Climate change: spend-based carbon emissions data can help drive impact at scale

As carbon emissions continue to skyrocket and negative effects become more prolific, urgency around taking meaningful action is increasing. But is our collective response fast enough to meet the challenge head-on? And are we using all of the tools that we have available?

Can spend-based carbon emissions data help both accelerate and scale business engagement on climate change?

The coverage vs detail challenge

What is becoming increasingly clear is that in order for the world to have a chance at addressing climate change, we need as many businesses to be measuring their footprint and taking action as soon as possible. We also need those businesses to be measuring their complete carbon footprint i.e. full coverage; and sourcing detailed data where needed.  

Calculating a carbon footprint should be simple, but it often isn't. For many businesses — it’s a daunting, confusing and time-consuming task. The complexity lies in the details. Business carbon footprints involve more than just electricity and fuel use i.e.the emissions from their direct operations. They need to encompass the entire supply chain, from raw material extraction to production and delivery. Although indirect emissions are more than 80% of the total footprint for most industries, that data can be really hard to get. This leads to businesses needing to constantly attempt to balance the often competing priorities of complete coverage of emissions; and a high level of detail and accurate data from suppliers.This intricacy can stall efforts, as well as leaving those that have put in the effort still unsure if they are taking the right approach. 

Making an actionable start 

The ideal would be a comprehensive database of all companies and products and the current carbon intensity of each; allowing each business to ‘look up’ supplier-specific data for the biggest portion of their footprint. Although there are an increasing number of businesses disclosing such information, and there are life-cycle inventories that cover a lot of processes and products, these are far from complete and not always current.

How to begin the journey from measurement to climate action? Note that emphasis. The ideal data is certainly where we all want to get to, but climate change is an urgent problem and we cannot wait for the ideal way to measure footprints. We need to make an actionable start right now.

The strength of EEIO models

Spend-based data is a great tool for both scaling up the number of businesses measuring their footprint, and achieving more complete footprint coverage. It is particularly useful for small to medium businesses that rely on complex supply chains and have neither the time nor the resources to conduct their own life-cycle assessments. 

Spend-based emission factors are typically derived from ’Environmentally Extended Input-Output Models’ (EEIO). One of the great strengths of EEIO data is that it reduces the anxiety of where to start. Because EEIO enables spend-based emission factors for  all economic flows they cover hundreds of detailed product classes that can match with the financial data businesses are familiar with. EEIOs calculate the emissions intensity of every part of the economy, covering direct emissions of each industry as well as incorporating upstream supply chain emissions. This enables the calculation of accurate business footprints that include the embodied carbon of purchases.

The value of EEIO models is threefold:

> Firstly they are comprehensive: no product type or activity is missing, even services like insurance, accounting or advertising are included. 

> Second, they provide Scope 3 emission factors that represent the full supply system: suppliers of suppliers of suppliers all the way back to raw resource extraction. There is no ‘cut off’ point that happens in life-cycle analysis, and this underlies the accuracy of EEIO spend-based factors. 

> Thirdly, the spend-based format of the emission factors make them easy to use for business. For example, raw materials from the mining industry might end up in a car or in manufacturing equipment. EEIO models account for this complexity and track carbon emissions throughout the entire supply chain, from ‘cradle to shelf’ accurately. Then a purchase of the final product ‘off the shelf’ can quickly be matched with an appropriate emissions factor.

The marriage of these ‘emissions factors’ with business transaction records is a game-changer for accurate quantification of a carbon footprint that includes supply chain coverage. By analysing a business’ spend data, it’s possible to match each transaction to a specific spend category—be it office supplies or components for the products you bring to market. Each transaction is then multiplied by an emissions factor (the carbon emissions per dollar of spend) to determine the carbon footprint. For instance, every time you use your card to buy office supplies, you can see the average associated carbon footprint of manufacturing those supplies and bringing them to market. All these individual transactions are combined into a monthly view of your business's carbon footprint, which includes your supply chain emissions.

Why EEIO models can be trusted

Fundamentally, EEIO models draw on data published by public institutions, the OECD, national and internationally reported emissions inventories. The data provenance and linear mathematics of EEIO ensure transparency and tractability in the spend-based emission factors they produce.

The invention of EEIO modelling in the 1930s revolutionised how we view the economy and all its constituent parts. Indeed, the originator of input output analysis won the Nobel Prize in Economics. EEIO methods have since been improved over many decades, and can now also account for environmental externalities i.e. pollution. EEIO is a critical tool for governments and international organisations like the United Nations to help reveal the impacts of international trade and serving policy and decision making. 

EEIO data excels in providing a comprehensive view of carbon emissions, helping businesses to scan their supply chain footprint and get started. It is also a valuable tool for businesses that need to supplement the supplier or product-specific data they’re receiving for part of their supply chain spend, in order to report their full supply chain footprint. 

However, it's important to recognise its limitations, so it is used appropriately. More granular data might be required for specific, high-impact areas such as energy and fuel use. Details should be added where it is most materially relevant. This hybrid approach ensures that the data is both accessible and actionable.

EEIO models are developed, maintained, and assured by deep experts in environmental modelling, often with strong links to academia. This ensures that EEIO data is accurate, robust, reliable, and credible. In Australia, foe example, the organisations involved in EEIO include FootprintLab and University of New South Wales’ and University of Sydney's IELab.

Enabling action

EEIO data is a crucial part of the solution to inaction because it addresses the problem around too few businesses measuring their own and their supply chain footprint, and using this knowledge to inform focused reduction strategies. By speeding up the initial measurement phase, EEIO data enables more businesses to get started, and to move quickly from understanding their impact to taking action on reduction. With the right balance of data coverage and detail when footprinting, companies can prioritise actions that will have the greatest impact, driving real progress in their sustainability efforts.

Start today

The time to act is now - scaling engagement on carbon measurement and reduction is essential. The more businesses that measure their total carbon footprint - including own and supply chain emissions - the more targeted and effective action we can take across the business community. 

EEIO data is now highly accessible, either directly through expert data providers or via applied tools. EEIO data fulfils an important and growing need in the market to ensure footprint coverage, and its robustness is being continuously improved. Businesses with extensive supply chain networks need full coverage footprinting, and small businesses need easy tools to begin their footprinting journey. 

Significant progress on climate change requires a step change in how many businesses are engaging in carbon measurement and reduction. The tools are available, the data is reliable, and the need is urgent. In fact, given mounting regulatory pressure, inaction presents significant corporate risk. 

Let's seize this opportunity to make a lasting impact; starting today.