Estimate Methodology

Introduction

Corporations are increasingly being asked to report and share their climate impact. Carbon accounting is a relatively new practice that enables companies to accurately report on their emissions footprint and progress in their climate goals.

Carbon accounting is the process of measuring and tracking an organization's greenhouse gas emissions. Similar to financial accounting, it quantifies the impact of a company’s business activities, and this information can be used to understand the organization's climate impact, set goals to reduce emissions, and report progress to stakeholders.

Spend-based Method

Spend-based carbon accounting is one of several methods for calculating greenhouse gas (GHG) emissions. It uses the financial value of a purchased good or service to estimate emissions. At its most basic, spend-based carbon accounting works by multiplying the financial value of a good or service by an emission factor. An emission factor is a value that represents the amount of GHG emissions produced per unit of financial value. In this case, the spend-based method associates transaction details like the Merchant Category Code (MCC) with an emission factor and scales emissions based on the value of the purchase (in USD/GBP/EUR).

For example, let’s assign a hypothetical emission factor for coffee as 0.5 kilograms (kg) of CO2e emitted per United States Dollar (USD) spent. This factor accounts for the GHG emissions estimated in the generation of coffee, such as the water used to grow the beans, the fertilizer applied to them, the electricity needed to grind them, and the transportation involved in bringing them to you. In the spend-based method, the total carbon estimation for buying $25 of coffee would be 12.5 kg CO2e (0.5 kg CO2e/USD multiplied by $25 of purchased coffee).

Activity-based Method

Activity-based carbon accounting collects specific and detailed data from across a company's entire value chain. This method works by aggregating data on a company's activities, such as energy consumption, transportation, and waste production. That data is then used to calculate the emissions associated with each activity.

For example, the company would collect data on the number of miles driven by employees, the type of vehicles used, and the fuel efficiency of those vehicles. The company would then use this data to calculate the emissions from its transportation activities.

Carbonlink Estimate Methodology

The Carbonlink API is not a one-size-fits-all solution. It is designed to be customized to the specific needs of each client. This means that the API can select the best accounting/estimation approach for each client depending on the information provided.

The API is a tool to help businesses make intelligent decisions without needing to finance expert climate consultation. For the overwhelming majority of use cases, the Carbonlink API will service client needs perfectly. However, it is important to remember that the results are an estimate. If you believe you have a specific use case that requires a different accounting methodology, reach out to us at [e-mail].