Spending and sustainability: Here’s what’s in storeApril 19, 2023 | By Ken Moore
By the end of the 2020s, significant innovations will reshape commerce and usher in “the next economy.” The latest edition of Mastercard Signals, released Tuesday, explores nine of these transformative changes, including how a growing commitment to sustainability among consumers and the companies that serve them will change how products are designed, built and delivered. Here’s how that trend may play out over the next five to seven years.
Consumers will increasingly reward companies that tangibly support their social, ethical and environmental objectives.
A growing cohort of consumers indicates they prefer to buy from companies that align with their values across a spectrum of environmental, social and governance (ESG) issues. This global trend, driven by Gen Z and Millennials, favors a world where purpose-driven and local brands will receive an outsized portion of spend.
In the past, a lack of purchase options and transparency in product sourcing slowed the advent of conscious consumerism, which entails deliberate purchasing decisions that consumers believe have a positive social, economic, and environmental impact.
Nonetheless, consumers' awareness is increasing, and spending behaviors will likely catch up. Most people in Gen Z will pay more for products from purpose-driven brands and seek to buy locally sourced and ethically produced goods when possible. Technology will enhance consumers' ability to understand how products are sourced and their environmental impact: QR codes and RFID tags can provide information at the point of discovery in-store and online.
Early indicators show that companies with high ESG performance ratings tend to be more competitive. They are often more profitable, and their earnings are less volatile. Their ability to stay ahead of this trend comes with challenges and opportunities.
In the wake of greater awareness of greenwashing — when organizations use misleading or false information to deceive the public about its environmental impact — companies must take legitimate steps toward demonstrating their credentials. This may include rethinking supply chain orchestration and improving the visibility of supplier behaviors. There also are opportunities to reimagine loyalty and align programs with the conscious consumer.
Payments with purpose
Companies can demonstrate their environmental commitment by embedding information into payment applications that help consumers make more eco-friendly spending decisions. Swedish fintech Doconomy, for example, was one of the first startups to offer mobile banking services designed to affect behavior and reward sustainable consumption. Mastercard collaborated with Doconomy to develop the Carbon Calculator, which enables financial institutions and merchants to embed carbon tracking inside their apps so consumers can view the estimated carbon footprint of all their purchases.
Bangor Savings Bank, a consumer bank based in the U.S., uses its rewards program to benefit its customers and their communities. Its Buoy Local program is a community-focused initiative that helps local and independently owned businesses drive sales by empowering them with modern mobile engagement and loyalty strategies.
With greater awareness in the near term, we expect accelerating momentum in purpose-driven payment flows as consumers favor businesses that realize ESG or net zero goals, are locally sourced and operate ethically. Banks and merchants aligning with the customer's values will outperform cohorts that don't evolve with the conscious consumer.