Salah Said, head of sustainability at online shopping & payments provider, and now retail hub, Klarna, is a firm believer that private companies offer more practical opportunities for driving meaningful change in sustainability than non-profit equivalents.
“I think [private] companies act much faster,” he explains. “They’re not dependent on funding from governmental bodies or donors, which makes the ability to develop solutions faster.”
Said has had plenty of experience in both sectors to crystallise his thinking, having previously served as CSR (corporate social responsibility) program manager at SAP, as well as senior sustainability strategic manager at German online retailer Zalando alongside various non-profit posts. Yet, Klarna’s strategy is an especially interesting one – and the speed and ambition which underlines Said’s work goes a long way to backing up his initial words.
Klarna’s legacy strategy
In the years leading up to 2020, Klarna, like many others, set ambitious targets to achieve net zero by 2040, and through a combination of avoidance strategies and carbon credits became carbon neutral in 2019.
But instead of rolling out the fanfare, they decided that this approach simply wasn’t enough.
“While we were able to achieve carbon neutrality in 2019 by purchasing carbon credits, we recognised that it was not enough” explains Said. “As a low-emitting tech company, reaching net zero and claiming neutrality would not significantly contribute to the global goal of achieving net zero emissions. We didn’t see the desired impact from our efforts.”
According to Said, it was this feeling that prompted Klarna to adopt the BCG WWF blueprint for corporate climate practice. A collaboration between the Boston Consulting Group (BCG) and the World Wildlife Fund (WWF), the blueprint for corporate climate practice recognises the challenges companies face when setting climate targets. These challenges range from understanding government commitments, to understanding assorted terminologies (such as net zero vs carbon neutral), and the constant fears of greenwashing.
The framework seeks to help businesses overcome these obstacles by offering them a simple way to set up and achieve their climate goals that surpass simply decarbonisation, encouraging them to also consider actions that go beyond their immediate value chain.
Klarna’s new approach
Klarna’s new climate strategy centres around an internal carbon tax. With it, Klarna self-imposes a fee of $100 (£80) for every metric ton of carbon emissions it generates from scope 1, 2, and company travel and for all other emissions falling under scope 3, the company levies $10 (£8). The company contributes resulting funds towards initiatives tackling climate change to drive impact.
“We looked at a lot of different pricing mechanisms that were based on the recommendation of the BCG WWF blueprint,” explains Said. “It’s a voluntary tax that we set ourselves and compared to a lot of other things that we see where it’s even more regulated in some other industries, we think it’s pretty ambitious, but I also think it’s just a start.”
At the time of writing, the carbon tax has helped Klarna raise a total of $5.07 million since 2021, including $2.35 million to contribute towards climate initiatives in 2023.
The intention is to create “more accountability across the whole organisation”, as Said puts it, and to incentivise teams to reduce their emissions. It also allows Klarna to support a wide array of projects and solutions that it considers necessary in order to globally achieve net zero.
“We support new solutions in the carbon removal space and beyond,” adds Said. “It’s really a lot about helping those solutions get off the ground, so other companies can benefit from them, and ultimately the world can benefit from them.”
According to a recent press release, the company’s internal carbon tax will soon support over 20 organisations tackling the climate crisis, funding initiatives from carbon removal to nature protection and decarbonisation.
This includes new investments in UK-based carbon capture and storage company, Carbon Capture Scotland, Kenya-based Octavia Carbon designs, and Brazilian-based Inplanet, along with re-investments in older partners, Husk, Silicate and InterEarth.
Salah, who chaired a panel discussion at the innovation forum later that day, was eager to explain why this focus on investment in innovation has longer-term benefits over simply carbon credits.
“We see what a lot of companies do, they optimise for carbon credits,” he says. “You take this amount of money, and you want a ton for ton credits back. If you continuously do that, you will not be able to scale new solutions that are needed but currently are artificially high priced because no one has them.
“We need to create the demand for those new solutions like Silicate, like HUSK, like Mission Zero and all the other amazing ventures that we see come off the ground,” adds Said. “We need to create that demand, and it’s not just about investors that should back them up, it’s about buyers. We need companies that are willing to put money for fewer credits, and when we see that, that’s when we see progress towards curbing climate change.”
As made clear by the number of booths packed into the Olympia in London for the event, there are plenty of startups to choose from, so how does Klarna decide where to spend its tax? To help with this, it works with Stockholm based tech startup Milkywire, who provides a curated list of projects to choose from.
“[Milkywire] are experts in the climate space. They work with a set of advisory board experts from various environmental organisations, and they source the organisations on the ground, learn about them, vet them, do their due diligence and then present the findings to the advisory board, and then we learn about them” explains Salah. “Then we decide what part of our carbon tax we want to directly contribute to the Climate Transformation Fund and what part of our carbon tax we want [to] directly support the carbon removal organisations with.”
Alongside financial support, Klarna also offers help in other ways.“It’s not always just for funding,” says Salah. “Maybe some of them want to do a redesign of their brand or want to have a good go to market strategy, and that’s where we can partner up with them and learn more.”
But Klarna has wider plans for the capital raised in its internal tax than simply supporting climate tech startups, this is where the Climate Transformation Fund comes in.
Established by Milkywire, the Climate Transformation Fund seeks to tackle a more diverse array of climate challenges beyond the scope of carbon removal. “[The Climate Transformation fund] does not just focus on carbon removal, but also on new decarbonisation initiatives and very importantly also climate advocacy”. Which Salah says is a big deal for the company. “It’s an ecosystem change and a system’s change we’re looking for. It’s really important for us to support organisations, like Human Rights Watch because we need to drive policy and the ecosystem towards this new approach.”
Salah is confident in Klarna’s process and is keen for other companies to “steal with pride and copy what we’re doing”. But he offers a word of warning that success may vary depending on a company’s business model.
“As a company, you need to understand what works best for you,” notes Said. “Klarna is obviously on the low-emitter side. That means we have much more ability to pay for projects outside our value chain. If you are a high emitting company because you’re manufacturing a lot of products, and you have all this machinery and so on, you need to focus much more on the combination or supply chain and making sure that you have the right price mechanisms in place.”
Putting the customer in control
Klarna also wants to give consumers who use their platform more control. This means allowing customers to donate to the same organisations they support, and, through the Klarna app, they can also make sustainable choices and engage in circular economy and sustainable shopping.
“Throughout the Klarna user journey, consumers can find more sustainable brands, more conscious brands,” says Said. “We try to educate them and give them information around the carbon footprint of the product and not just reading the carbon label because that’s hard to understand, but very practical tips.”
“So, if you buy this certain shoe from that certain brand, you can look in your former purchases, you can see the CO2 value, and we give you clear tips on how to take care of the product, how to mitigate your footprint after you made a purchase.”
Klarna is also focusing on circularity, recently introducing a feature in Sweden that allows consumers to sell items through the app and buy from second hand companies.
“We want to highlight second hand products, next to new products, especially with our features like search and compare where we already offer sustainability filters but also help consumers understand that they can maintain value with a product they have purchased with Klarna, they can buy products for life and maintain that value and see that value monetary but also, help mitigating waste”
“We want our consumers to understand our approach, and we want to take them with us on this journey.”
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