centre will ramp up its work next year, when it starts looking at new ways of working with partners to explore how emerging technologies such as 5G, quantum and advanced AI can be used to help tackle environmental challenges.

Technology holds some of the answers, says Kloberdanz, but many of these solutions don’t necessarily exist yet. “Fostering innovative solutions with practical applications is urgently needed to achieve global climate change goals,” she says.

As the global economy rapidly digitises, she continues, it’s essential that both people and the planet can thrive together. Creating solutions that support sustainable spending and empower businesses and consumers to transform how they produce, distribute and purchase products and services, will help achieve this.

Mastercard is also working to create new models of collaboration with its global network of partners. For example, the Priceless Planet Coalition, which Mastercard launched last year and is running with Conservation International and World Resources Institute. It brings together over 80 businesses worldwide to set about restoring 100 million trees, also supporting the World Economic Forum’s one trillion trees platform.

“What we can provide is the framework and infrastructure for partners so that efforts aren’t fragmented,” explains Kloberdanz. “But it’s not simply philanthropic dollars… it’s us engaging with banks and retailers to help incentivise consumer behaviour by running engagement and donation campaigns tied to their core business. This, combined with our network effect, can make a huge impact, especially when guided by our experts Conservation International and World Resources Institute.”

As well as inspiring consumers, she continues, it is about: “creating a new model for global reforestation at scale… ensuring that we are doing this in a way that is going to have the greatest impact for the climate, but also for communities and biodiversity, too.” The programme will also feature on partners’ banking apps, enabling consumers to donate to reforestation projects.

Recognising that collaboration is key to addressing the climate crisis, Mastercard is also supporting the new Climate Fintech Cards & Payments Challenge, launched in September by the New Energy Nexus NGO. It brings together major financial institutions with fintech startups, to develop ideas that inform the way people spend, and how payments are handled. 

Winners of the challenge will be fast-tracked on Mastercard’s own Start Path engagement programme, which gives them access to the company’s technology and expertise to help scale their businesses.

No man is an island, and sustainably revolutionising spending will take dedicated collaboration from financial institutions, fintechs, merchants and consumers. The Covid-19 pandemic proved that when the situation feels urgent enough, everyone can come together to tackle an emergency. Now we must collaboratively apply that same urgency to future-proofing the planet.

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