Climate change is an existential threat to businesses, economies, and life on earth. With global warming reaching critical levels, the Intergovernmental Panel on Climate Change (IPCC) has emphasized the urgent need for funding to finance decarbonization in its recent synthesis report.
Moreover, regulatory pressures and consumer demand for sustainable practices are on the rise, pushing businesses to take action. Payment processors, with their vast reach and influence over merchants and consumers, are uniquely positioned to drive change throughout the value chain. In this article, we explore how payment service providers (PSPs) can help merchants measure, disclose, and reduce their emissions while mobilizing funds for carbon reduction and removal initiatives.
Regulatory pressures are mounting, with new legislation such as the EU Green Deal and the Corporate Sustainability Reporting Directive requiring companies of a certain size to disclose emissions and other Environmental, Social, and Governance (ESG) factors. Many payment processors will fall under this disclosure regulation, making it essential for them to act proactively to reduce their carbon footprint and demonstrate their commitment to sustainability. By developing tools and technologies to help merchants measure and disclose their emissions, PSPs can not only comply with regulations but also establish themselves as sustainability leaders in the industry.
Many merchants lack the knowledge or resources to tackle their emissions and implement sustainable practices. In the UK, SMEs account for 99% of all businesses, and 50% of business carbon emissions. But only 3% have measured their carbon footprint and set a target. Payment processors can step in to bridge this gap by offering technology solutions that enable merchants to track their carbon emissions and identify areas for improvement. By integrating sustainability metrics into payment platforms, PSPs can make it easier for merchants to access and understand their environmental impact, empowering them to make data-driven decisions that reduce their carbon footprint.
Consumer demand for sustainable products and services is growing rapidly. Payment processors can leverage this trend by offering innovative solutions that engage consumers in climate action. For example, PSPs could enable customers to round up their transactions to the nearest dollar, with the extra amount being donated to carbon reduction or removal projects. Alternatively, they could offer a 1% for the planet offering or loyalty programs that reward customers for choosing eco-friendly merchants or making low-carbon purchases. By promoting and facilitating sustainable consumer choices, payment processors can help drive a shift towards a more climate-resilient economy.
Collaboration is key to driving meaningful change in the fight against climate change. Payment processors should partner with environmental organizations, regulators, and other industry stakeholders to develop and promote best practices for emissions reduction and reporting. By sharing knowledge and resources, PSPs can help create a more sustainable payments ecosystem that benefits merchants, consumers, and the planet.
In addition to supporting merchants and consumers in their sustainability efforts, payment processors must also take action to reduce their own emissions - beyond operational emissions. This includes optimizing the payment process itself - payment terminals and data centres can be configured for energy efficiency and transition to renewable energy sources. PSPs can also fund their own climate action projects as an additional contribution. By demonstrating their commitment to sustainability, PSPs can inspire others in the industry to follow suit and work together to address the climate crisis.
Climate change is an emergency that requires all hands on deck. As key players in the global economy, payment processors have a unique opportunity to drive change throughout their value chain and become a force multiplier in the fight against climate change. By helping merchants measure, disclose, and reduce their emissions, engaging consumers in climate action, collaborating with stakeholders, and leading by example, payment processors can play a crucial role in catalyzing the transition to a low-carbon economy.
Ultimately, the green payment revolution has the potential to create a ripple effect throughout the business world, encouraging sustainable practices and fostering collaboration across industries. By taking the initiative to act on climate change, payment processors can not only improve their own ESG performance but also contribute to a more sustainable and resilient global economy. The time for action is now, and payment processors have both the power and the responsibility to lead the way towards a greener future.