We think full transparency of Compensate’s finances is a big deal. It’s also a key factor in our reliability in the eyes of people, our partners, our monthly compensators, and you, the reader. But there are a few good questions to be asked about the finances.
How exactly does Compensate use the money?
How long do funds rest on Compensate’s bank account?
Does someone get a percentage?
Are Compensate’s own expenses covered out of the pot?
With this blog post, we will answer all these questions – and maybe a few more! We’ll open up our money books and tell you exactly how money comes in and how it goes out, in short, how your compensation payment turns into carbon dioxide binding trees.
If, after reading the whole thing, you still have questions unanswered, you might want to refer to our Frequently Asked Questions here. If you still have questions, you can also always hit us up on social media or via email at firstname.lastname@example.org.
Let’s first take a look at how compensation payments add up to fight back climate change.
To bind carbon dioxide from the atmosphere and to fight back climate change, Compensate receives payments from individuals. Individuals are either monthly compensation subscribers or customers of our partner companies, who forward their compensation payments directly to us in full. All payments measure either the individual’s carbon footprint or the carbon footprint of a product or a service.
Monthly compensation subscribers’ payments are accounted to us once a week via Stripe. The weekly schedule allows us to analyse our finances and to plan ahead for carbon emission unit purchases.
Stripe is a payment service provider. We partner with Stripe, because they are among the most trusted in the field and because with them, we can offer our subscribers a secure, reliable and functional online payment service. Their charge is 1.4 percent + 25 cents of the total monthly fee.
And because we always want to work with the most cost-efficient and trustworthy partners, we are regularly seeking other online payment methods.
The monthly compensation payment is equal to the individuals carbon footprint and chosen compensation service. We offer a package which compensates the yearly carbon footprint, but also a package such as Compensate + Clean Up, which compensates for double the amount – thus also binding double the amount of carbon dioxide from the atmosphere.
With our partnering companies the money trail is slightly different.
When a company starts with us, we first take a good moment of research to calculate a verifiable compensation price. In the student restaurants of Unicafe for example, anyone can compensate the carbon footprint of their lunch. The compensation price varies depending on whether your lunch of choice was meat, fish / vegetarian, or vegan. The restaurant keeps a record of how many Compensate-lunches are sold and report back to us.
Compensate then bills the company for the compensation payments, and they are added to the sum of compensation payments each month.
At this point we’d like to share with everyone that Compensate as a non-profit company operates on separate funding. Before our launch to the world we received some private donations, and recently Business Finland granted Compensate with a sizable multi-million loan. This means zero percent of your compensation payments are used to run our daily operations – we do not take one cent off of them. Instead, we fully channel the payments to carbon sink developers to maximize the impact of the money.
When and how does the money – the compensation payments – move on from Compensate?
In short, compensation payments are used to buy carbon emission units whenever possible.
To answer in length, let’s first take a look at some background facts.
One emission reduction unit equals to one tonne of carbon dioxide (1000 kg of CO2) taken off the atmosphere. In offsetting projects and in carbon sink development projects, impact is often measured in these units. Sometimes they may also be referred to as certified emission reductions.
As part of comprehensive climate action and while also radically cutting emissions, we must reduce the amount of carbon dioxide already in the atmosphere. Carbon binding technology is furiously growing and many new, scifi-esque methods are being developed by the day.
Currently forestation remains one of the most cost-efficient ways of binding carbon. Compensate - also currently - focuses on carbon sink development projects, which focus on forestation. Carbon emission reduction units are the currency with which the compensation market operates on.
Which brings us back to Compensate’s finances.
Operators that sell these emission reduction units often define a minimum amount of units they are willing to sell at an instance. Compensate currently partners with Southpole. With them, the minimum sale is 500 to 1000 credits.
With Compensate, the price of one tonne of CO2 is 20 euros. At the moment the 20 euros covers planting trees worth of one carbon dioxide ton (10 euros / emission reduction unit) and protecting a forest area equal to four tons of carbon dioxide (2,50 euros / emission reduction unit). Compensate’s minimum order is thus around 2 000 to 4 000 euros.
Carbon emission reduction units are thus not bought with tens of euros or a couple hundred euros but with much bigger amounts. Compensate has bought units on average 2 times per month with a sum varying between a bit over 10 000 euros and almost 40 000 euros.
To make everyone able to evaluate Compensate’s operations, we publish our bank statements and the bills and certificates from the carbon emission reduction units bought. This way, people can see how we receive compensation payments and how they are being allocated to buying carbon emission reduction units. All of the bank statements can be found here.
Sometimes, after we have have bought the units, there is still money left in our bank account.
If all the money is being used to buy carbon emission reduction units, how come the balance doesn’t go to zero?
The explanation comes from timing and Compensate’s overcompensation model.
When carbon emission reduction units are being bought, the purchase (as in the official removal from register) takes a few days. The purpose of the delay is to make sure that each unit is only bought once. This way Compensate only buys verified units and the amount of removed CO2 is guaranteed.
Thus Compensate is billed for the bought units, with a couple day’s delay. When we receive the bill, we have most likely already received more compensation payments. So in reality, as Compensate pays the bill, the balance is already higher than when we made the purchase.
Not to worry though, the money won’t go to waste! It’s there to build up the sum for the next purchase.
Compensate overcompensates to make sure that the compensation always has an impact on the atmosphere.
Here at Compensate, we are committed to make sure that the compensation we carry out is always at least twofold. For example, if a monthly compensation subscriber pays for the compensation of 5 tonnes of CO2, we buy at least the worth of 10 tonnes of CO2 in carbon emission reduction units.
Currently, the compensation is fivefold as for now, the 20 euro price makes it possible. In the future if those 20 euros are not enough even for a twofold compensation, together with the scientific community, we will define a new, higher price.
This way, every time we buy carbon emission reduction units, we do it with a sum that can be divided by 20 euros. That is also a reason for the balance of our bank account to be 19 euros for example.
In two months, Compensate has bought carbon emission reduction units with 97 080 euros.
Through us, people have compensated for 4 854 tonnes of CO2 and thanks to our overcompensation model we have compensated for 24 270 tonnes of CO2 from the atmosphere. The amount of CO2 removed from the atmosphere is approximately the equivalent of 363 000 trees planted and 135 football fields worth of protected forest. *
All our bank statements and receipts from purchases can be found here. We are developing the way we report and inform about our finances in our website. In addition, we are striving to make it possible that after the carbon emission reduction units have been bought the balance will go to zero. This requires some planning and thinking ahead but we believe that we can make it happen.
We always welcome ideas, improvements and feedback! Please feel free to contact us via email at email@example.com.
But how do we choose our carbon sink projects? When will we start to protect the forests in Finland? Why is it more expensive to plant a new forest than to protect an existing one? More on this on our next blog!
*These numbers are estimates and are based on the forestry projects funded by Compensate and are not to be generalized to other forestry projects.