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Spend-Based vs Activity-Based Emissions Accounting: Why Companies Need Both

Emma Valli

Marketing Coordinator

Spend vs activity based emissions

In practice, both spend-based and activity-based emissions accounting are needed to assess the climate impacts of businesses. Each method has its own strengths and weaknesses, and by combining these accounting methods, emissions accounting can be done efficiently and accurately relative to its purpose.

Differences Between Spend-Based and Activity-Based Emissions

The fundamental principle of greenhouse gas emissions accounting and reporting is to create an inventory of all relevant climate-impacting activities within an organization. Activities are multiplied by a defined emissions factor, which describes the climate impact of the activity.

The value of the emissions factor itself is expressed in a unit that equates different greenhouse gases, in kilograms or tons of CO2 equivalent (kg CO2e or t CO2e), per unit of activity measured. Units of activity may include:

  • Mass (kg)
  • Amount of energy (kWh)
  • Transportation distance (tonne-kilometres)
  • Monetary value (€).

Monetary-based climate impact assessments are referred to as spend-based emissions accounting, while those based on other functional units are known as activity-based emissions accounting.

Spend vs activity-based emissions

Spend-Based Emissions

Spend-based emissions accounting, also known as the economic activity input-output life cycle analysis (EIO-LCA), estimates greenhouse gas emissions based on economic data from various business activities.

In spend-based accounting, emissions are calculated based on economic information, such as procurement costs, using emissions factors defined for various expenditure categories. Spend-based emissions accounting allows for quick calculation of emissions for overviews, and can be applied even when precise activity data is not available. Spend-based emission factors are good to calculate emissions from purchased services for which physical emissions are complex to accurately measure.

Benefits of Spend-Based Emissions Accounting:

  • Quick way to calculate emissions
  • Spend-based emission factors are good to calculate emissions from non-physical purchased services
  • Economic data is readily available
  • Carbon footprint calculators can be easily integrated with corporate financial management or cash flow systems

Drawbacks of Spend-Based Emissions Accounting:

  • The level of accuracy is insufficient as the calculated emissions are not based on physiological or biological processes
  • Activity-level data is required, for example, in GHG Protocol-compliant accounting
  • It is difficult to obtain information about changes in total emissions as the calculation is based on spending
  • It is not possible to distinguish between biogenic and fossil greenhouse gas emissions

Activity-Based Emissions

On the other hand, activity-based emissions accounting calculates emissions from specific activities, such as fuel consumption, business travel, and energy use, based on direct data. This method relies on real operational data, providing a more accurate and detailed measurement of emissions. It is considered the orthodox method of emissions accounting because it directly links emissions to specific business activities and processes.

Benefits of Activity-Based Emissions Accounting:

  • Provides a more authentic and accurate picture of emissions
  • Allows for the distinction between biogenic and fossil greenhouse gas emissions
  • Enables monitoring of emissions development
  • Sufficiently accurate for emissions reporting needs

Drawbacks of Activity-Based Emissions Accounting:

  • Data collection can be challenging
  • Slower than spend-based accounting
  • Integration of the accounting tool into the enterprise resource planning system is possible but often more difficult than with spend-based accounting

Combining Methods

The advantage of combining spend-based and activity-based accounting methods lies in their complementary strengths. Spend-based accounting is fast and provides a good overview of emissions. It can be used for calculations when precise data on indirect emissions is not available. However, the accuracy of spend-based calculations is limited due to the general emissions factors used.

Conversely, activity-based accounting is precise, but implementing it for all emission sources can be resource-intensive and complicated. It offers a detailed view that is critical for targeting emission reduction measures.

Often, both approaches are needed in a company’s emissions calculations. A general rule is that the major emission sources should be calculated activity-based, as also mentioned in the GHG Protocol. Activities where activity data is difficult to obtain can benefit from spend-based accounting.

It is also good reporting practice to transparently share which method has been used and why.


By combining spend-based and activity-based accounting, a balanced approach to calculating emissions is achieved. Spend-based accounting quickly provides a picture of indirect emissions, while activity-based accounting offers the precision needed to obtain a comprehensive view. Together, they form a robust framework for effective accounting and reporting, promoting informed decision-making and better climate work.

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