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The Critical Role of a Hybrid Approach in Achieving Net Zero Goals

June 18, 2024
6
min read
Written by
As the global community intensifies efforts to combat climate change, achieving net zero emissions has become a crucial objective for businesses. Accurately accounting for Scope 1-3 emissions is essential for understanding a company's current environmental impact and developing a comprehensive pathway to reduce emissions and ultimately reach net zero.

The Importance of Accurate Emissions Accounting

Precise measurement of Scope 1-3 emissions allows businesses to identify key areas where emissions can be reduced. This detailed understanding is critical for setting realistic targets and implementing effective strategies to lower the carbon footprint. However, achieving this accuracy requires sophisticated methods of carbon accounting.

Activity-Based vs. Spend-Based Carbon Accounting

There are two primary methods to carbon accounting: activity-based and spend-based.

Activity-Based Carbon Accounting involves tracking actual physical activities that produce emissions, such as fuel consumption, energy use, and waste generation. This method provides highly accurate data and detailed insights into specific emission sources. Examples of activity data include: liters of diesel, kWh of electricity, etc.

Spend-Based Carbon Accounting estimates emissions based on financial expenditures. By analyzing how much money is spent on various goods and services, companies can infer the associated emissions. This approach is useful for capturing emissions across a broad range of activities, especially when detailed activity data is unavailable. Examples of spend data include: amount (USD) spent on diesel, amount (USD) spent on electricity, etc.

The Debate and the Hybrid Solution

A significant debate exists over which approach is more effective. Activity-based accounting is praised for its precision, while spend-based accounting is valued for its comprehensiveness. However, we believe that businesses shouldn't have to choose between the two. Each method has its strengths, and when combined, they provide a more robust and comprehensive understanding of emissions.

Combining these approaches allows for accurate representation of the volume of emissions in a company’s value chain. The key is to ensure that spend-based estimates are reliable and not overly generalized. High-quality spend data, when combined with detailed activity data, creates a powerful tool for accurate and actionable carbon accounting.

MoreScope’s Hybrid Approach

MoreScope has implemented a hybrid approach that integrates both activity-based and spend-based carbon accounting methods.

Why MoreScope’s Spend-Based Method (MEEM) Stands Out

MoreScope's Environmental Economic Model (MEEM) is a market leader, built on a decade of pioneering research at SINTEF, one of Europe's largest independent research institutions. This model transforms customers' financial data (transactions) into highly granular spend-based emission estimates. The model expertly matches suppliers with their sector of operation and region, linking spend data with emission factors from global databases, taking into account global trade relations, production technology and emission intensities for specific sectors in specific regions. MoreScope seamlessly integrates both activity-based and spend-based methods, encouraging and enabling customers to effortlessly replace spend estimates with activity data, wherever possible, for exceptional accuracy and completeness in emissions tracking.

By leveraging transactions alongside granular activity data, MoreScope provides a complete and accurate inventory for Scope 1-3 emissions. This hybrid model offers the best of both worlds: the detailed accuracy of activity-based data and the broad coverage of spend-based data.

Our platform ensures that spend-based estimates are derived from high-quality data, making them a reliable foundation for further analysis. This, combined with precise activity data, gives businesses a robust starting point for tracking their emissions and demonstrating improvements over time.

Why Is Hybrid Approach Essential for CSRD Compliance and Climate Strategy Integrity

With the Corporate Sustainability Reporting Directive (CSRD) looming, the EU is signaling the need for higher integrity in climate strategies that genuinely drive decarbonization. The hybrid approach is essential for this, as it enhances accuracy, completeness, and therefore more trustworthy performance and decarbonization results.

CSRD is a reporting framework that requires companies to implement high-integrity climate strategies. Companies using MoreScope can confidently state that they have mapped all material emissions, identified hotspots, and built granularity with activity data, eliminating guesswork. This integrity is crucial for CSRD compliance.

MoreScope’s hybrid approach brings significant value to customers by:

In conclusion, the hybrid approach to carbon accounting is a critical innovation in the journey towards net zero emissions. MoreScope’s advanced tools and methodologies provide businesses with the accuracy, flexibility, and comprehensive coverage needed to effectively manage their carbon footprint and drive sustainable progress.

For more information on how MoreScope can help your company achieve its climate targets and net zero ambitions, visit our website or contact our team of experts. Together, we can make sustainability reporting a seamless and transformative part of your business strategy.

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