Subscriptions, meet Sustainability - how Zuora helps customers to meet their carbon reduction goals

Madeline Bennett Profile picture for user Madeline Bennett November 22, 2023
Summary:
The Subscription Economy specialist has seen a big influx of customers asking about its own carbon footprint and emission reduction targets.

Zuora
Rachael Claudio

The consumer electronics market has a lot to answer for when it comes to environmental impact and wasted resources. More than five billion mobile phones were thrown away last year; meanwhile, there are 21 million unused, but working, tech devices currently hoarded in UK homes, including 12 million laptops.

Hardware makers are gradually starting to embrace a subscription model in an effort to minimize electronic waste while maintaining ongoing revenue. For example, Nokia is now offering a Circular subscription service for its handsets, where customers subscribe rather than buy a device. This helps keep mobile phones out of landfill and prolongs the lifetime of the hardware.  When a user returns a phone, it’s either passed onto another subscriber, or it’s donated to be refurbished and reused. 

Similarly, Acer’s Device-as-a-Service program lets businesses subscribe to the latest hardware, along with a productivity software suite, cloud storage and in-house support, rather than buying the device and taking on responsibility for disposing of it at the end of its lifecycle. The service is part of Acer’s move toward the Circular Economy, with a focus on device trade-ins and extending the lifetime of hardware. 

Meanwhile sports retailer Decathlon offers a rental scheme for electric bikes, kayaks, tents and more, so customers can borrow items to try out, or for a weekend or a holiday. The retailer has recently added a bike BuyBack service that will let customers resell their old adult or children’s bikes back to Decathlon. The bike can then be up-cycled and reused, while the customer gets up to 45% of the RRP in store credit. 

What all three companies have in common is that they are using Zuora technology to manage and monetize their subscription services as they add more sustainable offerings to their product line-ups. Zuora founder and CEO Tien Tzuo explains the operating model shift at play here: 

We don't think the old product economy makes sense, an asset transfer model where you're buying more and more stuff and these things get obsolete so fast. Every year, there's a new phone. What do you do with your old phone, your old laptop? They just sit around in your drawer and eventually wind up in landfill. It's not fair to ask the end customer, what do you do with the device.

The Circular Economy is a better model, as the company takes responsibility for everything from the cradle to the grave. Tzuo adds:

It's like when you go camping. You pack it in, you pack it out, don't leave anything behind. That's a much better model.

While its customers are finding value in Zuora technology to support more sustainable business models, the company is also working on its own measures. As Tzuo notes:

CSR [Corporate Social Responsibility]  has always been a core part of who we are [as Zuora], it's part of our DNA. Maybe because I was influenced by Marc Benioff, having been there [Tzuo was employee number 11 at Salesforce, and worked there for nine years]. We're mission-driven, we're values-driven, we give back to the community.

This year is the second in a row that Zuora has been carbon neutral, and all the firm’s offices now run on renewable energy. As Zuora doesn’t own its buildings, this relies on the company working with its vendors and suppliers, Tzuo notes:

To be quite frank, it goes the other way too. We have a lot of companies both in Europe and the US that come to us and say, we love you as a vendor, but we want to know what you're doing in this area. Our customers and future customers are very keen in this area as well.

Reduced footprint

When it comes to managing its carbon footprint, 71% of Zuora emissions come from its supply chain, known as Scope Three emissions. This means that for Zuora to reduce its own footprint, the business needs to rely on its suppliers and vendors. Rachael Claudio, Director, Social Impact at Zuora, adds:

A lot of our customers have similar footprints or similar situations where in order for them to really be able to make a dent in their footprint, they need to rely on their suppliers.

Over the past year, especially during the last six months, Zuora has experienced a big influx in customer requests asking for information around its footprint and what the firm is doing to reduce it and to set targets, Claudio says:

It’s so they can feel comfortable that they're going to be able to meet any reduction targets since it'll be so heavily relied on actions that their suppliers are taking.

When a customer came to us wanting to add an amendment to our agreement around sustainability, they were surprised with how far Zuora has come. They left that call feeling confident that Zuora was a supplier. We were not going to be a barrier to them hitting the reduction targets they've set.

Simultaneously, Zuora is preparing itself for any reduction targets affecting its own Scope 3 regulations. The firm has updated its supplier code of conduct, adding a Sustainability clause, and is getting ready to send out its first supplier survey imminently. This will ask whether suppliers have set any targets and calculated their footprint, and will give Zuora a baseline of data on where its suppliers are with their sustainability efforts. Claudio adds:

Once we get the results from this survey back, we'll have a good idea of how we need to engage with them moving forward.

Collaboration with other vendors and suppliers is the only way companies will manage to meet their obligations under SEC and EU regulations on climate and sustainability disclosure. Zuora works closely with Nasdaq's ESG Advisory team on its responsibilities, which pointed out to Claudio:

You’re either all going to succeed or you're all going to fail because you're all in this together, relying heavily on each other.

It's this really interesting point in time in the Sustainability world for companies, especially SaaS companies with such big Scope 3 footprints.

Claudio is confident the willingness is there from all the companies along its value chain to enable Zuora to meet its Sustainability targets – and that all can succeed rather than fail:

The smaller companies are probably a little bit further behind, but companies are providing a lot of educational resources. We got a request recently from a customer that linked us to the Watershed platform. It asked us all these questions about targets we've set and what our roadmap is going forward. It also said - if you're new to this world, click here, and then you were taken to this portal with educational resources on how to get started. 

It looks like companies are giving their suppliers some grace and are willing to work with them to be able to come along this journey.

While Zuora is already on top of supplier surveys and achieving carbon neutral status for its operations, the firm is still in need of software to help with Sustainability tracking, and consulting or external support to ensure it stays compliant with regulations. Claudio explains:

We did not feel like we had the right systems in place to track all of this new data so we are actively talking to different agencies that can work with us to help us. For the past two-and-a-half to three years, we've had very light support and done most work in-house. Now, we're going to rely a little bit more heavily on external support, specifically around tracking and storing data, making sure that not only are we able to store all the Scope 3 data, but that we're able to track all of our ESG goals and the progress we're making against all of them, and have that consolidated into one place.

One area that Claudio would like to see evolving is supplier surveys. Currently, most companies are using their own survey, and either issuing it themselves or working with a vendor they're partnering with. This results in companies getting flooded with a myriad of different surveys, which are all asking similar – but not the same - questions. She adds:

If this is going to be business as usual, given all of these regulations, I hope there can be some standard form or some standard way that companies can submit information and pass information back and forth so that every week we're not being sent a different survey, a different form to fill out.

My take

Whether companies have the goal of building a better revenue model with subscriptions, which then results in a more sustainable offering, or their Sustainability goals led them to subscriptions, the overall outcome is a positive one for our planet.

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