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  • Writer's pictureOne Small Step

Who Pays?

Newsletter 20 Nov '22

Whether it's social media or decarbonisation, someone needs to bear the cost.

I'm sure you've all heard about the firestorm of controversy engulfing Elon Musk this past week – ignited by Twitter's move to start charging people $8 per month for blue-tick account verification. There have been heaps of legitimate concerns raised about messing with Twitter's verification system, but something I've found particularly fascinating is the indignation felt by so many at being asked to pay for a social media service.

Facebook and Google are not public services provided by benevolent entities. They are multi-billion dollar tech conglomerates who monetise their sites by selling your data to advertisers. We are the product, interacting with these digital ecosystems entirely for free, while our eyeballs and attention are sold by Facebook, Google and Twitter to third parties.

There's no doubt that Twitter has seriously bungled this attempt to introduce a user pays model– but who would we prefer pays for their service? If you become the customer, rather than just a user, it instantly gives you more leverage. Leverage which could transform the way these platforms function– shifting their focus away from harvesting and selling your data, and towards the provision of services that benefit you.

This same question can be applied to climate change mitigation and adaptation: who pays? Who pays for the necessary and urgent transition to a decarbonised economy? Who pays for the products and services that will help us get there? The obvious and clear answer is governments and the companies most responsible for carbon pollution. But as I’ve discussed in previous newsletters, the pace of change at the national governmental level is painfully slow and therefore inadequate, and the largest corporate entities with the biggest footprints appear the least capable of changing, given their entire business model is predicated upon the production and sale of fossil fuels or emissions–intensive products.

There is some movement in the private sector: venture capitalists have raised a whopping $260 billion USD since 2018 to fund climate innovations, making up over a quarter of all venture funding this year. This is wonderful news.

However, something not well understood by the general public about venture capital– and this sadly includes many impact investment funds– is that these sources of capital are structured to fund enterprises that have a defensible capacity to ‘return the fund’. For these funds to survive, the companies they invest in must have the potential to generate massive, outsized profits, typically at least 10x the initial venture investment.

"So even if a project has the potential to massively reduce emissions, if it can't also generate a bonanza of further riches for these private investors, it's unlikely to attract funding."

Given that carbon pollution is still effectively a negative externality– meaning it's not accurately or consistently priced into the cost of doing business in many markets– materially eliminating carbon emissions from the atmosphere isn’t necessarily a highly profitable activity on its own. This means that heaps of essential carbon emission reduction projects aren’t getting the attention or support they need.

You can see this pattern play out in the demand-side space in which I operate, where early-stage companies that talk a big game about supporting climate action are receiving tens of millions of dollars in venture capital, but the ‘carbon impact’ part of their product offering (and their revenue generation mechanism) is actually just selling carbon credits to businesses and consumers. They are effectively middlemen, packaging offsets of varying rigour, with a markup and a lot of triumphant branding, to allow companies to claim they are squeaky clean, green and 'carbon neutral', while having done next to nothing to measurably drive real–world, systemic decarbonisation.

So how do we move past these spurious, profit–hungry practices?

The recent US Inflation Reduction Act, despite some very unpalatable concessions on oil and gas exploration, is a huge step forward. It uses the tax system and loan guarantees to financially incentivise both consumers and businesses to upgrade their fossil fuel infrastructure, transition to clean energy systems and adopt electrification and electric vehicles. This still requires companies and consumers to pay to upgrade their own energy and transport systems, but at least now they can receive subsidies and loans from the US federal government to do so.

In One Small Step’s case, this week’s app upgrade allows you to assess the cost (or more often, the financial savings) of taking recommended climate actions, at a glance. For most users, completing the full suite of activities recommended in your climate action plan saves you thousands of dollars a year. This is due to improved resource efficiency: reducing your energy usage, reducing the amount you spend on petrol, and on non–essential consumer items, eliminating waste and growing your own food. All of these things add up to save you a lot of money.

However, at a micro level, this brings us right back to the very same issues we're seeing at Twitter. When we charged $4.99 a month to access a subset of the app's tools and content, we received highly negative reviews and criticism from users. There was an expectation that the product should be completely free, and the fact that we asked people to pay for it made us seem less trustworthy– like we had some ulterior motive beyond our environmental mission.

Ultimately, we decided to offer the app for free and seek out alternative streams of revenue– including receiving commissions from low carbon companies when we recommend their services to our users, alongside non–sponsored options. Unlike the open–slather approach of the tech giants, we've made every effort to navigate these partnerships transparently and ethically, setting a very high bar on which companies we recommend.

We’ve also launched an enterprise software option, so companies can offer One Small Step to their employees. However in the current economic climate of layoffs, plummeting market capitalisation and rapid inflation, a tool that supports staff to decarbonise, with something more in-depth than offsetting, isn’t something a lot of companies believe they have the budget or time for.

To date, these alternative revenue streams earn OSS only a few hundred dollars per month.

Maintaining such stringent sponsorship standards massively shrinks the number of brands and products One Small Step can recommend. I turn down multiple requests a week from brands that want us to advertise their products, because they have minimal sustainability credentials. Buying more T–shirts isn’t something I ever want to promote, regardless of the fair–trade quality of the cotton. I want to encourage people to buy way fewer T-shirts and instead care for what they already own. This is a far cry from less scrupulous e-commerce influencers with 20 affiliate links for ‘green products x, y and z’ included in their latest blog post about personal sustainability.

We're a team of just two full–time staff, so building and vetting these commercial partnerships takes a lot of time and effort– constantly pulling us away from focusing on making our behavior change software as effective as possible.

When I consider that the app has the capacity to save each individual user thousands of dollars and nearly eliminate their carbon emissions, offering the entire service for free while we struggle to cover our costs each month is starting to feel imbalanced. So where does that leave us? At a certain point, if no one is willing to pay for the value they get from One Small Step, then it won’t be possible to continue, nor would it make sense to.

The reality is that creating or building anything usually costs money– so the belief that tools like One Small Step should be free carries with it an unspoken expectation that the people providing these services should work for free, or should be okay with being chronically underpaid, because they’re motivated to dedicate their time to an altruistic cause.

Or perhaps the expectation after Facebook and Google is that some other mode of revenue should be sought, like advertising. But this entrenches a consumerist model that's tied to successfully getting people to buy more and more stuff. I think this expectation really needs to change.

Notably, I don’t receive as much criticism from people who are personally involved in innovating social or environmental impact, who are striving to create things in the world that didn’t previously exist. They know from experience how hard it is, and how much work and dedication it takes, and that arguing passionately about how the world should work isn’t the same as trying practically to change it.

So to sum this all up, I'm starting to reconsider charging a monthly or annual subscription for users to access the environmental, health & wellbeing tools offered by our app, while demonstrating to users that the app actually saves them a huge amount of money.

We could also implement a system whereby anyone who can’t afford a subscription can get in touch with us directly to request full access to the app and all its features for free (similar to Sam Harris’ model for his meditation app). My aspiration is that as a community, we pitch in together to build sustainable economic models that don't incentivise over-consumption of non-essential items, with their concomitant impact on the planet. But instead, we create systems that help to strengthen community cohesion, social wealth and environmental stewardship. Positive examples that spring to mind for me are Wikipedia and Patreon.

But I'm interested to hear from you. What do you think of this idea? I know not everyone reading this will agree with me, but I’d love to hear your thoughts. Thanks for reading,

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