Spend-based vs activity-based: Scope 3 calculation methods compared
You start your Scope 3 calculation and immediately face a methodology question: do you begin with finance-department procurement spend combined with sector-level emission factors (spend-based), or do you track down a physical unit and a precise factor for every product (activity-based)? This article compares the two methods and explains when to use each.
The three GHG Protocol methods in brief
The GHG Protocol Scope 3 Calculation Guidance identifies three primary calculation methods, between which a company chooses on a category-by-category basis.
Spend-based uses the monetary value of purchases multiplied by a sector-specific emission factor (kg CO2e / €). The fastest and most approximate method: it requires only financial procurement data.
Activity-based uses a physical unit (kg, MWh, tonne-km) multiplied by a product- or material-specific emission factor. The most accurate method: it requires primary data or detailed supplier information.
Hybrid combines both: the largest and most material categories are calculated activity-based, the rest spend-based. In practice, this is the golden mean for most companies.
The GHG Protocol does not mandate a specific method, but requires that the method used is documented transparently and justified on a category-by-category basis.
Spend-based: the fastest way to get started
Spend-based calculation follows a simple formula: procurement spend × sector-specific factor = emissions.
For example, €50,000 spent on IT consulting × the Exiobase factor for “Computer services” (e.g. 0.15 kg CO2e / €) = 7.5 tCO2e. The same logic applies to all procurement line items.
Strengths: Fast to get started: requires only the accounts payable ledger and a sector factor table. Quickly provides an overall picture and highlights hot spots. Works well for small purchases and categories where no other data is available.
Weaknesses: Coarse. Emissions do not reflect a supplier’s actual reduction actions, because the factor is a sector average. Price changes (e.g. inflation or procurement negotiations) distort the result: the same product at a higher price appears to have greater emissions.
Typical factor libraries: EXIOBASE (European and global), US EEIO (United States), Comprehensive Environmentally Extended Input-Output (CEEIO) in the United States, and sector-specific benchmark databases.
When spend-based is sufficient: Initial calculation, small categories, categories where primary data is realistically unavailable, first baseline before refinement.
Activity-based: the most accurate but most demanding
Activity-based calculation uses a physical quantity and its associated factor: 10,000 kg of steel × 1.9 kg CO2e / kg = 19 tCO2e.
Strengths: Accurate. Reflects actual procurement decisions and supplier choices. Choosing a lower-emission supplier immediately reduces the figure. This is a prerequisite for valid tracking of reduction targets.
Weaknesses: Requires primary data from suppliers or precise product-specific factors (Ecoinvent, DEFRA, EPD publications). Data collection is laborious, and primary data cannot be obtained for all purchases. May require reconciling accounts payable with inventory records.
Typical factor libraries and data sources: Ecoinvent (product-specific LCA factors), DEFRA (factors published by BEIS for fuels, transport, etc.), EPD publications (supplier-specific PCFs), ISO 14067 calculations.
When activity-based is essential: Largest categories and products, targets that measure emission reductions (SBTi), accuracy requirements (CSRD, customer questionnaires), categories where supplier choice has significant leverage.
Hybrid: the golden mean in practice
Most SMEs cannot operate entirely activity-based, but want accuracy in key categories. The hybrid approach addresses this.
In practice, the hybrid model works as follows. Identify the 20% of purchases that account for 80% of emissions (Pareto). Calculate these activity-based using primary data. The remaining 80% of purchases, covering 20% of emissions, are calculated spend-based.
Example from a manufacturing company:
- Activity-based: Steel, aluminium, electric motors (PCF from 3 suppliers, covering approximately 70% of material cost).
- Spend-based: Office supplies, IT services, marketing, small components (the remainder).
This delivers accurate figures for hot spots without requiring a separate supplier questionnaire behind every purchase invoice.
Example: the same purchase, three calculation approaches
A company purchases €100,000 worth of steel from a supplier that uses an electric arc furnace and renewable electricity.
Spend-based (EXIOBASE factor). “Basic iron and steel” sector factor e.g. 1.2 kg CO2e / €. €100,000 × 1.2 = 120 tCO2e.
Activity-based, sector factor per kg. Quantity purchased 50 tonnes × typical blast furnace steel 1.9 kg CO2e / kg = 95 tCO2e.
Activity-based, supplier PCF (low-emission steel). Quantity purchased 50 tonnes × supplier’s PCF 0.4 kg CO2e / kg = 20 tCO2e.
The same transaction, three different figures. The difference illustrates why method selection matters, particularly when a supplier is genuinely low-emission and you want that to show in your own calculations. Spend-based makes no such distinction.
Frequently asked questions
Is spend-based accurate enough?
For initial calculations and small categories, yes. The method is sufficient for identifying hot spots and obtaining a first baseline figure. For more precise measurement of reduction targets, customer questionnaires, and SBTi validation, it is worth moving to activity-based for the largest categories.
Can you switch from spend-based to activity-based later?
Yes, and this is the common path. The first year is spend-based, hot spots are identified, and in subsequent years primary data is collected for the largest categories. The baseline generally needs to be updated when the method changes in order to maintain comparability.
Where can you find sector-specific emission factors?
The most common libraries are EXIOBASE (European and global, commercial), US EEIO (freely available, US-focused), Ecoinvent (product-specific LCA factors, commercial), and DEFRA (UK-published factors). NGS uses these on a project-by-project basis.
Which method is best from an SBTi perspective?
SBTi accepts both. Spend-based is acceptable for target-setting when primary data is unavailable. For tracking targets, activity-based is better, as it reflects actual reductions. The recommendation is to move to activity-based for the largest categories over time.
What is the advantage of the hybrid model?
Hybrid delivers accuracy where it matters without turning small categories into a heavy primary-data project. In practice, 20% of purchases typically account for 80% of emissions in most companies, so a Pareto-based split is efficient.
Which method is right for you?
In a free assessment, we look together at which categories spend-based is sufficient for and where it makes sense to move to activity-based primary data.
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