Broadly speaking, there are two ways to determine the size of your carbon footprint: with activity-based or spend-based data. In the article below, we explain the difference using a case from our client CCV.
Case CCV
CCV is a European provider offering end-to-end payments at every touchpoint of the customer journey. From convenient online payments to powerful in-store and unattended solutions. Hedgehog recently determined the organisation's carbon footprint through an activity-based analysis, and in this example, we use a payment terminal to explain the difference between activity-based and spend-based data.
What is activity-based data in a carbon footprint?
Activity-based data is data that truly relates to the impact of your product or organisation. In an activity-based analysis, we conduct research to provide you with precise insights into your impact and how this is generated.
Activity-based emission factors measure the amount of emissions associated with a specific activity, such as the number of kilometers driven by a vehicle or the amount of electricity consumed in your office. These factors are calculated based on data specific to the activity, and are relatively easy to determine for certain emission sources (such as kilometers or kWh in the examples mentioned above).
When looking at the emission source "purchased goods," finding activity-based references becomes somewhat challenging. This is because it doesn't simply state 'the impact of 1kg payment terminal is xxx kg CO₂-eq.' Hence, a more in-depth investigation is needed to determine the environmental impact of this product.
Purchased goods are the largest CO₂ emission source for most organisations and need to be meticulously mapped before reducing your impact.
Activity-based emission factors provide an accurate and precise approach to measuring greenhouse gas emissions. Through this approach, you can determine your emissions up to 70% more accurately, compared to other emission estimation methods. However, implementing activity-based emission factors takes a lot of time, making this method costly.
What is spend-based data in a carbon footprint?
Spend-based data is general data derived from monetary values in databases. Spend-based data, or spend-based emission factors, estimate the environmental impact of organisations based on their expenditures for goods and services.
With this method, the monetary value of purchases is multiplied by the emission intensity of the category (from the database) that the product or service most closely resembles or fits into. Emission intensity is the greenhouse gas emissions per euro of value added. This figure provides an overview of the environmental efficiency of production processes.
In the example of the payment terminal, the spend-based analysis leads to an outcome, a figure, but you can’t plan CO₂ reduction based on this. The spend-based emission factor closest to the terminal is the category 'electrical machinery and apparatus,' which includes also for example laptops, monitors, mice, and screens. Therefore, the environmental impact of an average electrical device is the basis, rather than the impact of the specific payment terminal. The described impact is not accurate.
Moreover, this emission factor does not provide insights into which components, processes, or materials of the payment terminal have the greatest impact. The only way to (on paper) reduce the environmental impact is to buy cheaper payment terminals from another supplier. This way, you spend less on the emission source, and your spend-based CO₂ emissions decrease.
In a spend-based analysis, the CO₂ footprint is calculated based on emission factors, which are multiplied by the monetary value. In this example, you would use an amount, say 2.5 million euros, to express the collective value of all payment terminals. Then, you multiply this amount by the found emission factors from the 'electrical machinery and apparatus' category. This gives you the "total" impact of these terminals. So, if you spend less money on this category, your impact “goes down.”
With spend-based data, we do not calculate your precise impact, but rather arrive at a more general and standardised approach to this impact.
Benefits for CCV of the activity-based method
Through the activity-based analysis, CCV knows exactly where and how the environmental impact of the terminals occurs. We have created a database with activity-based emission factors, and CCV is now able to track their emissions using the Hedgehog Carbon Platform.
Insights from the activity-based analysis also reveal where the greatest impact of the product arises. For CCV, the LCA study revealed that the most significant impact can be found in the chosen materials for the payment terminals.
This also provides opportunities to adjust the production process; choosing different materials reduces both the environmental impact and costs for the organisation. This is an insight that a spend-based analysis is impossible to give you.
Data collection takes time
The larger and more complex your organisation or product, the more complex the process of data collection becomes. Because you not only have to search for all the data yourself, but you often have to request it from your suppliers. It can take weeks to months to gather all the insights you need.
In the case of CCV, being an international company with multiple locations, the data collection process involves coordinating with various stakeholders. Our contact person and project leader at CCV is Anna Ahrenberg, Brand and Sustainability Lead.
Anna Ahrenberg: "Thanks to Hedgehog's expert help, we broke down the big task of collecting CO₂ and LCA data step by step. In just four months, we completed our first CO₂ review. Grateful for the support that turned a tough job into a doable success!"
Read more about CCV in Our Work.
