Fintech Company Xero Doubles Down on ESG Criteria

Xero, a fintech firm, as a case study of how the ESG criteria are integrated into a fintech company's business model to serve the greater good

Xero team

Fintech company Xero has been taking extra measures to double down on its environmental, social, and governance (ESG) criteria in a move that will please customers, employees and investors alike.

This new focus on the ESG criteria means that the company will be placing even more emphasis on such factors when making investment decisions. According to Xero’s CTO, Mark Rees, “each year, our business grows and scales to serve more customers. This means our approach to sustainability is getting more intentional, more significant, and more integrated into the fabric of the company.”

Taking climate change into account as a fintech company

The decision to focus on the ESG criteria is part of a more significant effort by Xero to become more sustainable as a company. In addition to doubling down on its ESG criteria, Xero has also been working to reduce its carbon footprint and make its operations more energy efficient.

“In an initiative called Net Zero @ Xero, Xero has invested in carbon offset projects by purchasing carbon credits across three separate carbon certified environmental projects and conservation schemes across the globe which are recognised under international standards,” noted Rees. “Our FY21 offsets will include all high-value offsets which create positive impacts across multiple United Nations Sustainable Development Goals, focused on enabling wider biodiversity benefits alongside carbon emissions reduction.”

Xero offset 100 per cent of its carbon emissions in 2019 and 2020, and it has committed to do so each year going forward. This achievement is a significant accomplishment, and it’s one that other companies should emulate.

Setting a positive ESG example for others to follow as a leading fintech firm

As a fintech company, Xero is uniquely positioned to help make the financial world more sustainable. By doubling down on its ESG criteria, Xero can set an example for other companies and help to promote sustainability in the financial sector. “Based in New Zealand and Indonesia, the projects are designed to restore indigenous forests and protect endangered species while soaking up carbon dioxide directly from the air,” added Rees.

  • Fishermans Bay Conservation Project (New Zealand) – Small-scale project (59 hectares) located near Akaroa is predominantly indigenous forestry recovery, with several high-value conservation activities, including protecting the breeding habitat of endangered yellow-eyed penguins and extremely rare plants. “We’ve developed a long term partnership with the team at Fishermans Bay (they’re also a Xero customer), sponsoring the entire carbon sequestration project till 2025,” said Rees.
  • Katingan Mentaya Project (Indonesia) – World-leading forestry project that protects critically endangered species and is home to 5-10% of the global population of the Bornean orangutan. This project also contributes to nine of the United Nations Sustainable Development Goals (SDGs).

All of these efforts aim to make the company more environmentally and socially responsible. By doubling down on its ESG criteria, Xero sets a positive example for other companies to follow.

What will Xero do next in relation to the ESG criteria?

As of 2022, Xero will begin utilising Salesforce’s Sustainability Cloud to manage the calculation and evaluation of its carbon footprint more easily and precisely. “Ultimately, we want to optimise our carbon footprint so that we can continue to reduce our impact, rather than just offset it, and using Sustainability Cloud will help us to work towards this goal,” said Rees.

Xero likewise relies on the Amazon Web Services (AWS) cloud services platform as one of its cloud services platform partners. AWS has a long-term objective to use 100% renewable energy in its worldwide infrastructure, and it recently achieved 50 per cent renewable energy usage.

“Xero is proud to be a signatory of The Climate Pledge, co-founded by Amazon and Global Optimism in 2019 as a commitment to decarbonising the economy, with the goal of being net-zero carbon by 2040,” said Rees. “Through participation, we look forward to collaborating with fellow signatories to address the most critical climate challenges. To provide some context to this commitment: The 200+ global companies who have signed The Climate Pledge generate over $1.8 trillion in global annual revenues and have more than 7 million employees in 21 countries. Together, signatories are expected to mitigate 1.98 billion metric tons (BMT) of carbon emissions from a 2020 baseline. This is equivalent to 5.4% of current global annual emissions.”

Carbon Analytics and Spherics are two of Xero’s UK app partners. They’re available in the Xero App Store, and their solutions focus on assisting Xero’s small business clients as they pursue their own long-term sustainability.

What characterises Xero’s approach that is different to other fintech companies?

Xero is unique in that it has a strong focus on the environment and social responsibility. This focus sets it apart from other fintech companies and makes it a leader in the field of sustainability. Fintech companies typically focus on developing innovative technologies, but Xero takes a different approach by emphasising environmental and social responsibility.

The company’s strategy of developing a rapidly expanding but long-lasting business entails putting its efforts on three key areas:

  1. Consciously managing its environmental impact
  2. Helping to build thriving communities
  3. Cultivating an engaged workforce

“From developing strategy and managing risk and governance, through to looking at how we can make smarter purchasing decisions – we constantly look at our full value chain, including suppliers, customers and partners and set clear targets to ensure we embed our SEI values into everything we do,” noted Rees. “This means we also have to think differently about who we work with to ensure our partners contribute to our efforts.”

Focusing on sustainability has been a critical part of Xero’s success and sets it apart from other fintech companies. By emphasising the ESG criteria, the company can stand out from the competition and develop innovative technologies that are more sustainable.

“Growing in a sustainable way also aligns closely with our culture, values and our purpose to make life better for people in small business, their advisors and communities around the globe,” added Rees. “When we consider the teams building and executing technology initiatives at Xero, it’s important they’re engaged in what we’re trying to achieve because they play a big role in driving this forward on a day-to-day basis.”

The bottom line

Xero is doubling down on the ESG criteria and is committed to developing innovative technologies that are more sustainable. “Each year our business grows and scales to serve more customers,” added Rees. “This means our approach to sustainability is getting more intentional, more significant, and more integrated into the fabric of the company.”

In conclusion, the ESG criteria are essential to Xero because it helps the company make better decisions. For example, developing a product that has a smaller environmental impact is not only good for the planet but it can also save money in the long run.

“There’s no denying the ethical and economic benefits of driving a sustainably-focussed IT strategy. In particular, taking a sustainable approach to IT as a platform provider unlocks even more opportunities for us to help our customers. As the world moves towards a more sustainable and environmentally-friendly future, IT leaders with sustainable growth at the centre of their strategy will only become increasingly attractive to employers, clients and partners,” concluded Rees.