We sat down with Alexandra Colac from the Klarna Sustainability Team to learn about circularity and how Klarna contributes to circularity and sustainability.
Tell us more about you, Alex. What is your role, and what did you do before joining Sustainability at Klarna?
I joined the Klarna family in January 2022. Before joining Klarna I was part of Zalando’s sustainability team, where I focused on strategy and led a sustainability brand assessment framework for its brand partners. My work revolved around sustainability, mostly focusing on social compliance, human rights and sustainable supply chains, primarily in the fashion industry. At Klarna, I’m responsible for life cycle assessments, sustainability metrics and helping consumers to find relevant information about sustainable products and brands.
What is the Circular Economy?
I think the best way to think about it is a process or approach where we need to rethink the way we currently produce and consume. The circular economy is a system that is restorative by design. At the core of it is the concept of waste – materials and products never become waste, but retain their integrity and are kept at their highest value for as long as possible.
What does Circular Economy mean in the context of Klarna? And why is Klarna focusing on this?
Today only 7.2% of the world’s economy is circular, and it is estimated that the potential benefit from converting the remaining 91% is around $4.5 trillion. We know that the circular economy represents the largest wave of consumer and business transformation. Demand for secondhand is increasing, and the market is projected to double in the next 5Y, reaching USD 77B. At Klarna, we are uniquely positioned to help consumers maximize the use of products and can help them shop for pre-owned items.
One objective within our approach to sustainability is to encourage circular shopping. We aim to provide consumers with reuse options, to resell, donate, or recycle pre-loved items and empower them to minimize waste and extend the life of products through circular services. One can divide the circular economy into different phases: the Design and Manufacturing phase, which looks at how can we rethink the design and use materials to eliminate waste; the Use phase; the Reuse phase; and the Closing The Loop phase, where we’re looking at how to dispose of a product (e.g., recycling, decompose).
Looking at the Circular Economy process flow, we have identified two stages where Klarna can support the industry to transition to a circular economy – the Use and the Reuse phases. Using a t-shirt as an example, the Use-phase looks at how we can take care of the shirt through care, repair or restyling. This is where we see the greatest potential to impact consumer behavior. In the Re-use-phase, we’ve already fallen out of love with our favorite t-shirt, so we need to look into ways to prolong the products’ life through resale, donations, and more. At this stage, we not only have the opportunity to engage our consumer, but also our retail partners.
So how does it look in practice?
First and foremost, the consumer is at the center of all the work we have been driving so far. Transitioning to a circular economy requires transforming our consumption system, which is why an informed consumer can play an important role. That is great for the planet and also for consumers’ wallets, as circular services often save money. Klarna helps consumers to find circular services of retail partners through our app. We recently launched the “Shop Circular” collection in the Klarna App showcasing the circular services our retail partners offer to consumers.
Saving money? How?
Now more than ever, evidence shows that consumption patterns change, especially when faced with a global recession and the cost of living crisis. On average, preowned shoppers save nearly $150 a month, or $1,760 a year, by buying secondhand items. By giving consumers more options to find pre-owned products, we help them save money. Further, by making resale opportunities of re-commerce partners more visible directly in our app, we can help consumers generate value from their past purchases.
In January, Klarna also launched a resell feature allowing Swedish users to list pre-bought purchases for sale directly via the Klarna App. The feature works in partnership with Tradera and helps users quickly and easily find new homes for items they no longer want, with prefilled ads support and Klarna-verified listings made visible to over 3 million users on Tradera. In times of economic pressure, consumers are embracing shopping options that allow them to save money and make money at the same time.
How does Klarna help consumers to participate in circular services?
We mainly focus on educating consumers by providing them tips and information on how to take care of their products, encouraging them to shop secondhand products, and enabling them to extend the life of products by providing resale opportunities.
How does that look in practice? What has Klarna been working on so far?
My vision is to continue to add circularity features throughout the Klarna ecosystem to promote buying and reselling used items, as well as additional components like where to find repair centers or how to upcycle previously bought items.
Earlier this year, we partnered with Sellpy and Klarna’s Fashion Director Emila de Poret to launch a “Shop smarter” campaign to inspire consumers to think more sustainably and consciously about their shopping. We created a lot of exciting content to help to “edutain” people about selecting, buying, caring and selling more consciously. You can check out the campaign video, here. Klarna continuously partners with brands to promote circular shopping, and have also launched other campaigns featuring brands that offer pre-owned products across various verticals like fashion and consumer electronics.
What are some of the biggest challenges and opportunities for companies when transitioning to a circular economy?
The positive impact of the circular economy is clear, but it also comes with challenges and requires changes at scale for businesses, consumers, regulators and society. I think one of the biggest challenges is that the concept still lacks a universally accepted definition, which leads to not having clear indicators and KPIs in place to encapsulate all aspects of circularity. Another critical aspect is the supply chains, which will have to change drastically – from changing suppliers and production countries, to transforming the way products are being designed and made.
How we produce and consume is essential to transitioning to a circular economy. Transitioning to such a model allows companies to get creative and innovative. A few examples of companies bringing new circular solutions to life are AMP Robotics (artificial intelligence for recycling), Resortecs (dissolvable stitches that improve clothing recycling), and Serendipalm (a regenerative supply chain alternative for palm oil).
What excites you the most about sustainability at Klarna?
My journey in sustainability started on the ground visiting factories, where I learned about manufacturing processes, their environmental impact and their social, health and safety effects on workers. From there, I moved on to a fashion company where I had the opportunity to influence the work we did with suppliers and factories. I then continued my career at a large e-commerce retailer, where I supported brands to improve how they approach sustainability in their supply chain.
Given Klarna’s reach, I am excited to apply my expertise beyond the fashion industry and help define how we communicate about sustainability across all industries. With our vision to become a single destination where consumers can carry out all of their online shopping, Klarna is uniquely positioned to take a stand regarding sustainability. We’ve already embarked on this journey by showcasing sustainability attributes to consumers on product and brand levels, and we can go even further by collaborating with retail partners in the sustainability space.
Discover the Shop Circular Collection here: