What is the Spend-Based Method ?

The Spend-Based Method is one of the two main approaches to carbon accounting, which works by taking the monetary value of a purchased good or service and then multiplying this value by a relative carbon emission factor in order to calculate the amount of greenhouse gas emissions produced. This is considered the more simple way to calculate carbon emissions, but is not as precise as the activity based model.

In laymen's terms, the spend-based method works by multiplying the economic value of a product or service purchased by the relative carbon emissions to calculate the amount of greenhouse gas emissions produced. This is considered the more simple way for calculating carbon emissions, but may not be as precise.

FAQ

How Does the Spend Based Method Work?

The spend based method works by multiplying the financial value of an item a company has purchased for use by the amount of carbon dioxide or greenhouse gas emissions it emits.

An example of the spend based method is if a company is to purchase a vehicle, and multiply the estimated amount of GHG emissions it is expected to emit each year by an emission factor from a conventional database – to provide a quick and easy calculation of the vehicle’s potential annual carbon emissions.

Spend Based vs. Activity Based Method

The Spend-Based Method calculates emissions using financial data via the use of emission factors – making it a faster method to determine a company’s emissions, especially when  supplier-specific or activity data is unavailable. However, the con of the spend-based method is that it could potentially be inaccurate due to the generalizations made for the calculations.

The Activity-Based Method, on the other hand, relies on actual activity data including kWh used, liters of fuel, or kilograms of waste in combination with specific emission factors for each activity. This approach allows for greater precision, making it ideal for detailed carbon accounting. That being said, this method requires more extensive data collection and coordination. 

Both methods can be successful when used together depending on data availability and goals. At Greenly, we use a combination of both the activity based and spend based methods to allow for utmost accuracy to help develop the best carbon reduction strategy possible for your business.