Current Methodology

There are two main methods used in carbon accounting.

The spend based method

The spend based method works by multiplying the economic value of a product or service purchased by the relevant carbon emissions in order to calculate the amount of greenhouse gas emissions produced. The spend based method of carbon accounting utilizes environmentally extended input and output models, otherwise known as EEIO models, and is often less mathematically complex or time consuming to calculate.

While using the spend based method for carbon accounting is simpler, it isn’t always reliable given the economy and the tendency for prices to constantly fluctuate. Also, the inconsistency of exchange rates between foreign currencies makes it difficult to rely on the spend based method.

So, is the spend-based method of carbon accounting worth using?

The spend based method of carbon accounting is the best approach if the carbon calculations need to be done quickly. However, if the average data of the carbon contributor is prone to marginal errors due to uncontrollable circumstances like inflation and foreign currency exchange rates – it may not be the most precise way to use carbon accounting.

The activity based method

The second primary approach to carbon accounting is the activity based method.

The activity based method of carbon accounting is more specific than the spend-based method, as it uses data to determine how many units of a certain material or textile component that a company has purchased.

For instance, when using the spend-based method, only the price of a chair purchased would be used to determine the amount of carbon emissions produced, whereas the activity based method uses the various amounts of the materials used for the product or service, like wood or fabric – to calculate the carbon footprint.

Both the spend-based method and the activity-based method make use of carbon emissions factors to calculate a company’s carbon footprint determine an activity’s emissions output.

The activity based approach to carbon accounting is more accurate than the data provided by the spend-based method, therefore – it is widely encouraged that companies strive to use a hybrid model methodology in carbon accounting. This means that companies should use a dual, more practical approach in carbon accounting and use both the spend-based method and the activity based method simultaneously.

This hybrid approach to carbon accounting will allow companies to accurately measure their carbon footprint with the activity based method, while still having the ability to quickly calculate their carbon emissions with the readily available spend-based method.