Our guide to system-complete carbon footprinting
The data for your carbon footprint is already in your bank statement
Calculating your core business finances is fairly simple. Gather your bank statements. How much did you earn? How much did you spend? Is your profit matching your target?
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Calculating your carbon footprint seems a lot more complicated. You’ve got bills showing the kilowatts of energy used for your own gas and electricity, so that’s straightforward. But what about all the products in your supply chain? How do you measure the carbon of sending an email, or from your insurance package? Where do you look to find data on the climate impact of things you buy and the things you do as a business? And if you switch spending money on one product for another with better carbon credentials, how can you show that?
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We'll take you through the basics of carbon footprinting. We'll start with the three different Scopes that cover your emissions. Then we show you how you can measure your your entire supply chain emissions using spend-based methods. Lastly we look at how to get more specific using activity and product carbon footprints, and crucially how to keep all of these different methods comparable, so you are always measuring everything.
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If you can calculate how much you spent on different things for your business, you can use the same data to calculate the carbon footprint from your supply chain.
Scope 1, 2, and 3 emissions
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Carbon accounting breaks down your emissions into 3 categories or Scopes. Your spending records can be used to measure all 3 Scopes.
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Scope 1 emissions
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These are direct emissions from using fossil fuels in your own facilities and operations. Your gas heating boiler and the fuel used in your company vehicles produce Scope 1 emissions.
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Scope 1 emissions are within your control and ownership.
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Data needed: Fuel bills for gas, LNG, coal, oil, and petrol and diesel used in company vehicles.
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Scope 2 emissions
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Scope 2 covers indirect emissions associated with the electricity you buy. When your organisation consumes electricity generated elsewhere, these emissions fall under Scope 2. Your electricity may be 100% renewable, or it may be generated from burning gas.
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Although Scope 2 emissions are indirect, you can influence them by choosing renewable energy sources or improving your energy efficiency so you use less electricity.
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Data needed: Electricity bills, and the breakdown of your countries' electricity generation.
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Scope 3 emissions
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These are other indirect emissions that occur outside your organisation’s direct control. They result from activities related to what your organisation does and buys, but are produced elsewhere.
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Examples include emissions from suppliers, product use, and waste disposal. The biscuits you buy and the collection of the biscuit package as waste are both scope 3.
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Scope 3 emissions are often the largest portion of an organisation’s total carbon footprint and the hardest for you to measure on your own, which is where Small World's experience can help.
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Data needed: Procurement logs and details of suppliers. Where possible the amounts of goods purchased as well as cost, and product carbon footprints especially for significant purchases.
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How spend-based models take biscuits to infinity
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As you pick your favourite biscuit to dunk in your brew, and think about where all the emissions come from in its production, how far back can you go?
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If you buy some biscuits in the UK, the input-output model knows the direct emissions from this first-tier industry, which is easy to imagine as the energy needed to heat the baking ovens. The model also knows how much the baking industry spends on packaging, transport and digital advertising as well. So, it calculates the smaller quantity of emissions from the amount spent on those second-tier industries. The packaging industry has direct emissions, and it also spends money on other industries, like paper production, and insurance. So the model calculates the emissions from these third-tier industries. The model keeps going up and up through an infinite number of tiers, adding ever smaller quantities of emissions to the total. The result is a complete carbon footprint calculated from the amount you’ve spent on a year’s supply of dunkable biscuits.
Using spend-based data with an input-output model gives a system-complete emission factor - but it lacks specifics. It doesn’t know the difference between spending on organic chocolate biscuits or macaroni cheese, which have very different ingredients and so will have different carbon footprints.
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Input-output models give system-complete carbon emissions but lack specificity. Avocados and Brussels sprouts are both vegetables, but have quite different carbon footprints.
Activity-based emission factors
You can improve your emission estimates by using the actual amount of something you bought rather than the total you paid for it. Spend-based models use the amount you spent, whereas activity-based methods use the quantity you bought.
A spend-based model will use the £'s you've spent on petrol in a year, and use the average petrol price to work out how much petrol that is and the emissions generated when it was burnt. But if you know the exact amount of petrol you used, in litres, you'll have more accurate emission factors.
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We use activity-based for any products and services where we have records of the quantities bought. This is usually easy for things like gas and electricity, and sometimes for the core products a business buys, like bags of flour and boxes of eggs.
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Product Carbon Footprints and Hybridisation
​Product Carbon Footprints, or an PCF, come from the bottom up. They start with the specific components of a product and then looks at the other components needed for those. But because it's done manually it generally stops after 2 or 3 tiers.
So this way of calculating carbon would capture the difference between chocolate biscuits and pasta and the different things needed to supply those, like sugar and wheat for the biscuits, and eggs and cheese in our macaroni dish. It would then look at those second tiers, the products and services needed for sugar or for eggs, and the emissions from those.
But because PCFs are calculated manually by people, going to infinity isn’t a workable option. This means that PCFs are much more specific than input-output models, but don’t go as far up the tiers, so they're not as complete and underestimate the full carbon in the supply chain. Many of the smaller emissions from the furthest tiers of the supply chain are omitted. These missing emissions are called the 'Truncation Error' but together these can form a large portion of all the emissions that should be included.​​
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That’s why we analyse PCFs, work out which tiers they’ve stopped at, and then use our input-output model to calculate the emissions from those missing tiers.
Truncation errors occur in PCFs because some of the tiers are missed out beyond the system boundary. These missing emissions are individually relatively small, but together can be significant.
Truncation errors
Three datasets to use spend-based and P-LCA emission factors together in one system-complete carbon analysis..
Total Carbon
Three datasets to use spend-based and P-LCA emission factors together in one system-complete carbon analysis..
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The benefits of hybridised P-LCAs for carbon accounting:
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If you are just using P-LCAs you will be underestimating your total supply chain emissions.
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If you are just using spend-based, you won’t be able to see the emission reduction actions of your suppliers in your reporting.
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If you are using a mix of P-LCAs and spend-based, but without hybridisation, you are comparing apples and elephants, because your system boundaries are not both system-complete.
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Using hybridised emissions factors gives you the system-completeness of spend-based accounting for your more specific LCAs, and makes your P-LCAs and spend-based emissions comparable.
If you need a little more help or advice, get in touch. We're happy to set up a free intro call to help understand what's needed to get the most reliable carbon measurements for your organisation.​
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We reach thousands of spenders
Our spend-based data is used by a number of clients, many of who use it to help calculate the carbon footprint of their customers. So our spend-based emissions are reaching thousands, maybe millions of people.
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Read our Cogo case-study to learn how they use our spend-based emissions to integrate carbon footprints into banking apps.
