85% of U.S. Banks Taking Steps to Foster Sustainability

Banks can make a bigger environmental impact than you might assume by switching to digital processes.

85% of U.S. Banks Taking Steps to Foster Sustainability
Photo by Rodion Kutsaiev / Unsplash

While the banking industry doesn’t always have as obvious of an environmental impact the way that some physical product-based businesses do, like fashion brands, that doesn’t mean banks are forgoing sustainability efforts. On the contrary, 85% of U.S. banks say they’re fostering sustainable behaviors and outcomes, up from 55% a year ago, according to a survey by digital consultancy Mobiquity.

In some cases, these sustainability efforts affect more retail customer-facing interactions, like switching from paper-based to digital processes, while others happen on more of a B2B level, such as by analyzing the sustainability of financing activity.

To some degree, banks might be making these changes due to regulatory pressure, but there are also clear business benefits, which companies in other sectors can learn from.

“Since ESG-related regulations in the U.S. are only now in the proposal stage and hotly contested, to date banks have often pursued digital solutions for customer experience, competitive, or cost reduction reasons, and highlighted related sustainability outcomes as benefits,” notes Ruby Walia, senior advisor for digital banking at Mobiquity.

For example, he points to the dual cost savings and sustainability benefits of e-statements.

“While customers of most banks are entitled to receiving paper statements through snail mail, a general rule of thumb is that each monthly statement costs a bank $1.50 per customer, so $18 annually per customer. These ‘switch to e-statements’ programs were probably prompted initially because of cost savings, but their sustainability benefits quickly became the icing on the cake,” he explains.

That’s not to say that banks or other businesses should engage in greenwashing, but if there are clear environmental benefits that go along with cost savings, then it could make sense to pursue these initiatives like reducing paper usage.

For the record, e-statements do seem to make a difference:

A 2018 Bank of America analysis found that if all of its statements were sent online rather than through the mail, that would reduce greenhouse gas emissions equal to the electricity used in around 5,550 U.S. homes per year.

Better for Customers, Better for the World

In the Mobiquity survey, in addition to 55% of U.S. respondents saying they're cutting down on paper usage, they also cited two other top initiatives to become more sustainable:

• 60% said they’re promoting remote working
• 55% said they’re using digital solutions

Respondents outside the U.S. also cited initiatives like closing branches and investing in carbon credits.

Digital solutions can mean different things to different businesses, but one example would be digital customer acquisition/onboarding, rather than relying on signing up new customers in physical branches, explains Walia.

“Branch traffic has been declining for over a decade with an associated decline in account openings…Investing in online account opening helped counter the drop off in branch activity — and, as a bonus, lowered marketing costs,” he says. “Long term, it will undoubtedly affect the branch strategy, probably shrinking their footprint and changing the mix of services offered in-branch vs. online, all of which have cost and sustainability benefits.”

Digital solutions could also mean using technologies like advanced data analytics or machine learning to better analyze the sustainability of bank portfolios, notes Walia.

On the consumer side, innovations like digital check deposits and peer-to-peer cash transfers also represent how banks can make changes that are more convenient, while aligning with sustainability goals.

“The efficiencies in such examples are enjoyed by all the entities involved: banks, customers, and the planet. So, there is a clear case to be made that banks that pursue digital transformation initiatives will lower operating costs and become more profitable,” says Walia. “Of course, this can't be a carte blanche for all digital transformation, but if done thoughtfully, it should yield the right results.”

Indeed, U.S. respondents cited increased profitability as the top benefit of sustainable banking, followed by customer loyalty and improved brand reputation.

That said, there are still challenges to improving sustainability. The top barrier, according to U.S. respondents, is a lack of universal sustainability-related compliance requirements. That could tie into the fact that around one-third of U.S. banks are not measuring ESG-related areas, according to the survey.

But in the absence of clear measurement and reporting requirements, banks (and potentially other businesses) could benefit from taking matters into their own hands.

“While not a regulatory requirement, banks are missing out on the benefits that sustainable banking brings and should refocus their resources on execution to maximize these,” the survey notes.

Disclosure: Our parent company, JournoContent LLC, has clients involved in sustainability-related areas, among others. The owner of Carbon Neutral Copy, Jacob (Jake) Safane, has investments in sustainability-related companies, among others.

As such, conflicts of interest related to these and other investments/business relationships, even if unintended, may exist at times. Please email info@carbonneutralcopy.com if you'd like further clarification on any issues.

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