Companies can calculate their emissions through two methods: the Activity-Based method and the Spend-Based method. Depending on the method you chose, you need to collect different type of data and get different accuracy of the results.
Activity-Based Method
Which data company collects: Activity data, which involves tracking the company's actions and their outcomes.
Example: For fuel emissions, data on the type and quantity of fuel used in production is gathered.
Accuracy of the method: Emissions are calculated precisely because:
Method utilizes emission factors tailored to specific activities. For example, the emission factor for a specific type of fuel.
Spend-Based Method
Which data company collects: Spend data, which requires analyzing financial expenditures on various activities.
Example: Material costs and energy expenses.
Accuracy of the method: Emissions are calculated less precisely because:
Emission factors are often based on industry averages or national inventories, not specific products.
Prices of goods are subject to fluctuations and influenced by numerous factors, making them less reliable for calculations.
Adjustments for factors like inflation and exchange rates can be made, but results remain uncertain.
By comparing these methods, companies can select the most suitable approach for their emission calculation needs, considering the trade-off between precision and ease of data collection.
How to select an appropriate method?
The activity-based method is generally more accurate as it is tailored to the company's actual operations and specific activities, but it can also be more time-consuming and data-intensive to collect. The spend-based method is less precise, since it only allows measuring industry-average emissions. However, it is simpler and more feasible for many companies, especially when starting their Scope 3 emissions assessment journey.
Spend based method for scope 3 calculations
Getting emission data from the suppliers directly can significantly enhance the accuracy of a company’s Scope 3 emissions calculations. However, often the suppliers do not have that information themselves, or it is very difficult to obtain the necessary data. Therefore, companies can use the spend-based calculation method to calculate some or all Scope 3 emissions.
💡 For companies that have never calculated Scope 3 emissions before, we recommend to adopt a pragmatic approach and start with the spend-based method to calculate emissions. It can serve as a stepping stone towards more detailed activity-based assessments in the future, as companies become more familiar with their emissions profile and as data collection capabilities improve.
Which calculator method is available in the tool
Currently, companies can calculate Scope 1 and 2 emissions using the activity-based method and Scope 3 emissions using the spend-based method. The reason for this approach is that Scope 1 and 2 emissions are directly influenced by the company's operations. In contrast, Scope 3 emissions, which are more challenging to collect data for and impact directly, are estimated through spending.