A Klarna case study: Sustainability as a business value and as a value for business
- Consumer products actively contribute to climate change, and ecommerce companies are playing their own role in worsening the climate.
- Klarna isn't turning a blind eye to its corporate responsibilities, encouraging conscious buying which underscores its efforts to combat climate change.
Fast fashion may have brought trendy and runway-ready clothes to the general public but it has also cost the planet dearly. Consumers now buy more and more often and their purchases are more focused on seasonal trends rather than pieces that will last them a long time. All of this means more clothes are produced and discarded than ever before. Currently 92 million tonnes of textile waste is produced every year and the apparel industry’s carbon emissions are expected to increase by 50% by 2030, the same year by which we will run out of our “carbon budget”.
One way to cut down on these emissions is to encourage more conscious buying. But for consumers, making conscious buying decisions can be difficult. This is because consumers are often misled with corporate smoke and mirrors around carbon emissions, and once a purchase has already taken place, there is very little to no incentive to take care of products that you currently own because reselling processes are difficult and full of friction.
Ecommerce retailers have a role to play here, as consumers shift to online shopping, retailer websites and online shopping destinations serve as a source of information and can nudge consumers in the right direction. Klarna’s recent update to its platform aims to do just that.
Recently, the company announced a new shopping dashboard, updates to its CO2 emissions tracker, and sustainability certification filters that aim to remove the friction from conscious buying. “Whenever we provide consumers with this information, we're not just responding to the demand that we see from consumers that want to shop more sustainably. We also consider our role with regards to a systems impact in the world,” said Salah Said, Klarna’s head of sustainability.
The new dashboard: The new dashboard serves as a centralized hub that shows a consumer’s overall CO2 impact, and highlights brands that prioritize environmental sustainability. The dashboard also curates editorial content on how consumers can take care of their purchases and educates them about sustainable practices.
Sustainability certification filters: The new search filters allow consumers to identify products that have sustainability certifications by third-party organizations like Global Organic Textile Standard (GOTS), People for Ethical Treatment of Animals (PETA), and Cradle to Cradle. The filters have been added to Klarna’s search & compare feature in the Klarna App and on Klarna.com.
Many consumers make their purchases not because of a product preference but due to their affinity for a brand. And these preferences are built by analyzing whether a brand’s policies and values align with their social values.
“A lot of consumers really care about whether the brand shares their values. And ask questions like, what do they do on a corporate level?” said Said.
To make shopping with environmentally conscious brands easier, consumers can now filter brands based on their sustainability ratings. The ratings are provided by Klarna’s partner Good On You, which scores brands on a five-point scale, based on their environmental impact on people, the planet and animals.
“We decided to take all the four and five star rated brands, and highlight them to consumers,” he added.
CO2 emissions tracker: 57% of consumers want to understand their emissions impact when shopping online, according to a survey by Klarna. This is why Klarna’s emissions tracker provides product level information on the emissions of an item and breaks it down to each stage of the product’s lifecycle. From this month, this tracker will be able to show emissions information on Health & Beauty and Electronics through the data provided by Vaayu.
“We wanted to make sure that it's not just an estimated value based on a merchant category. We wanted to look into the specific details of a product, such as its origin, weight, source, manufacturing process and delivery. Which is why we provide the consumer with this lifecycle status breakdown,” Said added.
Currently, 320,000 consumers monthly come back and check their carbon footprint, according to Said. He also added that since the app reaches 150 million consumers and half a million merchants, it is in the “perfect sweet spot” to encourage sustainable shopping and manufacturing.
Sustainability as business value and as value for business
When Big Corp is confronted with its impact on the environment, many organizations begin to pay lip service to sustainability by greenwashing their products, processes, and marketing. Klarna is setting an example that goes against the grain.
For one, the company has focused on reducing its carbon impact within its own operations by taxing its emissions. “We don’t believe in offsets,” Said said. Although carbon offsets are a growing industry pattern, they run the risk of compensating for emissions that may come in the future rather than solving for the carbon that is already in the air.
“Instead of going and offsetting emissions, we wanted to make sure that we support solutions that we need right now,” he added.
The company aims to reach net zero by 2040 and the carbon tax that it has levied upon itself has resulted in $5 million in contributions to 20 organizations that work on decarbonization of the atmosphere.
These climate conscious internal policies have carried over to how Klarna designs its core shopping product. While the new update encourages conscious consumption, existing features like “Resell” ensure that customers can give another life to products that they already own. Moreover, since the fintech’s digital interface privileges brands that are environmentally friendly, companies have a vested interest in improving their commitment to the climate and decarbonizing their manufacturing processes.
In a nutshell, Klarna aims to become a shopping destination not only for those that want to shop consciously, but also for those who want to cater to this growing consumer segment.