Spend-Based vs. Activity-Based Emissions: Understanding the Key Differences

When it comes to measuring a company’s carbon footprint, not all methods are created equal. The data you use—and how you calculate emissions—can drastically impact the accuracy of your reporting, the strength of your reduction strategy, and even how seriously your sustainability efforts are taken.

The challenge? Businesses operate in vastly different environments, with varying levels of data accessibility. Some companies have direct access to granular activity-based data, tracking fuel consumption, electricity usage, or raw material inputs with precision. Others rely on spend-based data, estimating emissions based on financial expenditures and industry averages.

While both approaches translate business activities into measurable emissions, they serve different purposes and come with trade-offs. Activity-based methods offer the highest accuracy but require detailed data collection, while spend-based methods provide broad insights with lower precision. So which one is right for your business?

In this blog, we’ll break down the differences between spend-based vs. activity-based emissions, explore their strengths and limitations, and help you determine which approach aligns best with your sustainability goals.

How carbon accounting methods impact emissions data

Carbon accounting is the foundation of any credible sustainability strategy. Without reliable emissions data, organisations  can’t set meaningful reduction targets or track progress effectively. Choosing between spend-based vs. activity-based emissions isn’t just a technical decision—it directly impacts how accurately your business can measure, manage, and reduce its carbon footprint.

At the core of carbon accounting are emission factors—conversion values that translate business activities into carbon dioxide equivalent (CO₂e) emissions. The two most common methods for applying these factors are:

• Activity-based method – Uses real-world operational data (e.g., litres of fuel burned, kilowatt-hours of electricity used) to calculate emissions with precision.
• Spend-based method – Estimates emissions based on financial expenditure, applying industry averages to convert spending into carbon impact.
  

While spend-based emissions factors provide a quick and accessible estimate, activity-based data delivers the granularity needed for accurate reporting and emissions reduction.

Activity-based vs. spend-based emissions: Strengths and limitations

Both the activity-based method and spend-based method serve the same fundamental purpose—converting business activities into measurable emissions—but differ in terms of accuracy, feasibility, and actionability.  Understanding their strengths and limitations is key to selecting the right methodology for your business.

The activity-based method: Precision and actionability 

The activity-based method  provides the highest accuracy in carbon accounting because it relies on measured data from specific activities. Instead of using estimates, businesses track actual operational inputs, such as fuel consumption, energy use, or material sourcing.

How large companies use activity-based data

Microsoft meticulously tracks its energy use across global data centres, applying activity-based emission factors to calculate its Scope 1 and 2 emissions. This enables targeted reduction strategies, such as optimising energy efficiency or transitioning to renewable sources. 

Amazon works with suppliers to gather activity-based data on manufacturing, logistics, and materials sourcing. Through initiatives like the Climate Pledge Friendly Program, they make informed decisions about sustainable sourcing, improve production efficiency, and optimise packaging design, reducing their environmental impact. 

Why choose the activity-based method? 

✔ Highest level of accuracy: Since data is derived directly from business operations, it provides the most precise emissions measurement. 

✔ Stronger alignment with science-based targets: Many organisations pursuing net zero goals require granular data to develop reduction strategies. 

✔ Regulatory and investor confidence: Businesses with thorough carbon accounting practices are better positioned to meet compliance requirements and attract sustainability-focused investors. 

However, this approach does present challenges. The data collection process can be resource-intensive, as it requires advanced tracking systems, supplier engagement, and a dedicated sustainability team. On top of this, the organisation needs to ensure data accuracy. For companies with complex supply chains, this level of granularity may not always be feasible. 

The spend-based method: Simplicity and accessibility

The spend-based method offers an alternative for businesses that lack direct access to detailed operational data. It estimates emissions based on financial expenditure, applying industry-average emission factors.

While this method offers a broad view of emissions, it assumes all goods and services within the same category have identical carbon footprints. This reliance on financial data may not account for all emission-generating activities, leading to gaps in the overall emissions profile.

Why companies use spend-based data

Small-and-medium-enterprises (SMEs) often lack the resources to implement a fully activity-based system. A spend-based approach provides a starting point, allowing them to develop a rough emissions estimate and identify areas for improvement. 

Companies with complex supply chains, such as global retailers, use spend-based data to assess the emissions from thousands of suppliers. Without direct access to supplier energy usage or transportation data, spend-based estimates provide a workable baseline–albeit with less precision than activity-based methods.

Why choose the spend-based method? 

✔ Easy to implement: Since financial data is readily available, businesses can quickly estimate emissions without extensive data collection.

✔ Cost-effective: Reduces the burden of direct measurement, making it accessible to organisations at all maturity levels.

✔ GHG Protocol-compliant: Recognised as a legitimate method for Scope 3 reporting when direct data is unavailable.

However, because this approach relies on industry averages, it lacks granularity. This makes it difficult to distinguish between high- and low-emissions suppliers, and to set accurate targets for reductions. Over time, businesses should transition towards activity-based methods to improve accuracy. 

Choosing the right approach for your organisation

The decision to use spend-based vs. activity-based emissions factors has several considerations, including the level of accuracy required, data availability, and the complexity of supply chains. For businesses with direct control over operations (such as manufacturers, logistics companies, and energy-intensive industries), an activity-based method would be preferred due to its precision. For companies with limited access to granular data (such as consultancies, retailers, and serviced-based businesses), a spend-based method provides a good entry point to carbon accounting. For organisations seeking a balance between accuracy and feasibility,  a hybrid-approach–using activity-based data where possible and supplementing with spend-based estimates – can be the most effective strategy. 

From estimation to precision: How Zevero bridges the gap

As the need for climate action grows, businesses need a more advanced approach to measuring and managing their carbon footprint. While spend-based emissions factors offer a fast and accessible starting point, transitioning to activity-based data is essential for long-term sustainability success.

That’s where Zevero comes in. We bridge the gap between spend-based and activity-based carbon accounting, making it seamless to collect, manage, and analyse emissions data – no matter where you are in your sustainability journey. 

Talk to our team today and see how Zevero can support you in moving beyond estimates to gather accurate data and take action.