Summary:
The spend-based method is a carbon calculation method for the procurement of goods and services. It provides a rapid and actionable initial mapping of the corporate carbon footprint, which represents a major proportion of Scope 3. Despite its limited precision, it enables businesses to prioritise high-impact categories and initiate a carbon reduction trajectory. This can then be consolidated through more refined methods based on supplier data.
Contents:
What is the challenge of Scope 3?
How do you apply the spend-based method?
What are the limitations and opportunities for development?
How does Manutan help you calculate your Scope 3?
Today, many companies are committed to measuring and monitoring their greenhouse gas emissions. Whether a regulatory obligation or a voluntary commitment, it all starts with the carbon footprint calculation. For the procurement of goods and services, several calculation methods exist. The spend-based approach is considered the most accessible.
What is the challenge of Scope 3?
Most companies engaged in a decarbonisation strategy have started by assessing and reducing their Scopes 1 and 2, that is, their direct and indirect emissions related to energy.
However, this is not always the case for Scope 3. A very vast and complex scope that corresponds to all other indirect emissions. According to the Global Climate Initiatives, it represents between 50 and 90% of companies' total greenhouse gas emissions, making it the major part of their carbon footprint. And if we look more closely, procurement accounts for 60 to 90% of this famous Scope 3! It is therefore essential to calculate and manage the emissions associated with the procurement of goods and services.
However, this is a delicate exercise because you need to strike a balance between the level of calculation precision and data accessibility. There are different carbon calculation methods to adopt depending on the categories concerned and the internal and external data available. Among the key approaches is the spend-based method, considered a good starting point for initiating carbon accounting.
This is highlighted by Misha Cajic, co-CEO of Avarni: "Starting off with the spend-based method is a good idea, since it will allow you to get an initial baseline of the entire category, and then apply more accurate activity-based calculations to the most material categories later on."
How do you apply the spend-based method?
The spend-based method estimates the average emissions per pound spent on a product or service. This calculation starts from the financial value of purchased goods and services, which is then translated into carbon emissions.
To obtain this, you multiply the monetary value of the good or service purchased by the associated emission factor. This is how you calculate the quantity of greenhouse gas emissions produced by your purchasing.
(Inset) Expenditure (£) X Average emission factors (kg CO2e/£) = Quantity of emissions produced (kg CO2e)
To compile expenditure, companies will draw on their information system (ERP) or their procurement records. They will collect the amounts spent for each type of product and service, based on market value.
To find emissions factors, companies use databases.
We distinguish:
- International reference databases: ecoinvent, EXIOBASE, Climate Watch...
- National databases: DEFRA for the United Kingdom, Base Empreinte® for France, UBA for Germany...
- Sectoral and specialist databases: GLEC for logistics and transport, négaoctet for digital...
What are the limitations and opportunities for development?
Often, companies start by using the spend-based method. Because it relies on accessible financial data, this approach is considered relatively simple and rapid. However, it is also considered less precise.
Certain limitations should be highlighted:
- Average emission factors do not reflect the reality of suppliers, their practices and their technologies. These are generalisations, which results in inaccuracies;
- Environmental impacts are not nuanced according to procurement decisions, meaning that all expenditure is treated the same way within a category. For example, there is no difference between purchasing a new product or a second-hand one;
- Financial values fluctuate depending on inflation, discounts or even exchange rates. This can complicate the monitoring of progress made in reducing emissions.
The whole challenge is to adopt a pragmatic and realistic approach to obtain an initial mapping. Of course, the idea is to improve the estimate over time, as new data is collected and reporting tools evolve. This then paves the way for other, more precise approaches: the average data method, the hybrid method, the supplier-specific method...
Companies can then refine their calculations, particularly in the most emissive categories. This is essential to clarify the estimate but also to understand the triggers for emissions and thus identify the keys to reduction. Let us also remember that all these methods can coexist, from the outset, depending on the level of maturity and the data available for each category.
To date, the method considered most relevant remains the supplier-specific method. This involves collecting actual emission data declared by suppliers for each good or service. Thanks to this personalised data, companies can develop ultra-targeted CO2 reduction strategies.
How does Manutan help you calculate your Scope 3?
The Manutan Group has developed the product environmental impact score. This approach enables us to provide complete information for each product, based on verified evidence, around several environmental impacts, including the carbon footprint. To carry out our measurements, we use the Product Environmental Footprint (PEF) methodology developed by the European Commission, which is based on product life cycle analysis, from the extraction of raw materials to its end of life.
At the heart of this approach is data collection. We collect primary data from our suppliers, such as raw materials and their associated weights, as well as the manufacturing origin. We supplement this information with other default data defined in the reference frameworks, which our suppliers are invited to update.
Today, we are able to provide the carbon footprint of more than 30,000 products, across various categories: office, chairs and seats, cupboards, lockers, boards and displays, workshop furniture, waste management, storage bins, office and industrial shelving... Ultimately, our ambition is to cover our entire offer.
Our eco-responsible offer
In addition to our product environmental impact score, we are developing an eco-responsible product offer. This refers to any product that bears a recognised environmental label (for example, European Ecolabel, Ecocert, PEFC, etc.) and/or is made from at least 25% recycled materials, and/or is second-hand (used or refurbished). This offer includes more than 100,000 products.
As you can see, the spend-based method constitutes a solid starting point for estimating the emissions from purchasing. To strengthen their approach, companies have every interest in collaborating with transparent suppliers engaged in a robust decarbonisation trajectory. This is the case with Manutan, which has set itself the ambition of achieving net zero emissions by 2050, and whose climate trajectory is validated by SBTi.
