Accurate climate impact measurement depends on choosing the right emission calculation method. Solely relying on a spend-based method can hinder the detailed insights and opportunities that activity-based methods provide based on real-world activities.
Understanding the differences between spend-based and activity-based emissions methods is important for selecting the best approach for your organization.
We define the methods as follows:
Spend-Based Approach
This method estimates emissions based on the monetary value of goods and services purchased. It is often used when specific activity data isn’t available, relying on industry-average emissions factors. While it’s quick and easy to implement, spend-based calculations can lack precision as they don’t account for supplier practices or efficiency variations.
Activity-Based Approach
Activity-based emissions accounting, on the other hand, uses detailed activity data, such as fuel consumption, electricity usage, or raw material input. This method provides more accurate and specific insights, allowing for a clearer understanding of where emissions come from and what actions can be taken to reduce them. While more data-intensive, it delivers transparency and traceability, crucial to meaningful decarbonization efforts.
When to Use Each Method:
• Spend-based is suitable for screening large supply chains or sectors where data is scarce.
• Activity-based should be applied when detailed data is available and precision is required, particularly for Scope 3 emissions.
At ReFlow, we emphasize the importance of activity-based data for shipowners and manufacturers seeking to make data-driven, transparent decarbonization decisions. Start with spend-based for an overview, but strive for activity-based insights to lead the change towards a more data-driven approach.
