Tips for Reducing Your Company’s Spend-Based Carbon Footprint

When tackling your company’s carbon footprint, understanding how emissions are calculated is key. The Greenhouse Gas Protocol serves as the foundational framework for measuring greenhouse gas emissions. This protocol, detailed here, defines categories of emissions and lays out methodologies for accounting, including spend-based emissions – a tool in understanding and reducing your company’s environmental impact.

What are spend-based emissions?

Spend-based emissions use financial data as a proxy to calculate carbon footprints. By applying emissions factors to each dollar spent in a given category, organizations can estimate the greenhouse gases associated with their operations.

While less precise than activity-based data, spend-based emissions are often the starting point for businesses looking to establish their baseline emissions inventory.

Why spend-based emissions matter

Spend-based emissions are important for assessing Scope 3 emissions, which cover indirect emissions throughout your value chain. Scope 3 comprises 15 categories, ranging from purchased goods and services to employee commuting and business travel. Often, spend-based calculations are the default method for these categories when more granular data is unavailable.

It’s no surprise that Scope 3 emissions are often the largest piece of the carbon puzzle. According to a McKinsey study, 98% of emissions are accounted for by Scope 3 emissions in the retail industry. By ignoring Scope 3, you risk overlooking the largest contributor to your carbon footprint.

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The challenges of spend-based accounting

While spend-based accounting is a useful starting point, its limitations are clear. These calculations often rely on broad averages, taking x dollars spent in y category to generate a number. However, this number doesn’t account for specific factors, like supplier efficiency, regional differences, or material sourcing. As a result, spend-based emissions can provide low-resolution data, useful for direction but not for pinpoint accuracy.

Reducing spend-based emissions

The potential for impact lies in identifying your material contributors – the biggest spend categories driving emissions – and focusing on reducing them. By analyzing your Scope 3 data through spend-based factors, you can prioritize efforts in areas such as:

• Business travel: Reevaluate your company’s travel policies. Encourage remote meetings to reduce the need for flights or switch to more efficient transportation methods, such as trains or carpools. For unavoidable travel, consider implementing a carbon budget alongside traditional travel expense limits to quantify emissions per employee. Learn about cutting down emissions in the employee category here.
• Purchased goods and services: Assess your supply chain. Shift toward vendors with robust sustainability practices, such as those offering carbon-neutral products or utilizing circular manufacturing processes. For example, adopting eco-friendly materials in facilities or operations can significantly lower emissions tied to spending in this category. Learn about cutting down emissions in the operation category here.
• Utilities: Align your office or facility upgrades with spend-based emission reductions. For instance, investing in energy-efficient appliances or retrofitting heating and cooling systems not only cuts carbon but also reduces long-term operational costs. Learn about cutting down emissions in the utilities category here.

By targeting high-impact areas, you can make meaningful progress toward reducing your overall emissions, even with spend-based data.

Moving beyond spend-based

Once your company has established its emissions baseline, the next step is refining the quality of your data. Collaborate with suppliers, request detailed reporting, and look for ways to gather activity-based information where possible. This higher-resolution data allows for more targeted and effective emissions reductions.

Spend-based emissions are the starting point, not the finish line, for creating a climate-conscious business strategy. With the right focus, your company can turn insights into actions that reduce emissions and drive sustainability forward. At Aclymate, we are your trusted partner in understanding and reducing your carbon footprint. With tools that simplify emissions tracking and actionable insights for meaningful reductions, we make the journey to sustainability seamless and impactful.

Want to learn more about evaluating and offsetting your business’s carbon emissions? Book a free 30-minute consultation call with our sustainability expert now.