Payment service providers can play a pivotal role in supporting society’s move to a low-carbon economy, yet several are struggling to attain their own net-zero targets. Some strategies have been working well, but much more needs to be done – even by the largest and best-resourced players in the sector.
Payment providers should be well positioned to cut greenhouse gas emissions – in their operations, supply chains and customer networks – thanks to their ability to track spending and engage with buyers at the checkout. They can use their data insights and influence to raise customers’ awareness of their carbon footprints, inform them of their options and nudge them towards the most sustainable ones.
That’s the view of Doug Sabo, chief sustainability officer at Visa, whose network “connects billions of customers”.
Sabo believes that his company has a “great opportunity to use its assets to inspire climate action through enabling sustainable behaviour. It’s also a chance for us and the payments industry to connect climate action to a business case, aligning with consumers’ demands and mitigating risks. We could do this by, for example, enabling seamless payments for electric vehicle charging.”
Here are five tips from pioneering payment providers on how the whole industry can hasten its progress towards net zero.
1. Rationalise and consolidate systems
One of the biggest contributors to payment companies’ carbon footprints is the electricity they use in their operations.
To reduce its CO2 emissions, North American Bancard (NAB), parent of PayAnywhere, has consolidated its systems and operations from six separate data centres into two, both of which use 100% renewable electricity. It has also equipped its call centres with energy-efficient Chromebook devices.
“We have learnt that competitively priced, environmentally friendly providers are out there,” says NAB’s chief information officer, Andy Bolin. “You just need to choose the right ones from the start. It’s easier to build a more sustainable ecosystem now than to reverse-engineer it later.”
2. Bring customers and networks on board
Perhaps the biggest opportunity for payments providers to cut CO2 emissions lies in engaging with their billions of customers and their huge supplier networks.
A 2021 business briefing by the University of Cambridge recommends that providers work collaboratively to shape new services that will counter climate change. The document, Payments for Net Zero, also highlights providers’ ability to use data-driven insights to support this by, for example, producing more targeted products.
Sendi Young, MD of payments settlement system Ripple in Europe, says: “Organisations should prioritise learning from others and take advantage of partnerships. We need to work as a collective to make our industry fully sustainable.”
To this end, Ripple has joined the Crypto Climate Accord, a group of crypto asset providers with the shared goal of decarbonising the industry.
PayPal, meanwhile, is aiming to harness the power of its 400 million customers to advance science-based action and align its offerings with their growing interest in sustainability. For example, its network of so-called return bars – locations where shoppers can hand back unwanted goods – enables product returns to impose a smaller carbon footprint than they would make via any mailing system.
A spokesman for PayPal says: “We’ve learnt that enabling climate solutions is not just about individual businesses; it’s also about markets and ecosystems. Innovation and entrepreneurship are also essential. We’ve invested in startup companies that are testing ideas that can unlock new climate solutions and address scalability issues.”
Sabo reports that Visa’s decarbonisation strategy has “evolved outside our operations. For payment companies, the transformative opportunity is to enable others to transition to a low-carbon economy by inspiring and empowering the consumers and businesses that use our services to make more sustainable choices.”
Visa has done this both directly with bank clients and via a partnership with Ecolytiq, which enables them to obtain estimates of the carbon footprint imposed by their spending habits. Clients also receive tailored guidance on how they could make more sustainable purchasing choices.
3. Invest directly in removing carbon
Buy-now-pay-later giant Klarna has introduced an internal tax on all its emissions, including in its supply chain. This entails setting aside money to spend on decarbonisation initiatives.
Last year the fund totalled $1.7m (£1.4m). Initiatives have included four projects designed to remove 11,000 tonnes of CO2 from the atmosphere.
Klarna believes that most carbon-offsetting activities aren’t as effective at combating climate change as those that extract CO2 already in the atmosphere, which is why it is focusing most of its attention on permanent carbon removal.
For its part, Ripple has committed $100m to invest in carbon-removal innovations, building carbon credits and enabling users to reduce their carbon footprint through a digitised credit token system.
4. Commit to science-based targets
PayPal is targeting net-zero greenhouse gas emissions, as defined by the Science Based Targets Initiative (SBTI), by 2040. It has already achieved its goal of procuring 100% renewable energy for its data centres.
The company also has SBTI-based targets for reducing greenhouse gas emissions throughout its supply chain. It plans to achieve them partly by persuading vendors to set their own targets and work towards these.
Visa has already achieved carbon neutrality in its own operations, according to its reporting under the Carbon Disclosure Project (CDP) framework. Moving all of its premises on to 100% renewable electricity has been key to its success in this respect.
Like PayPal, the company is targeting net-zero greenhouse gas emissions in its supply chain by 2040. It plans to do this by participating in the CDP Supply Chain programme, which encourages suppliers to measure their emissions, set reduction targets and report on their progress towards these. Visa also uses its supplier code of conduct to state its expectations of them in this respect.
5. Use tech that’s sustainable by design
Payment providers using digital assets and blockchains can evaluate and choose the most sustainable partners from the start.
At Ripple, Young acknowledges that the crypto sector has been put under scrutiny from the environmental lobby – justifiably so, because the process of verifying transactions on a blockchain consumes huge amounts of energy. But she adds that providers have been working to develop more sustainable crypto mining methods.
“We see great potential for blockchain and crypto to forge new paths to zero carbon,” Young says. “For example, the XRP Ledger blockchain is achieving carbon neutrality by confirming transactions through a low-energy consensus model.”