Optimizing GHG emissions calculation

Mastering data challenges and methodology selection for peak performance

As companies increasingly recognize the importance of understanding and mitigating their environmental footprint, the choice of calculation method becomes crucial. In this blog post, we compare two fundamental approaches: the spend-based methodology and the activity-based methodology, highlighting the significance of data availability in shaping this decision. Join us as we navigate the intricate landscape of GHG calculations, aiding you in choosing the right path for your business's sustainability journey.

One of the most significant challenges faced by companies is ensuring the accuracy and availability of data crucial for calculating greenhouse gas (GHG) emissions. A common issue is that data related to consumption, procurement, and production is sourced from disparate ERP systems, lacking consistency and coherence. An issue that we faced recently in the context of calculating scope 3.1 and 3.4 emissions, was that the provided data related to material procurement suffered from three primary issues: lack of harmonization, inconsistency, and crucial missing elements at the product individual levels such as material ids, supplier ids or units of measurements among others.

Methodology

The primary concern stemming from data inconsistency led to the realization that utilizing a singular calculation method for determining GHG emissions would not be the optimal approach. In this scenario, the data could be segregated into two distinct groups based on their characteristics:

• First group: Procurement information for purchased products/materials featured standard metrics for units of measure such as lt, kg, g, gal.
• Second group: Procurement information for purchased products/materials featured units of measure like pce, dozen, crate, etc., with no conversion factor to the standard metric unit of measure, and the eur spend amount on procurement was provided. In some cases, no unit of measure was provided, only the eur spent the amount on the procurement.

Each group's data characteristics aligned with the requirements of two different greenhouse gas calculation methodologies, each employing a distinct strategy to quantify and analyze emissions, primarily focusing on operational activities (activity-based) or financial expenditures (spend-based). The first data group met the criteria for the activity-based methodology and the second data group aligned with the spend-based methodology requirements. 

The activity-based methodology provides a more precise and detailed understanding of emissions by directly measuring activities and their associated emissions. Although it requires extensive data collection in terms of emission factors, it is a complex, resource-intensive, and time-consuming process. Conversely, the spend-based methodology is easier and less resource-intensive for gathering emission factor-related data compared to detailed activity-level data. However, it lacks precision compared to activity-based methodologies, relying on assumptions and average emission factors associated with expenditure categories which are at the same time volatile due to impacts of inflation, exchange rates, etc.  These simplified assumptions can lead to either overestimation or underestimation of emissions, as they do not capture specific operational nuances.