As businesses strive to reduce their carbon footprint, the methodology used to calculate their emissions plays a pivotal role in how they will reach these goals. There are two different methods which are defined by the GHG-protocol: spend-based and activity-based. Each method has its advantages and trade-offs, however making the right choice depends on your desired goals, data availability, and accuracy requirements.

In this article, we will break down the key differences between spend-based and activity-based calculations, explore their respective use cases, and help you determine which one is the best fit for your needs right now.

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Spend-based emissions calculation

The spend-based method calculates emissions by multiplying the financial cost of a product or service by an emission factor derived from industry averages. These emission factors represent the carbon intensity per euro (or dollar) spent in a given sector.

How it works:

• A company analyzes its procurement or financial data to identify the different spending categories (e.g., electricity, transportation, manufacturing materials).
• Each category is assigned an industry-average emission factor (e.g., kg CO₂e per dollar spent).
• The emissions for each category are summed up to determine the total footprint.

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Example:

A company is transporting 10,000 kg (10 metric tons) of barley grain from Berlin to Paris (1050 km), using a diesel-powered heavy-duty truck. Market rates for cost of road freight transport are €1.50 per ton-km and the industry average emission factor for freight transport spend is 0.45 kg CO₂ per € spent.

(10 tons x 1,050 km x €1.50 per ton-km) *  0.45 kg CO₂ per € spent = 7,088 kg CO₂

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Advantages:

• Quick and easy to calculate. Requires minimal data collection beyond financial records.
• Useful for high-level assessments. Helps identify major emission hotspots across an organization.
• Ideal for companies with limited access to direct data from suppliers or operations.

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Disadvantages:

• Lower accuracy. Industry-average emission factors do not account for supplier-specific practices.
• Not suitable for tracking reduction efforts. Since the calculation is based on financial value rather than physical emissions, it does not reflect efficiency improvements or sustainable sourcing efforts. The only way to reduce would then be to spend less.

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Best Used When:

• Supplier-specific data is unavailable.
• Estimating emissions for many small purchases.
• Early-stage carbon accounting before collecting detailed data.

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What is activity-based emissions calculation?

The activity-based method calculates emissions based on the actual physical units of activity (e.g., kWh of electricity, liters of fuel, kilograms of materials used) multiplied by a corresponding emission factor. There are two different levels of data granularity when doing activity-based calculations: Average-data method or supplier-specific method.

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Average-Data Method

How It Works

• The company collects detailed activity data related to its operations (e.g., liters of fuel consumed, emissions generated during processes), and from its suppliers (e.g. kg of raw materials used, distance traveled for transporting goods to/from sites).
• Each activity is multiplied by a emission factor (e.g. kg CO₂e per liter of fuel) retrieved from an emission factor database such as IPCC, Ecoinvent, Climatiq

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Example:

A company transports 10 tons of barley over 1,050 km, using an average emission factor of 0.08 kg CO₂ per ton-km:

10 x 1,050 x 0.08 = 840 kg CO₂

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Advantages:

• More accurate than spend-based (based on actual physical activity).
• Easier to apply when detailed supplier data isn’t available.
• Works well for categories with standardized emission factors (e.g., energy, freight, raw materials).

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Disadvantages:

• Still relies on generic data rather than supplier-specific emissions.
• Does not reflect efficiency differences between suppliers.
• May not capture regional variations.

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Best Used When:

• More detailed data is available than spend-based, but supplier-specific data is lacking.
• Used in lifecycle assessment (LCA) or industry-wide emissions modeling.
• Good for estimating emissions from raw materials and transport.

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Supplier-specific method

How it works:

• The company collects detailed activity data related to its operations (e.g., liters of fuel consumed, emissions generated during processes), and from its suppliers (e.g. kg of raw materials used, distance traveled for transporting goods to/from sites).
• Each activity is multiplied by a emission factor (e.g. kg CO₂e per liter of fuel) given by the supplier or calculated collaboratively.
• The emissions for all activities are totaled to get a precise footprint.

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Example:

A company transports 10 tons of barley over 1,050 km, using an  emission factor supplied by the transport supplier of 0.06 kg CO₂ per ton-km:

10 x 1,050 x 0.08 = 630 kg CO₂

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Advantages:

• More accurate. Uses real-world activity data rather than financial estimates.
• Reflects sustainability improvements. Allows companies to see the impact of efficiency measures (e.g., switching to a lower-carbon material or improving fuel efficiency).
• Better for target setting and reduction tracking. Helps companies identify and act on specific sources of emissions.

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Disadvantages:

• Data collection can be complex. Requires detailed tracking of inputs, activities, and supplier data.
• Calculation at scale will challenging. You will have thousands of activities which need to be mapped to the corresponding emission factors, which will take a lot of time.

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Best Used When:

• Key suppliers provide reliable emissions data.
• Companies want to engage suppliers on carbon reduction.
• Used for Scope 3 reporting where high accuracy is needed.

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Hybrid approach: combining both methods

How It Works:

Combines multiple methods to improve accuracy while managing data limitations.

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Example:

• Use supplier-specific data where available (e.g., actual truck emissions from a logistics provider).
• Use average-data factors for categories with missing supplier data.
• Use spend-based estimates for minor, low-impact categories.

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Advantages:

• Balances accuracy and feasibility.
• Improves overall data quality while managing gaps.
• Enables gradual improvement in emissions tracking.

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Disadvantages:

• More complex to implement than a single method.
• Requires continuous data collection and updates.
• Needs internal expertise to blend different data sources effectively.

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Best Used When:

• A company wants to improve emissions accuracy over time.
• Mix of supplier-specific and generic data is available.
• Used in carbon accounting frameworks (e.g., Science-Based Targets, CDP reporting).

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When to use what method?

Selecting the best emission calculation method depends on data availability, accuracy needs, and reporting goals.

The spend-based method is ideal for early-stage estimates, using financial data to approximate emissions. It’s easy to implement but less precise, as it doesn’t account for supplier-specific differences.

The average-data method improves accuracy by using industry-standard emission factors based on physical activity (e.g., fuel use, weight, distance). It works well for general emissions tracking but may not capture regional or supplier-specific variations.

For the highest accuracy, the supplier-specific method relies on actual emissions data from suppliers. This approach is best for detailed carbon accounting and supplier engagement but requires significant effort to collect and verify data.

The hybrid method combines all three approaches, using supplier-specific data where available and filling gaps with average-data or spend-based estimates. It balances feasibility with precision, making it ideal for companies improving their emissions reporting over time.

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Conclusion

Both spend-based and activity-based emissions calculations play a role in carbon accounting. The right approach depends on data availability, accuracy needs, and business objectives. While spend-based methods are great for quick estimates and high-level insights, activity-based calculations offer greater precision and actionable data for emissions reduction.

For companies serious about sustainability and compliance with frameworks like the Science-Based Targets initiative (SBTi) or CSRD, moving towards activity-based calculations and using supplier-specific data where possible—is the best way forward.

Climatecamp can help you implement activity-based calculations and speed up the process of mixing different kinds of data granularity, circumventing one of the main challenges with combining methods. We even help you go as granular as possible by collecting primary data from your value chain and validating it, ensuring the highest accuracy of your carbon footprint. Do you want to our platform and way of working? Request a demo here.

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