How to choose the best carbon accounting methods for your SMB
If you are from a Small and Medium-Sized Business (SMB) that is just starting its journey of using Carbon accounting software, you would need to decide on the best method for carbon accounting that is ideal for your business/organization. At this stage, you may have questions about the methods that are best suited for you.
Here is an overview of Three of the most common methods and reasons to consider each depending on your business/organization’s circumstances. Specifically, it will depend on the availability of data, resources, and the level of detail that would be required.
The three methods that we’ll provide you with a review on are:
- Spend-based carbon accounting method
- Activity-based carbon accounting method
- Hybrid carbon accounting method
Spend-based Method
The spend-based method is easy and quick to implement. It is cost-effective and provides broad coverage.
The advantage of this method is that it’s easier to implement and better for organizations with limited resources and access to activity data (i.e., GHG contribution data at source level) information. It is less challenging and has a lower cost to implement because it doesn’t require detailed data collection. It’s also useful because it provides a broad overview of emissions across different categories of expenditures.
The drawback of this method is that it is not as detailed or accurate as Activity-based methods. It also may have less actionability because it will be harder to pinpoint specific areas for emission reductions. Also, it may be challenging for some organizations to retrieve financial records from relevant sources within their organization on a case-to-case basis.
Activity-Based Carbon Accounting Method
This method is more accurate than the Spend-based method and provides more certain carbon (GHG) emissions data. And being more certain helps create better-targeted reduction strategies. It also provides actionable insights and guides businesses/organizations to identify specific activities or processes that are significant sources of emissions. This method also aligns with potential regulatory requirements for detailed emissions reporting.
This method is more resource-intensive. Collecting detailed activity data would require more effort, which may be a challenge, especially for small businesses. Implementing and managing it may also be more complex than the spend-based method.
Hybrid Carbon Accounting Method
This method provides a balanced approach between the two. It combines the strengths of both spend-based and activity-based methods, providing a more comprehensive picture. It’s more flexible and allows SMBs to start with easier spend-based estimates and gradually incorporate more detailed activity data as resources and capabilities allow. This creates a scalable solution and can grow with the business/organization, becoming more detailed as they expand and more data becomes available.
This method is moderately complex. It’s not as resource-intensive as the activity-based method but requires more effort than a spend-based approach. It will also be carefully set up initially to balance the two approaches effectively.
This overview of the three methods should help you choose the best method for your SMB. We offer all three options in Sustainium. For most SMBs, the hybrid method is often the best choice due to its flexibility and balance. It allows you to start with a straightforward approach and thereafter progressively add more detailed activity data. This method provides a good balance between ease of implementation and the accuracy of emissions data, making it a scalable and practical option for SMBs.
However, if your business is looking for a quick and cost-effective way to start measuring emissions, the spend-based method can be a good starting point. On the other hand, if the business has the resources and is aiming for high accuracy and detailed insights from the beginning, the activity-based method could be the best fit.
Our team is happy to help you choose the best method for your needs. Click here to set up a demo and we will talk through it with you.