Many organisations use spend based emission factors to simplify the quantification of their greenhouse gas (GHG) emissions. This approach is widely adopted, particularly when calculating Scope 3 Category 1 (Purchased Goods and Services) and Scope 3 Category 2 (Capital Goods). However, the question remains: how accurate is this methodology when reflecting the real emissions associated with your supply chain? 

Our Carbon and Sustainability Services Director, Stephen Burt, has taken a closer look. 

What Are Spend Based Emission Factors? 

Spend based emission factors are commonly sourced from national statistical bodies, with the UK Government’s Office for National Statistics (ONS) being one of the most referenced providers. These factors are categorised by industry using Standard Industrial Classification (SIC) codes and expressed as greenhouse gas emissions intensity by industry (kgCO2e/£). 

The underlying calculation is complex. The ONS describes the method as dividing the level of carbon dioxide emissions by the Gross Value Added (GVA) in constant prices. In practical terms, this creates an average emissions intensity for each sector based on national economic data. 

This allows organisations to multiply total supplier spend (aligned to relevant SIC codes) by the corresponding emission factor. The result is a simplified tCO2e figure for purchased goods and services. 

The Challenge with Averaged Data 

While the spend based method is efficient, it relies on industry averages rather than supplier-specific data. This creates potential disparity when applying the factors to real-world supply chains. 

To explore this variance, we reviewed more than 50 NQA ISO 14064-1 verified clients across 28 SIC codes. We compared their actual Scope 1 and 2 emissions with the ONS spend based factors. 

Key Findings 

• 77 percent of clients recorded actual emissions lower than the equivalent ONS factor 
• The average variance in this group was 79 percent lower 
• The median variance was 88 percent lower 
• 23 percent of clients recorded actual emissions higher than the equivalent ONS factor 
• The average variance in this group was 623 percent higher 
• The median variance was 126 percent higher 

There were six SIC codes where variance exceeded 100 percent, indicating significant outliers. 

When these outliers are removed, the average variance across all industries in the sample was 63 percent lower than the spend based factor. 

What Does This Mean for Organisations? 

The findings highlight that while spend based emission factors are convenient and widely accepted, they do not always provide an accurate representation of supplier-level emissions. Industry-level averages will not reflect operational efficiency, energy sourcing, technology utilisation or optimisation strategies employed by specific suppliers. 

To enhance accuracy in Scope 3 quantification, organisations should prioritise activity based emissions data wherever possible. 

Moving Towards More Accurate Reporting 

It is understandable that obtaining activity based data can feel overwhelming, particularly for organisations that handle large volumes of purchased items. However, small operational shifts can create significant efficiencies. Many products are purchased repeatedly, and purchase data is typically processed via software systems or procurement teams. 

By embedding the capture of material and weight data into procurement workflows, organisations can build a more reliable dataset over time. This creates the potential for automated reporting and a more accurate measurement of carbon impacts across the supply chain.