This lesson explores different calculation methods in carbon accounting, emphasizing the importance of selecting high-quality methods for accurate emissions estimates and effective decarbonization planning, while highlighting the limitations of spend-based calculations.
In carbon accounting, there are a variety of calculation methods that determine the mathematical formula used to calculate the footprint associated with a business activity. Since different kinds of business data (i.e., fuel amount, dollars spent, and miles driven) can be used to calculate emissions for the same business activity, there are complimentary calculation methods for the associated business data. The image below is an example of the fuel-based method employed by an organization that knows how much gasoline was used in their company car.
Let’s dive deeper with an example using employee air travel (classified as scope 3 - Category 6: Business Travel) to walk through the importance of data quality. The fuel-based calculation method is the most accurate method available for this business activity and, in turn, provides the most valuable insight for planning and executing a decarbonization strategy.
However, it’s unlikely that you know the exact quantity of fuel American Airlines used for your flight, and it would likely take considerable effort to source that information.
Assuming you don't know the exact fuel used, you likely know how much you spent on the flight, which enables using the spend-based method to estimate the emissions associated with your purchase. While spend-based methods are a great start that can allow you to identify an emissions baseline, they are very much considered emissions estimates, and there are several issues with Spend-based emissions that limit their actionability in decarbonization.
In the case of business travel, spend-based calculations may greatly overstate or understate the emissions resulting from your flight.
For example, flights from NYC to London on a Boeing 787 will generally always have similar emissions. However, depending on the day you book the flight, a ticket can cost anywhere from roughly $500 to over $4,000. The spend-based calculation method does not account for this and will estimate vastly different emissions depending on the day, seat class, etc., even though the actual emissions associated with this flight are generally unaffected by those variables.
Spend-based issues like this arise across all upstream categories, and while we don’t want to discourage anyone from using them to estimate an emissions baseline, they’re not particularly useful for decarbonization planning.
As we’ve seen in the example above, higher-quality calculation methods typically provide more accurate emissions estimates - they also have a much greater ability to capture and track the effects of decarbonization efforts. For example, the carbon reduction from switching to a more sustainable fuel may be captured by the Fuel-Based method but not by the distance-based or spend-based methods, as the activity data and emission factors for the latter do not typically distinguish the effects of using different fuel types. In fact, if the more sustainable fuel has a higher price than conventional fuel, a switch to more sustainable fuel may even show up as an increase in a company’s emissions when using the spend-based method because the emissions are estimated by multiplying the same spend-based emission factor by a greater amount of spend.
In a sea of data, it can be overwhelming to get granular information to set long-term decarbonization targets. Persefoni’s Scope 3 Data Exchange automates the data collection process from suppliers, enabling your organization to receive the most granular data for your emissions estimates and decarbonization journey.