Lim En Ning
At this point, almost everyone has probably heard the term NFT floating around somewhere. However, the accompanying hype does not come without repercussions. NFTs have been touted as harmful to the environment, creating many problems such as emitting large amounts of carbon dioxide, being so energy-intensive that minting one NFT is comparable to the amount of energy that Switzerland uses in a year, and many others. These concerns are legitimate, and it is important for users of NFTs to be aware of these implications.
Despite all this talk that points to advocating for no NFTs in our ecosystem, there is a flip side of the coin that people have yet to discover. To be fair, NFTs aren’t fully terrible. NFTs can promote sustainability, but this will have to be a conscious choice on the consumer’s part. As a sense of urgency peaks around the climate change forum, can we harness NFTs for good?
Using sustainable NFT platforms
Blockchain technology is the main driving force behind the NFT ecosystem, and it necessitates significant computational power to safeguard transactions. This computational power, in turn, requires large amounts of electricity, and thus creates a large carbon footprint. We can help to limit our impact on the environment by switching to platforms that are built to be more sustainable.
For starters, try using blockchain networks that use proof-of-stake (POS) consensus mechanisms instead of the energy-intensive proof-of-work (POW) mechanism. Famous cryptocurrencies like Bitcoin are built on a POW mechanism, but POS platforms offer far more long-term benefits.
A notable POS mechanism is Tezos, whose key feature is self-upgradability. Self-upgradability, or self-amendment, is meant to overcome the struggles of the POW blockchains. Tezos is capable of updating itself natively and autonomously without requiring a hard fork or an external governance model. In other words, this on-chain governance mechanism empowers token holders to participate in the decision-making process and provide feedback on proposed upgrades. Therefore, the platform remains up-to-date and functional at all times.
Furthermore, some platforms are implementing ways to offset carbon emissions, making them a more environmentally friendly option. An example would be EOSIO, an eco-friendly blockchain that offers carbon-neutral minting.
Utilising more sustainable platforms not only allows your brand to tap into the numerous benefits (listed below) that NFTs can bring for your brand, but it also aligns well with your brand’s ESG commitments. This puts your company in a good light when dealing with consumers who care about the origins of their products.
Green NFTs are digital assets created while supporting environmental causes. They are also known as impact NFTs. The primary focus of green NFTs is to minimise its carbon footprint, which is a major concern in the NFT industry due to the high energy consumption and carbon emissions associated with their creation and transactions.
For example, businesses can create NFTs that represent renewable energy certificates or that donate a portion of the proceeds to environmental organisations. One case in point would be the World Wildlife Foundation (WWF)’s launch of an NFT collection on Polygon. This collection aimed to raise funds for wildlife conservation efforts by commissioning artists to produce NFTs representing 10 endangered species. This generated interest in the public, allowing them to raise more than €250,000. This funding was then put toward the preservation of their habitat, the creation of new protected areas or fighting against poaching and overfishing.
However, there was also backlash from the general public. WWF received flak for their use of NFTs, despite WWF’s reassurance that Polygon was a green and sustainable choice. Therefore, we must be aware of our customers’ sentiments before jumping onto the NFT bandwagon. A good idea would be to release content about NFTs and the platform you choose to use before the actual product release.
Transparency about sustainability
Consumers are getting increasingly concerned with the source of their products. If customers agree with the values that your brand holds, it gives them common ground to connect with you. This naturally increases brand loyalty, giving you a higher customer retention rate. Greater transparency in the production and sale of NFTs can help consumers make more informed decisions about the environmental impact of their purchases. When consumers can easily discover the background of how an NFT was minted or the purpose of the collected funds, they are much more inclined to purchase it.
Sustainable NFT efforts
Consumers can get to the source by purchasing NFTs minted from renewable energy. Consider using sources like wind or solar to power NFT operations. This significantly reduces the carbon footprint of NFTs.
Another option is to collaborate across industries and with organisations working on sustainable solutions. More often than not, there are limits to what a single company can do to be more sustainable. Even international companies like Procter & Gamble (P&G) also face limitations in their pursuit of sustainability. Although multinational corporations (MNCs) are large and influential, sustainability is a tricky topic. Addressing sustainability challenges requires significant financial, technical and human resources. MNCs may not have the resources or expertise needed to develop and implement comprehensive sustainability strategies, especially in emerging markets or regions with weak governance structures.
MNCs may also face public scepticism or mistrust, especially in cases where their past actions have harmed the environment or communities. Collaborating with other stakeholders and engaging in transparent and accountable sustainability practices can help build public trust and legitimacy.
The last way to green your NFT game is to carbon offset. Carbon offsetting is a process that involves a reduction in, or removal of, carbon dioxide or other greenhouse gas emissions to compensate for emissions made elsewhere. Companies can invest in carbon-offsetting projects. There are many to choose from, and it entirely depends on what your company is passionate about. A prominent one is Verra: VCS, with more than 1,806 projects removing over 928mil. tons of CO2 and other GHG emissions. Due to its stringent regulations and standards, the VCS programme has emerged as the world’s largest program for GHG crediting. The Verra Registry also enables a transparent disclosure of project details and activities. This information is available to the public, ensuring that your customers can be assured.
Using sustainable NFTs to your advantage
Implement loyalty programmes
Your customers can earn NFTs as a reward for interacting with your brand. When customers fill in a survey or share your social media post, they can be gifted an NFT. This is especially the case for companies who wish to position themselves at the forefront of innovative technology.
NFTs provide brands with alternative methods to generate revenue from their content. NFTs offer brands a fresh way to earn money from their content by selling exclusive access through NFTs. This creates a new revenue stream and a more interactive experience for customers, bypassing traditional subscription models or ads.
NFTs offer the possibility of appreciation, which can instill a sense of long-term value for customers. To enhance this effect, brands can incorporate a tiered system where customers can obtain higher-tier NFTs by starting with lower-tier, free ones.
Grow brand awareness
The nature of NFTs is such that they frequently get shared and talked about online, particularly if they gain enough traction. It can be beneficial for your brand if customers show interest in the NFTs produced. As a result, customers are more likely to check out what your business is about, increasing customers and sales.
NFTs are commonly used as collectibles and have the potential to grow in value. Holding contests with NFTs as prizes can draw a large audience, esp. because NFTs are too expensive to purchase on the regular. Such contests may involve various forms of brand engagement, such as quizzes or sharing content with friends and followers. Additionally, you can brand the NFT such that your company remains at the top of customers’ mind each time they use or view the digital asset they received.
Brands that possess a robust online presence likely have diverse content showcasing key milestones in the company’s history. Instead of just a social media post like every other brand out there, why not mint that moment into an NFT? The opportunity to acquire a piece of your company’s or the Internet’s history can capture people’s attention. This is similar to a collector’s desire to obtain an original manuscript from a renowned author.
A robust sustainability strategy can assist companies in accessing novel markets as well as expanding in established ones. The quest to develop groundbreaking, sustainable solutions that tackle worldwide environmental and social challenges is compelling entrepreneurs and business leaders to reconsider their operations and innovate new products and services.
NFTs have evolved. They are no longer just digital images that artists use to grow awareness for themselves. More and more businesses are tapping into the Web3 space, integrating NFTS into their daily marketing operations. Without a doubt, now is not too late to jump onto the bandwagon, but only if you are confident of approaching NFTs the sustainable way.