When calculating the carbon emissions of a product, service, company etc, there are several different methods or approaches that can be used – depending on the data and information that is available. 

The Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (often referred to as the GHG Protocol) is the most commonly used standard for calculating emissions within a business setting. 

The GHG Protocol offers four different methods for calculating emissions:

• Spend-based method. Takes the financial value or cost of a material, good, or service, and multiplies it by a relevant emission factor. For example, if a company wanted to determine the emissions from delivering their product they might multiply the cost of the diesel fuel needed by an emission factor based on the carbon emissions resulting from $1 of diesel used.
• Supplier-specific method. Collects actual lifecycle data from suppliers on the emissions produced by an activity. Continuing the previous example, a company’s logistics provider might be able to tell them the exact type of diesel fuel used in deliveries, and the company that produces that diesel may have actual data from testing the fuel on the carbon emissions from using the fuel.
• Average-data method. Takes the units for an activity (e.g. litres of diesel or kilograms of timber) and multiplies this by a relevant emission factor. Again in the same example, a company might use an emission factor which gives the average carbon emissions produced per litre of diesel used and multiply this by the number of litres used for their deliveries to get an estimate of emissions produced.
• Hybrid method. Uses supplier-specific data from actual suppliers wherever possible, and uses secondary data (average data or spend) wherever this is not available. This is the method that the GHG Protocol recommends.

Combined, the supplier-specific and average-data methods are commonly known as ‘activity-based methods’ – so you’ll often come across spend-based vs activity-based approaches as the two main ways of calculating emissions within a business.

Spend-based vs activity-based: the pros and cons

Generally speaking, the spend-based method can be a more simple approach. It’s typically easy to find the data on the typical price of items or activities within the value chain of a product without needing any information from suppliers, and many emission factor databases take this approach so it’s also easy to find relevant emission factors. But, this also means that the spend-based approach can lack specificity and accuracy. 

In contrast, an activity-based approach is likely more granular and accurate because it enables you to get closer to actual data for a specific activity or item (especially if you have access to supplier-specific data). But this is much more difficult to determine and so it’s less likely you’ll have access to this data and there are less activity-based emission factor databases, meaning it can take a long time to calculate emissions using this method.

On top of this, the spend-based and activity-based methods are also appropriate for different scenarios, depending on the units of measurement the data comes in for an industry, activity, item etc. 

For instance, if a company wanted to calculate the carbon emissions of their products to be able to show customers this information at checkout, then it would be more appropriate to use the spend-based method because the information you have about that purchase is spend-based e.g. that the customer has bought a $40 pair of trainers. 

On the other hand, if a logistics company wanted to show their customers the carbon emissions of a logistics journey, it would be more appropriate to use the activity-based method because the information about that journey will be the mode of transportation, the distance travelled, and the weight of the cargo – rather than the cost of the shipment. 

That’s exactly how we approach our automated emissions calculations at Lune – and it’s why the GHG Protocol recommends the hybrid approach as the best approach for most businesses. 

It gives the best of both worlds – using supplier-specific data where possible and supplementing this with average-based activity data or spend-based data depending on what is available and appropriate. 

Supplementing the GHG Protocol with industry specific methodologies 

Alongside the methodology suggested by the GHG Protocol, it’s also worth checking if there are any industry specific methodologies or frameworks for calculating carbon emissions that are relevant to your company, product, or service.

For instance, our freight and logistics emissions calculations at Lune are aligned with the GHG Protocol and the GLEC Framework (audited & accredited by the Smart Freight Centre)  – the leading methodology for freight transport which enables consistent calculations of carbon emissions across our global, multi-modal supply chain.

Read more about our methodology for calculating emissions in our API documentation, or get in touch with our team.