By Arthur Newman
To put it mildly, consumers haven’t always had a favorable view of finance companies, especially after the Great Recession. Until recently, the pure focus of the vast majority of consumer finance companies, such as banks and credit card providers, has been to maximize profit, fees and other “fine-print” costs. These practices rarely sit well with the public, as they often generate distrust and skepticism.
Further, the public is demanding more and more social responsibility from the organizations from which they buy goods or services, and forward-thinking financial services companies are figuring this out.
As in the case of the fossil fuel industry, consumer finance companies’ talk of sustainability can evoke strong skepticism and accusations of greenwashing or hype. Commitment has to be tangible: a measurable, additive and verifiable improvement, rather than simply adhering to current regulations or running self-congratulatory marketing ads. Designing sustainability programs for financial services is additionally challenging because the traditional CSR focus on areas such as production, transportation and supply chain sometimes do not apply to finance companies. Thus, a greater level of creativity is required. Sometimes social responsibility initiatives can be internally focused on areas such as power usage, power consumption and wage practices. Alternatively, the focus may be on using the business to drive external goods, such as providing funding to address social problems.
Moreover, for sustainability initiatives to be credible, companies must also look at their investments to see where divestment in environmentally harmful industries should occur.
For every dollar in net merchandise purchases made with the Sustain:Green MasterCard, the company reduces the user’s carbon footprint by 2 pounds. In addition, a bonus 5,000 pounds of CO2 are eliminated after the card’s first use, with other bonuses based on spending throughout a given financial quarter. In a sense, Sustain:Green is creating an automatic consumer market for carbon offsets, where the industry has struggled to motivate consumers on their own.
How does Sustain:Green overcome public skepticism? First, the process is automatic; the user doesn’t have to do or pay anything to be rewarded with offsets, and the card has no annual fee. Second, it’s transparent: Users can track the reduction of their carbon footprint through their personal online dashboard, and both this reduction and the provision of money to the Mata No Peito rainforest initiative is recorded by the American Carbon Registry and verified by the nonprofit Winrock International. Finally, the card itself is biodegradable. This has both real and symbolic significance to the cardholder, as a way to avoid adding to landfills and as a sign of Sustain:Green’s commitment. Currently, it’s the only known biodegradable credit card in the U.S.
Green banks are also financial institutions committed to the triple bottom line: people, planet and profit. These institutions provide financing for clean tech and sustainability projects, particularly relating to renewable energy, “by leveraging public funds … to attract private investment so that each public dollar supports multiple dollars of private investment,” according to the Coalition for Green Capital. Leading banks in this category are the Connecticut Green Bank (formerly CEFIA) and the New York Green Bank. Neither bank is funded by new appropriations generated by taxing consumers. Instead, existing state funds, called “systems benefit charges,” are repurposed, and Regional Greenhouse Gas Initiative (RGGI) funds are also funneled to them. Finally, both state banks, as government-created entities, have built-in accountability. The Connecticut Green Bank must publish an annual Comprehensive Plan, and the New York Green Bank practices transparency through public filings, including quarterly reports.
Community Development Banks also fit into this triple-bottom-line activity. A good example of such an institution is Beneficial State Bank, which serves California, Oregon and Washington. The bank is not exclusively environmental in its mission – it’s equally concerned with social justice and economic sustainability – but ecology is a major focus. By examining the pie chart in its annual report, in which the organization divides up its outstanding loans by purpose, 10 percent of the loans went for clean tech and 7 percent were for sustainable food and agriculture. Just as importantly, the bank commissioned an inventory of greenhouse gases (GHGs) for its entire operation. It then purchased the equivalent of the total in carbon offsets.
These institutions – credit card providers, Green Banks, the B Corporation certification program and Community Development Banks – all have different relationships with green enterprises. They all also have different means to demonstrate accountability: the American Carbon Registry (Sustain:Green), official government reports (the Green Banks), The B Corp standard (the B Corporations) and annual reports (Beneficial State Bank).
However, they all have one thing in common: Unlike too many modern companies, they put long-term sustainability above short-term profit. As the public continues to demand environmental responsibility to a greater and greater degree in all their products, including financial ones, these organizations are poised to excel in a growing market. Despite their progressive marketing, their business behavior is conservative; they demonstrate that to move forward toward greater sustainability requires going back to business basics, responding to consumer demands, and taking care of both people and planet, in addition to profits.
Image credit: Flickr/Duncan Smith/Corbis via Myfuture.com
Arthur Newman is the CEO of Sustain:Green, which combines social and environmental responsibility with innovative biodegradable credit cards and prepaid cards designed to fight climate change. Arthur is also a partner at Carbon Capital Advisors. Before founding Sustain:Green, Arthur was a partner at Halpern Capital, Global Sector Director for Internet, Software and IT Services at ABN-AMRO, and a Wall Street internet analyst at Schroders and Gerard Klauer Mattison.