Firms throughout the payments world have set net zero targets and put decarbonisation at the centre of new sustainability strategies. But what is actually being done?
With sustainability consciousness sweeping financial services, many institutions are setting net zero carbon targets to minimise their environmental impact. This has gained momentum in the wider financial services space, but activity is now occurring within payments. At The Payments Association (TPA), the ESG working group has been tasked with creating a decarbonisation framework specific to payments. This will deliver a framework payment firms can use to put carbon numbers to given transactions, offering unprecedented visibility of their carbon footprints and arming decision-makers with the information they need.
However, in the face of climate change—and the worsening droughts, wildfires and storms—what change is happening at these companies? Mastercard has set a net zero target, and the firm’s chief sustainability officer and executive vice president, Ellen Jackowski, pointed to activities around decarbonising operations and the firm’s supply chain.
“Emissions from our operations—known as Scope 1 and 2 emissions—account for only 9% of our GHG emissions, and we’re working to reduce those further through energy efficiency and purchase of renewable energy,” says Jackowski.
“78% of our emissions come from our supply chain. Tackling these ‘scope three emissions’ is a critical part of our environmental strategy. We believe it’s our duty to support our suppliers with their own emissions reduction journey.”
Building on this supply chain engagement, Mastercard has gone further and encouraged suppliers to set science-based targets. Overall, these steps have helped Mastercard reduce scope 1, 2, and 3 emissions by 41% from its 2016 ‘base year’.
Other firms were not as forthcoming. When asked by Payments Review to elaborate on decarbonisation strategies and how these were being manifested, several payment firms that have made net zero commitments—including Visa, Klarna, PayPal, and Barclays—declined to comment. This lack of transparency is causing some concern. Adam Soilleux, director of financial services advisory, ESG governance, risk and compliance at BDO, sees a lot of noise being made at a high level around decarbonisation but, in certain instances, a lack of “credible transition plans” executed in the interim.
“What we are seeing is ambitious targets but instances of a lack of clear transition plans to reach those,” says Soilleux. “It’s quite easy for an entity to decarbonise, say, the first 50% or so of its emissions, but getting to net zero is a lot harder. There are quick wins, but those won’t get an organisation to net zero.”
Here, a challenge to overcome is the unique business model of the payments industry. According to Soilleux’s colleague, associate director Gloria Perez Torres, these firms have not experienced the pressure that others in the wider financial services space have faced.
“While we see clients putting pressure on banks and asset managers to have net zero goals and green products, it has been different in payments as there is not that same pressure to change,” she says. “We expect that as payment firms start to work more with banks implementing green strategies, they will have to answer more questions about their own strategies. That could bring about some change.”
Language around sustainability and net zero is extensive across many payment firms’ websites but does not always reflect reality. According to fintech advisor Ian Benn, who has spent over two decades working in the payments industry, he sees decarbonisation manifesting as “tinkering”.
“One of the biggest issues here is that of greenwashing,” says Benn. “There is such a fear of being accused of greenwashing, damaging the brand through making over-inflated claims about small improvements, that firms are increasingly going the other way and are shy of talking about their small, but sometimes meaningful improvements. This is almost as pernicious.”
One popular strategy, however, has been the role of carbon offset programmes. The World Bank recently revealed that adoption has been surging, with carbon pricing revenues reaching a record US$104 billion in 2023. According to Charlie Bronks, head of ESG and senior vice president at Crown Agents Bank, although these are not perfect, they are a readily available solution.
“Whilst it’s not a perfect science, the alternatives to reduce carbon from the start are challenging, and a lot of CEOs are open to what else they can do,” she says. “We are seeing many payment companies partnering generally with environmental organisations looking at reforestation, renewable energy projects, carbon offset initiatives, etc.”
We believe it’s our duty to support our suppliers with their own emissions reduction journey.
TPA’s work on establishing a decarbonisation framework is crucial because a reliable, standardised framework for measuring carbon data in payments does not yet exist. The logic is that this data will then better inform decarbonisation efforts. However, there is a danger of inertia if firms wait until such data is available. David Beer, head of business development (EMEA) at carbon management solution provider Cogo, says there is a danger of decision-makers getting “hung up” on the accuracy and availability of this data.
“Don’t let perfect get in the way of action,” says Beer. “It might not be perfect when you start, but the numbers will improve. If you wait until methodology and data become better, that will never come.”
This highlights the emphasis the payments industry is placing on balancing data accuracy with actionable progress. Crown Agent Bank’s Bronks says she has seen some progressive business leaders in payments who are more willing to act and not wait for data standards to be finalised. Though mindful of why some businesses prefer to wait— due to the cost of getting these decisions wrong—she points to the wider context that change is required.
“Any transition can be costly, but the famous quote from former US Deputy Attorney General Paul McNulty to ‘If you think that compliance is expensive, try non-compliance’ applies exactly the same to the futureproofing of a sustainable business model,” adds Bronks. “Implementing new technologies and updating infrastructure requires substantial investment and time. That is a big conversation to have and needs to come from the top.”
BDO’s Torres is seeing some firms being proactive on this front, with efforts made to measure carbon emissions and build up an annual picture of how these change over time. However, she notes that many of the firms she works with are only just starting in this journey.
“The bigger firms have been doing this for longer,” says Torres. “The smaller firms don’t have the same pressure or resources, but there are definitely smaller firms doing work on this and making sure they have sight of their carbon emissions and progress towards reducing their environmental impact.”
It is clear that combatting climate change will not be reliant upon one individual or a singular company but rather through collaboration. Benn says combining efforts, with industry bodies being a conduit for these, will help mobilise change on a significant scale.
“Whilst I suspect that every player is already making small improvements, a cooperative approach would allow our industry to draw out the entire payment lifecycle and then, for each step, identify those changes that could more easily be made,” he explains.
This need for collaboration speaks to the complex nature of payments, which can make meaningful change difficult. In a payment chain, several parties will be involved, such as the customer, the intermediary, the bank, and so forth. This offers several decarbonisation routes, but knowing where to go can be challenging.
“You have many actors across the field, payment firms, merchants, acquiring banks, etc, and they all care about that little bit that belongs to them,” says Beer. “That’s when it gets difficult—who cares and who’s responsibility is it? My suggestion is to try not to eat the elephant at once. Look at it in components and ask yourself what you can control and break it down.”
Likewise, BDO’s Soilleux highlights how decarbonisation will take a considerable amount of time to fulfil and points to the complexity of this challenge. Though net zero targets are helpful, he says more focus should be put on what change can be achieved in the near term.
“Our sense is somewhat that a firm might make a commitment to be net zero by 2050, and perhaps an interim to reduce by 50% by 2030. But they are buying themselves some time there,” he says. “I have not seen any short-term targets, for 2025, by example, that would require immediate action.”
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