Payments Ecosystem Ponders Role In ESG World

April 3, 2023
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Payments industry interest in environmental, social and governance (ESG) issues continued to bubble at the Merchant Payment Ecosystem conference this year, as panellists considered how to approach the sustainability juggernaut.

Payments industry interest in environmental, social and governance (ESG) issues continued to bubble at the Merchant Payment Ecosystem (MPE) conference this year, as panellists considered how to approach the sustainability juggernaut.

As one source at MPE told VIXIO last week, it is difficult to know what role the payments and electronic money industry can play in the financial services transition to a more sustainable workstream.

“There are no plastic bottles in the office,” he shrugged.

Yet, as evidenced by sessions this year at both MPE and London’s Pay360, this is an issue that is becoming increasingly prominent at board level.

Whereas it is very easy to educate consumers about products, it is not so easy to educate about payments, said Sam Langsford, inbound payments specialist at IKEA. “It is, nonetheless, part of our value chain.”

“For somewhere like IKEA, and I’m sure that this is true of any merchant with ambition in this area, this is a great missed opportunity, as consumers do have choice when it comes to payments, but we can’t inform them of the sustainability impact of one choice relative to another,” he said.

Consumers going green

“From a consumer standpoint, particularly post-pandemic, people are really looking for ways to shop their values,” said Stephen King, who heads up Europe’s sustainability solutions team at Visa.

People equate their climate awareness with shopping, and what they are doing with their money, he suggested, referencing former Bank of England governor Mark Carney’s assertion that the sustainability transition will be the size of the industrial revolution, but at the pace of the digital revolution.

“On the merchant side, you are facing regulation and the cost of that, as well as potentially the opportunity of that, is going to shift your business,” he said. “The potential to differentiate yourself and seek some of those consumers that are looking for more sustainable options.”

“At Visa, we believe there is a role to facilitate this shift that is happening and wants to happen,” said King.

The ubiquity of payments means that there is a role for the industry to play, said Dan Graf, co-founder of Earthchain.

“Payments are the rails that can drive this, but it is the emotions and layers on top of that that can create that power and have the reach to create that industrial revolution,” he said.

What regulation is on the way?

No regulation regarding sustainability is specifically directed at the payments industry yet, although regulators supervising the payments industry are certainly keen for it to be a focus for all those that they regulate.

For example, the UK’s Financial Conduct Authority recently stated in a Dear CEO letter that ESG was a focus of the regulator and that it expected the payments and e-money firms that it supervises to be in compliance with their regulation on this matter.

“You should familiarise yourself with the FCA’s ESG Strategy and ensure that your firm has appropriate governance arrangements for more complete and careful consideration of material ESG risks and opportunities,” the letter says.

Regulation such as the Consumer Duty certainly has a focus on the S and G of ESG, calling for firms to ensure that they are preventing consumer harms from happening.

In the EU, the Corporate Sustainability Reporting Directive (CSRD) has been introduced requiring large and listed companies to publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment.

The CSRD entered into force in January this year, and companies will need to be in compliance by 2024, with reports being published the following year.

France has also taken action, taking steps to ban paper receipts. However, the government has already pushed this ban back twice, with the government citing rising inflation as a reason for the delay because consumers need to check the accuracy of their shopping spend.

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