Activity data vs. monetary data: advantages and drawbacks
An increasing number of firms are willing to participate in the fight against climate change by reducing their greenhouse gas emissions. There is one major prerequisite in order to achieve this: carrying out a carbon assessment of the various activities of the company.
A carbon assessment sheds light on the main areas of emissions in order to find adequate solutions to reducing such emissions.
How is a carbon footprint assessment calculated? What particular methods and data should be used in order to ensure the assessment’s exhaustiveness and accuracy? Two main data sources are used: activity data and monetary data.
Read along to know all about these two types of data.
How is the carbon footprint of a company calculated?
The need for comprehensiveness
For a carbon footprint assessment to be of good quality, it must be comprehensive. This is the primary condition to having an insight on carbon-intensive activities and finding levers for action to reduce emissions of the most polluting ones.
However, the estimation of certain carbon emissions may be difficult. Indeed, some company activities generate CO2 directly: for instance, a plant may need electricity or natural gas to function, and the generation of this energy directly emits CO2. In this case, the estimation of CO2 emissions is fairly straightforward. On the other hand, other sources of emissions seem a lot more difficult to estimate properly: for example, how should a firm account for the emissions caused by their use of a cleaning service?
This article will show you how the carbon emissions of a firm can be calculated, according to the type of data available.
Sources for calculating an extensive carbon footprint
In order to assess the carbon footprint of a company, one main source is to be used: the firm’s activity data (also known as physical data). Although these are the most reliable, they may sometimes be incomplete.
Another tool can thus be used to calculate the carbon footprint of a business entity: monetary data (also known as financial or accounting data). These data are based on the price of goods and services purchased by the company and are much easier to access than activity data.
However, although it is technically possible to calculate the carbon footprint of a company by looking at financial data only, the result isn’t as accurate. More importantly, it will lead to fewer solutions when it comes to improving the climate footprint of said company. Read along to find out why.
The most powerful tool: activity data
What is the activity data of a firm?
Activity data, also known as physical data, can be of different sorts: quantity of energy consumed, tonnes of raw materials purchased, etc.
To compare and add up CO2 emissions of all these activities (which are often of a very diverse nature), they must be converted into CO2 emissions equivalents. To do so, one must multiply the volume of these activities by their emission factor, i.e. the estimated amount of CO2 for one unit of this activity.
Carbon emission factors are the coefficients enabling an activity (electricity consumption, purchase of services, transportation, etc.) to be converted into CO2 emissions.
There are various bases of carbon emission factors, such as those created by the French Resource centre for greenhouse gas accounting (ADEME). They are based upon studies that take into account the entire life cycle of an activity, good or service, in order to establish its climate impact. Within its Carbon Base, the ADEME offers over 5000 carbon emission factors.
The carbon footprint of a firm is therefore calculated by taking into account the activity data of said firm (also known as physical data), and by looking at the carbon footprint established by the chosen base of carbon emissions factors.
The shortcomings of activity data
Although activity data are useful, they have two main limitations:
- The level of accuracy of the data can vary. For instance, to estimate the carbon emissions of an office, one could consider the amount of kilowatt hours consumed or make assumptions based on its surface area, the number of people working there, etc.
- The data can be difficult to access. Indeed, a company subcontracting its production does not necessarily know the amounts of raw materials used. Also, the carbon-related emissions of certain purchases (such as services) are complicated to account for.
To this extent, physical data is not always available to draw up a complete carbon footprint assessment.
In addition, some carbon emission factors cannot be found in the ADEME database. Another thing to note is that the consolidation of a firm’s physical data is often time-consuming.
At carbometrix, we help you easily collect material activity data at a high accuracy level. Do not hesitate to contact us to learn how.
Monetary data, the tool of last resort
Monetary data can overcome the limitations of physical data, which may sometimes be difficult to collect. Because of their ease of access, it is theoretically possible to calculate a company’s carbon footprint using only monetary data.
However, due to their lack of precision, the instability of prices and their lack of solutions to limit one’s climate impact, they have many limitations. It is therefore best to only use them as a last resort.
How can a company’s monetary data be used to establish its carbon footprint?
As with activity data, monetary data must be converted into greenhouse gas quantities. The monetary emissions factor is provided in kgCO2e/k€ plus VAT.
Monetary data have the advantage of being comprehensive and easy to access, since they can be found simply by viewing a firm’s accounts.
When a product’s emissions cannot be directly calculated (because the information at hand is incomplete, for example), they can be estimated thanks to their price.
But, consider this example. A firm has financed plane flights for its employees as a part of its activities, but only keeps records of the invoices. It has no way of knowing the total number of kilometres travelled on these trips.
To this extent, relying on the money spent and applying a generic monetary emission factor is a way of approaching these emissions. This will give the average grams of CO2 emitted by a purchased flight, thus allowing an order of magnitude of the climate emissions generated by these trips to be included in the firm’s carbon footprint.
Limitations of monetary data
Monetary data enclose three main limitations:
- The lack of precision: estimated carbon emissions derived from monetary data may be incomplete. Consider this example: a plane ticket costing 1,000€ may get you to the other side of the world in economy class if you plan ahead, but may also get you to some place in France and back at the last minute in business class. These two examples have nothing to do emissions-wise.
- Price instability: some of the bases of monetary carbon emission factors are updated every year, but this is no longer sufficient in the current context (with current inflation, the war in Ukraine, etc.) Indeed, the price of raw materials may double only in a matter of months.
- The lack of levers for action: the objective of a carbon assessment is to determine the largest GHG emission items and to find out how to reduce them. By limiting oneself to monetary factors, one does not have many ways to reduce one’s carbon footprint apart from “spending less”.
3 cases that justify the use of monetary data
Very low emission items
For very low emission items, for which the level of precision is not very important, it is possible to rely solely on monetary data.
A carbon footprint assessment takes into account all activities, so even if low emission items are simply estimated, this may still be enough.
Monetary data can be used when more reliable information is not available. This allows for a comprehensive carbon footprint to be drawn up that takes into account all of the company’s activities despite this.
However, it remains ideal to gather up better information for more qualitative carbon footprinting in the forthcoming years.
The purchase of services
For some purchases, and in particular services, it is very difficult to calculate precise greenhouse gas emissions from physical data. In this case, they may be estimated from monetary data.
This is the case for services provided by third party companies (such as consultancy or cleaning), or for certain goods such as semi-finished components.
As a whole, calculating the carbon footprint of a firm is often a compromise between data quality and speed of execution.
There is no point in waiting to have perfect data available before drawing up a carbon footprint estimate, as this can take a very long time where climate change requires action now. Nevertheless, action must still be based on reliable data.
Whenever possible, it is best to use physical data, as these are more accurate and actionable. Indeed, a better quality GHG assessment will be primarily based on physical data, even if it can be supplemented by monetary data.
Now that you know all about carbon footprinting, contact us today to carry out your own firm’s carbon footprint assessment! At carbometrix, we collect a wide range of your firm’s physical data via a questionnaire with a maximum of 30 data points. This is a simple and easy process to get you started now!