Spend-Based vs Activity-Based Emissions Accounting

Use activity-based accounting where you have physical data. It's more accurate and the GHG Protocol prefers it. Use spend-based where you don't, because broad coverage beats perfect precision when you're starting out. Most organisations run both, and shift categories from spend to activity over time.

You'll meet two methods, most often in Scope 3: spend-based and activity-based. The choice decides how accurate your number is, how much data you have to collect, and whether real reductions ever show up in your reporting.

Spend-based accounting

The spend-based method multiplies the money spent on a good or service by an emission factor expressed in kg CO₂e per dollar. Spend $100,000 on office furniture at, say, 0.5 kg CO₂e/$ (illustrative), and you estimate 50 tonnes CO₂e.

It's fast and broad: the financial data already sits in your accounting system, so you can size every procurement category at once. But it uses industry-average factors that may not reflect your supply chain, it moves with prices (inflation can raise your reported emissions with no change in activity), and it can't see a genuine reduction: if a supplier switches to renewable energy, your spend-based number doesn't budge.

Activity-based accounting

The activity-based method multiplies physical activity data (kilowatt-hours, litres of fuel, tonnes of material) by a specific factor for that activity. For example, 10,000 kWh × 0.68 kg CO₂e/kWh (illustrative) = 6.8 tonnes CO₂e. For real reporting, use the current-year state grid factor from the NGA Factors workbook.

It's more accurate, it tracks real changes in energy use or material efficiency, and it gives you a reliable baseline for targets. The cost is data: you need detailed figures from operations and suppliers, and some categories are hard to capture with activity data alone.

The GHG Protocol data quality hierarchy

The GHG Protocol's Technical Guidance for Scope 3 ranks methods by data quality, best to worst: supplier-specific (primary data from your suppliers), hybrid (supplier activity data plus secondary factors), average-data (industry-average factors on activity data), then spend-based (financial spend × economic factors). Activity-based approaches win, but spend-based is explicitly an acceptable starting point when activity data isn't available yet.

Which method for which Scope 3 category?

How to sequence it

Start spend-based for broad coverage, then invest in activity data for your most material sources. It's the same priority order procurement teams use to decide which suppliers to engage first. The ASRS expects exactly that progression: you're not penalised for starting rough, only for standing still. Here's how the analyst does this on your own data: spend-based where that's all you have, activity-based where you've got the physical numbers.