Why banks cannot afford to ignore sustainability

Sustainability has rapidly moved to the forefront of corporate priorities, placing immense pressure on the financial sector to reduce its environmental impact. Beyond regulatory mandates and boardroom discussions, the expectations of consumers are clear. Research shows that nearly three-quarters of consumers are more likely to choose a bank that demonstrates a positive social and environmental impact. It is clear that sustainability cannot remain an afterthought; it must become a core pillar of financial services.

However, sustainability extends well beyond meeting the preferences of eco-conscious consumers. It presents an opportunity for banks to cut costs, streamline operations, and improve customer experience—all while contributing to global climate goals.

So, where should banks focus their efforts, and what tangible benefits can these efforts yield?

The path to greener banking

Banks must start by identifying areas where they can make measurable progress in reducing their carbon footprints. For instance, recent studies highlight that the average savings account contributes up to 2.3 tCO2 annually. With only 16% of financial institutions reportedly on track to reach Net Zero by 2050, the need for urgent change is clear.

One of the simplest ways banks can address this is by replacing legacy postal communications with secure digital alternatives. Sending a single letter generates approximately 29 grams of CO2 and considering the volume of correspondence banks handle daily, a transition to paperless communication offers a straightforward way to significantly cut emissions.

Another key area that is ripe for transformation is the "Know Your Customer" (KYC) process. Traditionally reliant on physical documentation, KYC has been essential in fraud prevention and identity verification. However, the pandemic exposed its inefficiencies and the necessity for digital alternatives. By adopting digital-first and automated KYC solutions, banks can eliminate the carbon footprint associated with printing and mailing documents. Automation also reduces process timelines from weeks to mere minutes, delivering a faster, more efficient onboarding experience for customers.

Additionally, banks must invest in Environmental, Social, and Governance (ESG) reporting tools to ensure their sustainability efforts remain on track. By leveraging smart devices and technology to monitor energy use, carbon emissions, and other metrics, financial institutions can identify areas for improvement, achieve measurable reductions in their environmental impact, and maintain the momentum needed to reach Net Zero targets.

The case for going green

Adopting sustainable practices not only aligns with consumer values but also unlocks substantial operational and customer benefits.

Switching from physical mail to digital communication enables banks to meet modern customer expectations, with recent data from Ofcom  revealing that 50% of consumers no longer want to receive paper statements. This alignment not only reduces carbon emissions but also improves customer satisfaction, particularly in light of findings that poor customer experience drives 20% of customers away from banks annually.

Cost savings represent another compelling reason for this shift. With letters costing as much as £1.65 each, banks like HSBC—with millions of customers—stand to save significantly by embracing digital alternatives.

Moreover, digital communication channels are faster and more effective. While traditional post takes days to arrive, emails and app notifications can deliver time-sensitive information instantly, reducing friction and enhancing customer interactions.

Automating KYC processes also yields numerous advantages. Automated systems are more accurate, reducing the need for manual rechecks and ensuring compliance with evolving regulations. These systems also allow banks to scale more effectively, onboarding new customers at pace while maintaining robust security measures.

Leading the charge toward sustainable banking

Sustainability is no longer a "nice-to-have" for financial institutions—it’s a necessity. By adopting digital-first practices, banks can simultaneously reduce their environmental impact, enhance operational efficiency, and deliver superior customer experiences. This shift goes beyond corporate responsibility; it’s about securing consumer trust and building long-term competitive advantages.

By taking decisive action now, banks can not only meet the expectations of eco-conscious consumers but also set a precedent for sustainable innovation in the financial sector.