When companies are determining their Scope 3 GHG emissions, there are various combinations of calculation methods to quantify and allocate Scope 3 emissions within the organization’s value chain. Here’s a breakdown of the difference:
Spend-Based Method: The spend-based method calculates emissions based on the monetary value of goods and services purchased by an organization. It involves applying an emission factor to the organization's procurement spend to estimate the associated emissions. The emission factor typically represents an average emission intensity per unit of currency spent across the relevant Scope 3 categories.
This method is relatively simple and requires less data collection compared to the activity-based approach. It is often used when detailed activity-level data is not available or when a quick estimation is needed. However, it may oversimplify emissions estimation as it does not consider variations in emissions intensity among different suppliers or activities.
Activity-Based Method: The activity-based method involves a more detailed analysis of an organization's activities and their associated emissions throughout the value chain. It relies on collecting data on specific activities or processes and applying appropriate emission factors to calculate emissions.
This method requires more comprehensive data collection and analysis. It involves identifying specific activities within each Scope 3 category, such as the distance travelled for transportation, the amount of waste generated, or the energy consumption of products. The organization may use surveys, supplier engagement, or data from internal systems to gather the required information.
The activity-based method allows for a more accurate estimation of emissions because it considers variations in emission intensity across different activities, suppliers, or products. It provides a more detailed understanding of emissions sources and hotspots, enabling organizations to target reduction efforts more effectively. However, it can be more time-consuming and resource-intensive than the spend-based method.
Both methods have their advantages and limitations. The choice between them depends on the organization's available data, resources, and specific reporting or reduction goals. Some organizations may even combine both methods to achieve a more comprehensive understanding of their Scope 3 emissions and develop effective strategies to mitigate them.