Positive Impact of Recycled PVC Cards on Carbon Emission and Promise of AI

A recent Harvard Business Review podcast featured climate change expert Charlotte Degot from Boston Consulting Group (BCG). Degot spearheaded BCG’s development of the CO2 AI initiative, which employs artificial intelligence to monitor, predict, and reduce carbon emissions. Following the initiative’s success, BCG has spun it off into a standalone startup. This new company has secured $12 million in funding from two venture capital firms. CO2 AI is focused on assisting large, complex organizations to:

• Accurately and efficiently measure and report on the impact of their emissions with the help of the world’s largest database of emissions factors and the use of artificial intelligence (AI)
• Create robust emissions reduction plans and initiatives
• Execute at scale

As of now, the company already has a track record of managing more than 300 million tons of CO2 and is experiencing tremendous growth with a clear plan to become the leader in the sustainability management software category.

Sustainability and net zero emissions target is already started to be part of big companies activities . In finance industry, it can be observed easily that sustainable investments, green financing plans are being introduced. Although , its a new area which is started to be more popular after 2016 Paris Climate agreement , banking card business has already took steps for contributing net zero target. For example , KFH is now issuing part of new cards with 85% recycled PVC.

According to G&D , one of the biggest card printing companies, the payment card industry currently relies heavily on PVC plastic for their 6 billion payment cards in circulation globally. About 40 million tons of PVC are produced each year for a wide range of purposes, from pipes to footwear. Americans tend to carry about twice as many cards as Europeans and many Asians.

As a beginner, firstly I tried to understand the impact of recycled card activities to reach net zero emission. Hence, its better to start from scratch. Eurostat dictionary explains CO2 as follows: Carbon dioxide (CO2) is a colourless, odourless and non-poisonous gas formed by combustion of carbon and in the respiration of living organisms and is considered a greenhouse gas. Emissions means the release of greenhouse gases and/or their precursors into the atmosphere over a specified area and period of time. Carbon dioxide emissions or CO2 emissions are emissions stemming from the burning of fossil fuels and the manufacture of cement; they include carbon dioxide produced during consumption of solid, liquid, and gas fuels as well as gas flaring.

BCG’s CO2 initiative states that Global GHG(global greenhouse gas) emissions currently total about 53 gigatons of carbon dioxide equivalent (CO2e), according to the Carbon Disclosure Project. To meet the goal of limiting the increase in average global temperatures to 1.5°C, as specified in the 2016 Paris Agreement, we must reduce those emissions by 50% by the end of this decade, according to the Science-Based Targets Initiative. AI can achieve overall emissions reductions of 5% to 10% – the equivalent of 2.6 to 5.3 gigatons of CO2e if AI were applied to all emissions. And, currently they are able to monitor around 300 million tons of CO2.

The impetus for the companies is carbon offsets set by EU trading system. Based on CO2 initiative predictions, AI will help companies to save around $208 billion to $424 billion for all companies globally which arises from carbon offset system.

Finance sector involvement on carbon emissions is not in top 5 sectors compared to transportation, electricity and agriculture or aviation industry. Nevertheless, it has direct and indirect impact on carbon emissions . Direct impact is its PVC cards, offices, electricity consumption etc. Indirect impact is caused by its relationship with third party suppliers and partnerships . As per report published by Bloomberg, banks indirect carbon emissions from investments and loans is 700 times higher than direct emissions. In general,this impact is around 3% of total global emissions.

To understand one of the direct emissions its better to understand PVC cards issued by banks(G&D): Each 5 grams PVC payment card creates on average 160 – 170 grams of CO2 equivalent emissions. Every rPVC card is made with 85% recycled industrial waste per finished card and results in a reduction of 36% of CO2 emissions in comparison to a standard PVC Card. Even though the impact looks very promising , emission reduction on PVC plastic for the 25 billion payment cards in circulation globally will not have a big impact considering other big sectors. With a rough estimation it will reach around 1.2 M tons CO2 when it reached full capacity. This will create an impact of 0.0012% reduction on global emissions. Some banks tried to print debit cards that are made from nonedible corn which biodegrade within six months under ideal conditions to reach 100% reduction in emission. It would take an estimated 400 years for traditional plastic payment cards to decay.

While focusing on direct impacts, finance industry is heavily taking initiatives to reduce indirect impacts as mentioned above. For example , Santander focuses on aligning their portfolio with Paris Climate Agreement goals , supporting customer in the transition, giving priority to green finance. KFH has also issued a Sustainability Sukuk and launched green finance recently. There are more purist companies in finance sector to reduce carbon emissions in payment card industry via transforming business into fully digital payment sector.

Its obvious that, in payment industry, the collaboration between customers and partners is vital to combat climate change. BCG anticipates that customers are prepared to pay a premium for a greener value proposition such as 10%.

As an example, Yapı Kredi a Turkish bank has launched a new program called Step with partnership of companies who has activities to achieve net zero targets. The Step members collect Step points from their climate friendly actions among bank transactions and participating partner purchases. The points are redeemed for sustainability projects to reduce their carbon footprint.

Since finance sector has an ecosystem of merchants from all sectors it can enable industry professionals to track customer steps in different sectors. Having this capability might lead more sophisticated initiatives. Especially having AI to monitor, predict and reduce emissions via harnessing customer data might bring a new approach on customer relationships and loyalty.