Evaluating a company's impact (the case of PayPal)

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This week’s read time: 3 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

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THIS WEEK’S COMPANY

PayPal

This week we dive deep into PayPal’s environmental and social impact.

PayPal is a leading global digital payments company that facilitates online money transfers and payments.

Some interesting facts:

• When it launched in 1998, the concept of securely paying for goods and services online was still very new, and PayPal helped to popularize digital payments. The company was one of the first digital payment companies to achieve widespread adoption and commercial success, largely due to its ease of use, security features, and integration with online platforms like eBay.

• PayPal’s early team members became known as the “PayPal Mafia” because many of them went on to start or invest in some of Silicon Valley’s most successful companies. Notable members include Elon Musk (Tesla, SpaceX), Peter Thiel (Palantir, Founders Fund), Reid Hoffman (LinkedIn), and Max Levchin (Yelp, Affirm).

COMPANY’S IMPACT

PayPal’s overall impact score

PayPal has a general impact score of +0.50 (on a scale from -5 to +5). Its impact is spread across 8 UN Sustainable Development Goals (SDGs) and 6 topics, split between positive and negative analyses.

In the socio-economic sphere,

PayPal has profoundly shaped the global economy by driving the growth of e-commerce and enhancing financial inclusion. With 426 million active consumer and merchant accounts, PayPal has created a secure, reliable, and user-friendly platform that makes digital commerce accessible to businesses and individuals alike. Facilitating over 25 billion payment transactions and processing a total payment volume of $1.53 trillion, PayPal has enabled businesses to expand their reach globally, opening doors to new markets. Beyond just transactions, PayPal has played a pivotal role in empowering unbanked and underbanked populations by providing them with access to essential financial services. This inclusivity has allowed millions to engage in the digital economy, fostering economic growth and broadening financial participation worldwide. The company also employs 27,200 people, while offering salaries above the country and industry average. It has reached gender parity only in the workforce (as per the ILO standards), but not yet at its management levels.

While PayPal has greatly contributed to the digital economy, it has also faced criticism for several drawbacks. The company’s high fees for small businesses and international transactions can significantly reduce profit margins and deter global commerce, posing a challenge for smaller enterprises looking to expand. Furthermore, unexpected account freezes and limited customer support have caused frustration and financial hardship for many users. Concerns about monopolistic practices, privacy issues, and a dispute resolution process that is often seen as biased have also raised questions about the platform’s fairness and reliability, presenting ongoing challenges for both consumers and merchants.

Environmentally,

PayPal emits over 515,000 tonnes of CO₂ equivalent annually, equal to the emissions of over 101,000 homes’ electricity use for a year. The company doesn’t report other environmental metrics as its impact is minimal due to the nature of its operations.

_{*The impact score is current as of August 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is PayPal’s ESG rating?

For comparison, PayPal has an A rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

PayPal’s impact scores by SDG

Positively (and by weight), the company scores the highest in the Decent Work and Economic Growth SDG (+2.63), followed by No Poverty (+3.52), and Partnership for the Goals (+2.50).

Negatively, the company scores the worst in the Peace, Justice, and Strong Institutions SDG (-3.03), followed by Industry, Innovation, and Infrastructure (-2.60), and Gender Equality (-1.32).

*the analysis takes into account the weight of the SDGs

CONCLUSION

Materiality Map & Final Words

So, PayPal’s key social and environmental impact lies in …

its significant role in driving e-commerce growth and promoting financial inclusion globally. With over 426 million active accounts and processing 25 billion transactions annually, PayPal has enabled businesses and individuals to thrive in the digital marketplace, fostering economic expansion and inclusivity. By offering financial services to unbanked and underbanked populations, the company has broadened access to the digital economy, contributing to economic growth worldwide.

However, PayPal also has some negative impacts. High fees for small businesses and international transactions can restrict global commerce and reduce profit margins for smaller enterprises. Additionally, issues like unexpected account freezes, limited customer support, monopolistic practices, privacy concerns, and a dispute resolution process seen as biased have raised concerns about the platform’s fairness and reliability. Environmentally, PayPal’s carbon footprint is relatively modest but still significant, with over 515,000 tonnes of CO2 emissions annually.

With a positive impact score of +0.50, PayPal reflects a balance between its contributions to the digital economy and the challenges it faces in ensuring fair practices and sustainability.

If you’d like to delve deeper into PayPal’s impact, you can explore it here.

Next week, we will analyze the impact of the largest chemical producer in the world, BASF. 🧪

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]