Emma Kisby, CEO EMEA at Cogo.
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Many companies struggle with the puzzle of how to ensure that their business operations become increasingly climate-friendly and how to market this in the right way. Too little can seem like inattention or indifference. Too much, and badly positioned, is greenwashing.
The financial services industry is under pressure because, as the saying goes, money makes the world go round. Banks own the nation’s wealth and have the ultimate power to ensure it is put to good use. The public is increasingly aware of this. Banks can now be the framework for a collective movement towards sustainable consumption and low-carbon living.
Green banking is an emerging but emerging trend, which providers must capitalize on to minimize customer churn. Tailoring banking products and services to the age of the conscious consumer is a wise move. We found that 75% of mobile banking customers in the UK want to know the environmental impact of their spending. Providing a bridge will attract a new kind of customer – one that will become increasingly dominant in the market as Gen-Z sign up for their first bank accounts.
Embracing the commercial opportunities presented by the green banking revolution can improve customer satisfaction (NPS) and customer retention and provide the bank with new ways to sell additional services or products. But offering green products, such as green ISAs or mortgages, is only the beginning of a solution. A meaningful commitment to green banking should take customers on the journey.
How many of us have scrutinized our banking and considered whether we should take the “green” option because it seems like the “right” thing to do? But with no real context or understanding of why it’s better and hoping for the best.
Being “carbon literate” means understanding how our actions affect the environment and having a clear motivation and direction to reduce our emissions. It is building this understanding that financial institutions should view as an essential step and ongoing mission of their offerings. Customers need to understand how their offerings differ and why it matters to them.
In recent research, we discovered that talking about kilograms of CO2 emissions can be too abstract. Most people cannot make a clear connection between those kilograms and the extent of the environmental damage.
On a more positive note, we saw a positive correlation between someone’s level of carbon literacy and the likelihood that they would take action to understand the size of their carbon footprint. In other words, as soon as a consumer has more confidence in it concept climate impact, they will want to do something about it. It follows that improving carbon literacy could increase engagement in green banking solutions.
Based on our behavioral science work, there are three approaches that the Cogo team has identified that organizations should consider when it comes to helping customers build a better understanding of how to make more environmentally responsible decisions.
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1. Traffic lights provide an easy, uncluttered measure.
In response to the findings of our research, our design team developed a ‘carbon spectrum’. This uses a color scale to compare the environmental impact of different actions. Our team has conducted an online trial and user experiments to test this carbon spectrum.
User testing showed that traffic light colors helped people visualize and interpret whether an action was ‘good’, ‘average’ or ‘bad’ for the environment. Plus, seeing carbon data next to individual transactions or expenses broken down by category of users helped put their carbon emissions into perspective. Overall, carbon literacy was improved by 8% when using the carbon spectrum function.
2. Address the intent-action gap.
Our latest survey asked mobile banking users about their carbon spending. Of 2,007 mobile banking app users in the UK, 88% said they considered the environment when considering a purchase.
But behavioral science tells us that there is often a gap between people knowing what action to take, intending to take it, and actually doing it. This creates what is known as an “intention-action gap.” This should not surprise. Taking the supermarket as an example, the price and nutritional value of your grocery store are clearly visible, but the carbon footprint of each item is still unclear.
The intention-action gap is caused by low carbon literacy. Concern for the environment and the intention to take positive climate action are hampered by people’s lack of understanding of the negative environmental impact of their spending choices. When it comes to smaller decisions, where there’s an element of ‘but what does this small difference make’, the lack of understanding of the impact can tip it over.
We must make decision-making as easy and rewarding as possible at all times. Provide clear information about why they should consider it and a user-friendly way of committing.
3. Support decision-making.
While consumers in general are more aware and supportive of carbon-cutting measures than ever before, they are faced with a slew of other considerations. Is it useful to make one decision instead of another? Is it affordable? Faced with a number of pressing threats, including hyperinflation and rising energy prices, cost will be a major driver of decision making. True sustainability means that planet-friendly options must be affordable for consumers to purchase and competitive for businesses to supply.
Rewards and discounts help induce consumers to make one choice over another, but there are smaller things banks can do as well. Giving feedback on the impact of someone making a greener decision can be the incentive needed to reassure them that it’s worth it. Look for an app integration that provides this feedback in real time along with tips and hints so customers can make better decisions accordingly.
Improving carbon literacy motivates people to try to reduce their carbon footprint, and here lies a symbiotic opportunity for financial institutions. Serve your customers better while supporting the environmentally conscious approach that will win the market in the long run.
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