Sustainability – the New Normal After the Pandemic

The last year has been dominated by the COVID-19 pandemic, which continues to surprise and to wreak huge damage. But perhaps there is another global issue that is just as urgent – namely, climate change and, as part of that, environmental sustainability.

The International Energy Agency has recently said 2021’s CO2 emissions will have the second highest increase ever, reversing nearly all the 2020 reductions. Which is somewhat surprising, not to say concerning, given the assumption that there is an axiomatic link between reduction in economic activity caused by the pandemic, which will take time to recover, and the environmental impact of such activity.

In November, the UK city of Glasgow will host the 26th meeting of the United Nations (UN) on climate change, COP26, and preparations are now well in hand for this. In this context, this month’s Currency News™ contains a number of articles about what the cash industry is doing to be good environmental citizens.

We could spend time arguing about whether cash is a ‘better’ form of money than electronic money, and on another day we are happy to engage with that question. But as was said at the recent Mint Directors Conference (MDC) webinar, payment mechanisms tend to get added rather than taken away. Cash is going to be with us for a long time and so the question is, how do we ensure cash plays its part?

The environmental impact of cash lies across its manufacture, circulation and destruction. The challenge needs to be considered in terms of climate change, excess nitrogen, air quality, water scarcity, toxicity and biodiversity. There are well established tools for measuring all of these and the good news is that the cash industry has been active for a number of years and significant progress has been made. As a starting point, the environmental management standard ISO14001 has been widely adopted and annual reports now routinely report environmental data and progress.

Manufacture of cash

There has been a major focus on reducing water consumption (particularly in paper mills), hazardous materials, emissions, carbon footprints and energy usage. All of these make good business sense, and manufacturers are both committing and delivering on their promises to do better.

Cash cycle impact

The main environmental load of cash, however, lies not in its production but in its circulation. The power running ATMs and the movement of cash by CIT companies are two significant areas. CIT companies are starting to experiment with electric vehicles and more sophisticated cash management tools. Central banks, banks, retailers and CITs are working to increase sorting and cash management close or closer to the point of need, reducing the loop and driving down costs, energy and emissions.

The NatWest bank has recently worked with organisations throughout the UK’s cash cycle to address this in a coherent and co-ordinated way. A Cash Environment Charter has been created to deliver some key targets such as eliminating single-use non-recyclable plastic in cash centres by 2030, targeting net zero carbon emissions and switching their electricity supply to be 100% renewable by 2022, with their suppliers to follow on. A key part of this is tracking and reporting emissions using common metrics.

End of note life

Unusually for a manufactured product, banknotes are returned to the central bank at the end of their life. This provides central banks with the opportunity to recycle or dispose of them in an environmentally-friendly way.

The metal content of coins, meanwhile, is valuable in its own right and perfect for recycling into new coins.

Other considerations

The environmental footprint of cash also needs to be seen in the context of payments overall. One of its problems is that, by its very physicality, it is assumed to have an impact that digital payments don’t. But such payments have a significant impact of their own – principally in terms of the consumption of precious materials and energy. The lazy assumption that cash is more damaging to the environment than the alternatives needs to be challenged.

There is also a body of opinion and evidence that cash is an inhibitor of consumption, responsible or otherwise. Purchases with cash are rarely impulse ones – unlike digital payments. This is both a benefit for personal budgeting and a brake on excessive consumption which, in itself, is bad for the environment.

Final thoughts

The environmental challenge is significant and will be a long haul. We should be proud of the way cash cycle stakeholders have, and are, responding. Cash has a good story to tell and should make sure this story is heard, whilst acknowledging how much more there is to do and that co-operation offers even more opportunities to do better.