Worldwide, the demand for greener products and services is growing. Companies of all shapes and sizes want to start managing their emissions to meet this demand. But not all these companies have a dedicated in-house sustainability expert, carbon accounting platform, or climate consultant to hand.

They need an easy way to track their carbon footprint, which is where spend-based emission calculations come in.

Spend-based calculations are the most accessible way to measure emissions. Spend data is readily available — every company tracks its finances, so every company can track its emissions.

This means if you have spend data, you can gauge your carbon footprint. It’s a great starting point!

The formula for spend-based calculations

Spend-based calculations take the financial value or cost of a material, good, or service, and multiply it by a relevant emission factor. Emission factors are standardised values used to calculate the amount of carbon emissions that a particular activity produces.

For example, if a company wanted to determine the emissions produced by the office furniture they purchased for $5,000, they can multiply the amount spent by the relevant emission factor.

The methodology is one of the four ways outlined by the GHG Protocol, the leading international standard for carbon accounting, for calculating company carbon footprints. Climate disclosures, like the EU CSRD, recommend companies use the GHG Protocol to calculate their emissions. Therefore, this method can support compliance.

While the spend-based method acts as an excellent starting point for calculating emissions, it lacks accuracy.

For example, if that office furniture was on sale and the company purchased the same furniture for $2500, the spend-based emission estimates would also fall by 50%. However, the actual emissions produced would remain the same, regardless of the price change.

For gauging your company's carbon footprint for the first time, compliance, and pinpointing emission hotspots, spend-based emission estimates are great! Companies can then drill down into these hotspots by enhancing the granularity of spend-based calculations, or use activity-based or supplier-based calculations.

Getting spend data to calculate emissions

Every company is required by law to track expenses for tax purposes. This means every company can calculate their emissions.

Forward-thinking spend management platforms like Simfoni, Payhawk, and Soldo are partnering with Lune to automate this for their customers. Rather than collecting the data themselves, or paying an expensive consultant to do it for them, their customers get emissions reporting through their spend management platform.

By providing additional data insights and using sustainability to create an emotional connection with their customers these platforms increase product stickiness and reduce churn.

To learn how you can increase customer loyalty with Lune, download the free guide: Planet and profit: The secret advantage of business spend