Calculating climate impact with each transaction

Accounting for the impact of a company’s business and actions on the environment is likely to play an increasingly important role in economics in coming years, as regulations tighten and public opinion shifts.

But it is also notoriously hard to account for the true impact that businesses, services and products have on nature. Doconomy, a Swedish fintech enterprise, seeks to do just that, with services calculating the impact of transactions (for banks), lifestyle (for individuals), corporate and business sectors, and products (for companies).

The idea came from working with a small client situated on an island in the middle of the Baltic Sea, says Mathias Wikström, co-founder and CEO of Doconomy, who at the time was working with the bank in his previous role. “They were seeing the Baltic Sea deteriorating outside their window, due to eutrophication [where nutrients gather in water to such an extent that it kills marine life] and other challenges,” he explains. “They wanted to engage their clients in understanding, basically, the cause and effect of their lifestyle choices utilising the tools of the bank.”

The Åland Index, the cornerstone of Doconomy’s business, was born – named after the archipelago where the Bank of Åland is headquarted. It measures the carbon intensity per category of each financial transaction, giving it a score and communicating to customers what impact their lives are having on the planet. For companies, it’s a reliable, central indicator of where their environmental leakage is coming from – offering easy-to-understand documentation on how to fix it. The index was a hit with the bank’s customers, but they numbered only 30,000, and the executive director of the bank – as well as Wikström and his co-founder Johan Pihl – felt that knowledge would be power if put in the hands of more people.

So in 2018 Doconomy was founded. “We introduce a second language in the transaction,” states Wikström. “With every transaction you make with your payment card, you have two impact factors on your account or on your bill. One impact is measured in euros, and one is measured in CO₂ emissions.” The goal is to change habits and attitudes. “Basically every transaction, or every payment card, becomes a textbook for change.”

Doconomy flips the premise of environmental, social and governance (ESG) goals on its head. Rather than presenting them as a bitter pill businesses have to swallow in order to signal to the world that they’re ‘good’, as a risk mitigation strategy, “it’s an opportunity to improve, it’s an opportunity to engage,” Wikström explains. “And it’s an opportunity to educate everyone about the positive impact that we can have.” Not only that, the app enables customers to take action to help the environment, armed with data on the effect of their own daily habits. Unlike other apps, which simply inform users about their carbon footprint, Doconomy’s technology allows people to proactively mitigate their impact by offsetting an equivalent amount of carbon or donating towards sustainability projects.

In the course of the pandemic, Doconomy grew from 10 to 100 full-time staff in Stockholm, as well as opening an office in Tokyo, and gaining representation in New York, Milan, Madrid and Munich. “It's quite a diverse and international set of talent that constitutes our team,” says Wikström. A partnership with a leading credit card provider brought Doconomy’s technology into more than 80 banks and brands across 30 different countries worldwide. Doconomy’s Åland Index is now integrated into their cards representing more than 850 million end users, helping improve climate awareness. At the same time, the company has partnered with the United Nations to launch a carbon Lifestyle Calculator, enabling people to see what impact their lifestyle has on the environment.

But awareness is only half the battle. In February Doconomy acquired Dreams Technology, a financial wellbeing company, hoping to harness its expertise in behavioural science to shift household spending onto a greener path. “We acquired them as an accelerator to bridge the intention-action gap,” Wikström explains. Using the psychological and behavioural insights that Dreams Technology has built up, including nudge theory (which shapes the design of decision-making environments in order to promote a particular choice), Doconomy aims to present its climate messaging in a way that also encourages people to change track.

The path to success hasn’t been an easy one, Wikström admits, with many questioning the importance of climate budgets. Scepticism about climate change, plus the comparative unimportance with which some people and businesses see the environment, has led to queries about the value of the data. Still, the company’s current growth and the scale of its clients indicates that attitudes are changing.