INTERVIEW
Setting the standard: Reducing the carbon footprint in payment processing Imran Ali, director, payments consulting, KPMG, discusses the ESG Working Group’s innovative project to create a universal carbon footprint standard for the payment industry, driving environmental sustainability across organisations of all sizes. What is the project and its main objectives?
We aim to establish an industry standard for measuring the carbon footprint of payments and payment processing. This standard aims to be universally applicable and suitable for any entity involved in payment processing, whether a large bank, a small fintech company, or anything in between. The standard will offer a straightforward method for these companies to assess the carbon footprint of their payment processes, including card production and digital payment processing. Essentially, it’s an off-the-shelf solution that enables easy and accurate carbon footprint measurement for various payment processes. The project aligns closely with the goals of the ESG Working Group under the Payments Association, which focuses
on fostering awareness and best practices in environmental, social, and governance aspects within the industry. A key objective, as outlined in The Payments Association’s Manifesto developed last year, is to create an industry standard for measuring the carbon footprint of payments. This objective is part of our broader aim to reduce the environmental impact of payments across the industry. The standard we’re developing is designed to be easily adoptable by both large and small organisations in the payments sector, thereby supporting the ESG Working Group’s mission to advance sustainable practices in the industry.
What are the current challenges organisations, especially SMEs, face in measuring the carbon impact of their payment processes?
First, there needs to be more awareness and knowledge about measuring the carbon footprint of their payment processes and implementing environmentally friendly practices. They often need help finding the proper guidance and information sources. Second, the cost factor is significant. Adopting environmentally-friendly policies or practices usually entails additional expenses, such as hiring third-party services, acquiring software, or dedicating resources to develop and implement these processes. These challenges are particularly acute for smaller organisations trying to assess and reduce the carbon impact of their payment processes.
28
How do existing solutions by large organisations differ from what is feasible for smaller firms?
Large organisations have started assessing the carbon footprint of their payment processes, a concept that still needs a standard across the industry. Some UK banks have created their own methods tailored to their operations. These aren’t broadly applicable, though. We aim to learn from these larger organisations and develop a universal standard. This will allow other firms, particularly smaller ones, to adopt these practices more efficiently, leveraging the experiences of larger companies for more efficient implementation.
What’s involved in developing this standardised framework?
First, it’s crucial to determine the broader environmental impacts of payments processing. While digital transactions are generally less carbon-intensive, traditional methods, such as cards, cheques, and cash handling, significantly contribute to the carbon footprint. Our approach includes exploring industry-wide strategies, including centralising cash processing and optimising cash deliveries, to reduce this environmental impact effectively. We’re developing the framework by studying practices from related industries like capital finance and mortgage lending and aligning with a standards body for existing frameworks. The process entails analysing various physical and digital payment processes and backend and