A guest blog post by Dr. Johanna Henrich, Senior Corporate Social Responsibility Manager at Wirecard.
Most leaders of disruptive technology firms would believe their organizations are positively contributing to – rather than detracting from – our environment and society. And that’s a good thing. These companies, by virtue of their innovative nature, have enormous potential to help tackle some of most pressing global challenges we face, head-on. It is clear that new ways of doing business open up new opportunities to accelerate progress. What is less clear however, is how we can harness this disruption to ensure a new breed of organizations contribute to a better world.
A combination of geo-political trends, shifting consumer behaviors and expectations, and emerging technologies, are driving unprecedented change. In response, the tech industry is creating a fully digital economy at pace and, in doing so, it offers new ways to address some of the most urgent challenges we face – both locally and globally, from providing rural communities with access to basic healthcare, to curtailing the effects of climate change. But, as the power and influence of technology companies increases, so too should their shared responsibility to create a fairer, cleaner and more sustainable planet. To achieve this, these firms must align their business plans to a set of social and environmental goals, shared by all – namely the Sustainable Development Goals.
Sustainable Development Goals
The United Nations’ Sustainable Development Goals (SDGs) were adopted in September 2015 by 193 countries, replacing the Millennium Development Goals (MDGs). There are 169 targets spread across 17 development goals, to be achieved by 2030. They are ambitious goals and, because they represent a far more comprehensive framework for global development than the MDGs, they demand the active participation of governments, civil society organizations, and corporations. The SDGs serve as an effective and popular framework for corporate social responsibility programs because they center on universal challenges. In fact, a 2018 report by consulting firm PwC revealed 41% of respondents said their businesses would embed the SDGs into strategy and the way they do business, within five years.
Financial technology, or FinTech, lends itself particularly well to the sustainable development goals: increased transparency and accountability, improved risk management and, thanks to increased efficiencies and automation, significantly lower costs. Moreover, FinTech has served to decentralize financial services to create a dynamic system with niche operators serving various consumer and business needs. So, when we think about what FinTech firms can contribute to the SDGs, they can help to increase prosperity for all, promote solidarity, improve natural resources, bolster economic resilience and accelerate decision-making.
FinTech as a positive agent for change
Each industry faces its own set of challenges, but few are quite as fundamental to our collective wellbeing or are as universal in nature as those faced by the financial services sector. For individuals, access to financial services can have a dramatic impact on welfare. In particular, financial access allows people to move away from short-term decision-making, allowing themselves and, in turn, their communities, to flourish. For enterprises, access to financial services promotes growth through the provision of credit. In turn, this benefits the wider economy by accelerating growth, intensifying competition, and stimulating demand for labor.
The digitalization of financial services must be inclusive and transparent. Lower-income families should be taken into consideration when launching a financial service, for example. More transparency means more accountability, but it’s a two-way street. Financial service firms will have far more data on individuals than ever before, meaning that their risk mitigation strategies might not be totally inclusive. Financial technology needs to be used properly to avoid further widening the gap between the world’s richest and poorest. Developments in high-frequency trading could affect long-term investors unjustly.
How can the FinTech industry contribute to the SDGs?
When considering how FinTech firms can contribute to the SDGs, they first need to contemplate how they can build development goals directly into their products and services. Second, they should address their indirect impact, which might include working with sustainable suppliers, instilling best practices among the workforce and supporting new technologies that are helping improve our world.
Each industry will relate to different development goals. For financial service providers, there are five which stand out in particular.
SGD 1: No poverty
The first SDG aims to eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day. Today, an estimated three billion people have little or no access to financial tools. Financial technology firms are well placed to address this large demographic, many of whom exist in developed countries. How can the sector serve those who have been left out by the current system – the elderly, the homeless, or the unemployed? Technological solutions have the potential to address these issues head-on. But if FinTech firms do not think about this while building their business plans, it can have the opposite effect by further excluding the most vulnerable.
SDG 8: Decent work and economic growth
This might seem like an abstract goal for FinTech firms, but inclusivity is central to progress. How can we better listen to the unique requirements of specific communities? How can we implement hiring practices that promote diversity and protect employees’ families and communities through offering safe wages and long-term career opportunities? New technology can be harnessed to increase access to essential financial services and, in turn, provide new platforms for innovation and prosperity.
SDG 9: Industry, innovation and infrastructure
FinTech firms provide financial services to governments, urban developers and corporates around the world. They therefore have the potential to act as an accelerator to help new innovative companies to develop products or services, or deliver new infrastructure project, which all serve to enhance the quality of life of urban dwellers. Moreover, there is huge potential for FinTechs to unleash creative problem solving. To achieve this, firms will need to consider their value chains and how they connect companies to each other to encourage collaboration and innovation.
SDG 10: Reduced inequalities
Inequality is a driver of low mobility, poverty and fractured societies. It is also extremely damaging to economies. The World Bank’s World Development Report on Gender estimates that women’s exclusion contributes to a loss of between 10 and 37 percent of GDP across all regions globally. The good news is that FinTech has already helped bank the world’s marginalized communities and is empowering women by giving them passage into the formal economy, along with the security that comes with it. The FinTech community has been better than traditional financial service providers at embracing diversity. By celebrating interdisciplinary teams comprised of individuals from diverse backgrounds, FinTech firms are benefiting from greater levels of innovation, while simultaneously tackling inequality.
SDG 12: Responsible consumption and production
Scarcity of resources and climate change are the biggest challenges we face in the 21st century. And while we will all have to confront this storm together, we won’t all be in the same boat. Those of us based in developing nations will tend to suffer disproportionately compared to those living in developed nations. Urgent action is needed to ensure that our material needs do not lead to the over extraction of resources. Financial technology companies can save huge resources both internally and externally. They should promote paperless policies across the business and consider how they can reduce the footprint of their offices and operations. Looking at the value chain to constantly monitor and improve sustainability is imperative to helping to meet this goal.
Let us be clear: financial services innovation brings huge potential for good. FinTech has ushered-in new technologies that have helped increase access to credit, promoting inclusivity and collaboration. Yet, the potential pitfalls to be avoided are numerous: emerging FinTech that embraces new digital technologies can inadvertently drive us further away from meeting the Sustainable Development Goals. The stakes are high. For this reason, corporate social responsibility programs are critical to the long-term success of FinTech firms.