Sustainable payments: Aligning transactions with ESG goals

In an era defined by urgent climate imperatives and shifting social expectations, the payments industry finds itself at a strategic inflection point.

Environmental, social, and governance (ESG) considerations, once the preserve of sustainability departments, are now influencing boardroom decisions and transforming financial ecosystems globally.

A Growing Imperative for Sustainable Payments

Aligning transactions with ESG goals

The environmental cost of financial transactions is often overlooked.

According to the Dutch Central Bank, a single debit card payment emits as much carbon as leaving an 8-watt light bulb on for 90 minutes. Multiply that across billions of global transactions, and the urgency for greener alternatives becomes evident.

Yet, sustainability in payments is not solely about reducing emissions.

As Mastercard’s 2023 report notes, sustainability has become a defining concern for global consumers.

Payments, once perceived as mere financial utilities, are now imbued with personal values and environmental considerations.

Consumers seek out payment solutions aligned with their beliefs, and firms that fail to adapt risk obsolescence.

Regulatory Momentum Meets Consumer Demand

Regulatory landscapes are tightening.

In the UK, the Transition Plan Taskforce (TPT) is setting credible pathways for climate transition disclosures, while the EU’s Corporate Sustainability Reporting Directive (CSRD) mandates granular ESG reporting across industries.

For payment firms, these shifts transform sustainability from a voluntary marketing differentiator to a compliance-driven business imperative.

At the same time, the payments industry lags behind other financial services segments in ESG integration.

While lending institutions have embedded ESG into risk assessments and product offerings, payments companies remain at the foothills of their sustainability journey.

Yet, herein lies opportunity – forward-looking payment providers can leverage ESG as a platform for innovation, resilience, and market leadership.

Climate Fintechs Leading the Way

Emerging climate fintechs are showcasing what sustainable payments can achieve. In the US, Aspiration Bank exemplifies an ESG-focused approach to banking and payments.

Its zero-carbon footprint credit card plants a tree for every purchase, while deposits explicitly avoid oil and gas funding.

With a planned $2.3 billion SPAC and celebrity endorsements, Aspiration is capturing the loyalty of younger, environmentally conscious consumers.

In the payments space, Ecountabl offers consumers real-time insights into the ESG impact of their spending, leveraging one of the world’s largest ESG brand databases.

By connecting bank accounts or credit cards, users can track and align their consumption with social and environmental goals.

Such platforms demonstrate how fintechs can integrate purpose and profit to reshape consumer behaviour while monetising transaction data responsibly.

Embedding Sustainability into Payments Infrastructure

The path to sustainable payments involves reimagining every layer of the payments stack. Card issuers, processors, and networks each have critical roles to play.

One approach is to re-examine physical payment instruments.

The global card manufacturing industry produces around 6 billion cards annually, equating to roughly 30,000 tonnes of PVC.

Some banks have begun issuing cards made from recycled materials, while others experiment with biodegradable alternatives.

However, transparency is paramount. As highlighted in regulatory analyses, issuers must ensure so-called “wood cards” do not conceal plastic or metal cores that negate environmental claims.

Digital payments present another opportunity.

Virtual cards eliminate plastic waste and can integrate carbon tracking tools into apps, enabling users to measure the footprint of transactions and offset emissions seamlessly.

Carbon receipts and green loyalty programmes that reward eco-friendly purchases go a step further, turning sustainability into a source of competitive differentiation.

Payments as ESG Enablers

The payments industry is uniquely positioned to drive ESG outcomes across commerce. As facilitators of transactions, payments companies influence consumer choices and merchant behaviour.

Data from the payments consultancy landscape suggests that while 60% of e-commerce businesses would select payment providers based on ESG commitment, only 5% of payments firms prioritise ESG as a strategic objective for 2025.

Bridging this gap could unlock powerful new revenue streams while advancing sustainability goals.

For example, integrating decentralised finance (DeFi) solutions built on proof-of-stake blockchains reduces the energy intensity of transactions.

Further, tokenisation technologies can enable secure, traceable ESG investments, enhancing consumer trust while meeting regulatory standards.

Aligning Incentives with ESG Goals

Financial incentives remain a largely untapped mechanism in sustainable payments. Unlike in lending, where green bonds and sustainability-linked loans reward borrowers for achieving ESG milestones, the payments sector rarely structures fees to reflect ESG impact.

There is growing debate over whether merchants operating under robust ESG principles should benefit from lower interchange rates.

Similarly, could consumers using Buy Now, Pay Later (BNPL) schemes for essential goods receive reduced transaction costs?

Conversely, should payments for activities with high negative environmental externalities incur ESG-adjusted pricing or surcharges?

Such models, though complex, could align financial flows with ESG objectives, rewarding behaviours that generate positive environmental or social outcomes while disincentivising harmful practices.

Transparent, data-driven frameworks would be critical to avoid greenwashing and ensure fairness.

Challenges on the Path to Sustainable Payments

Despite the opportunities, implementing ESG within payments systems is fraught with challenges. Chief among these is interoperability.

Fragmentation persists across the payments ecosystem, from card manufacturers and terminal providers to cloud service platforms.

Each operates its own sustainability standards and data methodologies, creating inconsistencies and undermining the credibility of ESG claims.

Data transparency is another hurdle. Accurate ESG reporting requires robust data collection, verification, and standardisation—areas where the payments industry still lags.

Investment in advanced data systems is essential but can be prohibitively costly for smaller firms, exacerbating market inequalities.

Cultural inertia within organisations also slows progress.

ESG must become embedded in corporate DNA, requiring leadership buy-in, employee training, and re-alignment of incentives to drive genuine transformation rather than surface-level marketing campaigns.

Finally, regulatory ambiguity poses risks. While the EU has advanced ESG disclosures for financial institutions, payments-specific regulations remain nascent.

This gap represents both an obstacle and an opportunity for proactive firms to shape future standards through industry collaboration.

Towards a Collaborative and Credible ESG Ecosystem

To overcome these challenges, industry-wide collaboration is vital.

Payments companies, fintechs, merchants, and regulators must develop harmonised standards for carbon tracking, ESG metrics, and transparent reporting.

Such collective action can create interoperable, verifiable sustainable financial products that deliver measurable impact.

Public policy has a role to play. If private initiatives prove insufficient, governments may need to incentivise ESG adoption through tax benefits, subsidies for sustainable payment technology, or mandatory disclosures.

The EU’s leadership on ESG regulation could provide a blueprint for global standards, shaping a unified approach to sustainability across borders.

The Future of Sustainable Payments

Ultimately, sustainable payments are about more than emissions reduction. They represent a shift towards a value creation model where profitability aligns with purpose.

Payments firms that embrace this shift can position themselves as leaders in an economy increasingly shaped by ESG considerations.

As consumers demand more transparency and regulators tighten compliance requirements, sustainable payments will transition from optional innovation to strategic necessity.

Firms that invest now in data credibility, technological innovation, and cultural transformation will not only future-proof their businesses but also play a pivotal role in financing a more sustainable world.

In the words of industry analysts, “Consumer behaviour has always been a massive force for change, and the payments industry is no exception.”

Sustainable payments harness this force, transforming everyday transactions into engines of environmental and social progress.