Monetary or activity-based?

carbon footprint does not just show how high emissions are. The calculation method also determines how well concrete reduction measures can be derived from it.

Not all carbon footprints are created equal

How meaningful a carbon footprint is does not only depend on which emission sources are included. How those emissions are calculated is equally important.

A key reason lies in the calculation method. This becomes particularly relevant for Scope 3.1 – purchased goods and services. Emissions in this category can, for example, be calculated based on purchasing spend or on actual purchased quantities combined with more specific emission factors. For a corporate carbon footprint, this makes a difference not only to the result itself, but above all to what can be derived from it afterwards.

Monetary or activity-based: What is the difference?

With the monetary, or spend-based, method, a company’s expenditure is linked to average emission factors for specific product groups or industries.

In simplified terms: Purchasing spend × emission factor per euro = CO₂e emissions

The method has one practical advantage: purchasing data is often already available and structured within companies. This means that even large purchasing volumes can be captured comparatively efficiently.

With an activity-based calculation, the focus is instead on what was actually purchased.

The calculation can, for example, be based on:

• number of units,
• kilograms of a material,
• litres of a raw material, or
• other physical units of quantity.

These quantities are then combined with suitable emission factors. Depending on data availability, companies can use average values, material-specific factors or concrete product data from suppliers.

The key difference is therefore: The monetary method links emissions to money. The activity-based method links them more closely to the actual products and quantities purchased.

One smartphone, two results

A simplified example shows how significant the difference can be.
A company purchases a mobile phone for €1,000.

Monetary approach

Purchasing spend: €1,000
Illustrative emission factor for electronic devices: 0.12 kg CO₂e/euro
Result: 120 kg CO₂e

Activity-based approach

Purchased quantity: 1 unit
Product-specific emission factor: 60 kg CO₂e/unit
Result: 60 kg CO₂e

In this example, the activity-based calculation produces a reported result that is 50 percent lower. This does not mean that activity-based calculations always result in lower emissions. For another product, the opposite could just as easily be true.

Instead, the example illustrates the limitation of average values: the price of a product only provides limited information about its actual emissions.

If the smartphone becomes more expensive, for example, the reported emissions also increase under a monetary calculation – even if the material, manufacturing process and actual product carbon footprint remain completely unchanged.

At the same time, differences between products, materials or suppliers can be smoothed out by average emission factors.

Where monetary accounting reaches its limits

For an initial assessment, this can be sufficient.

However, if a company wants to reduce its emissions in a targeted way, it needs to understand what is causing them.

A monetary footprint might show, for example: Product group A accounts for a large share of our Scope 3 emissions.

But concrete action requires answers to different questions:

• Which material is responsible for particularly high emissions?
• Which supplier performs better or worse?
• What impact would switching materials have?
• How would the footprint change with a lower-emission production process?
• How many tonnes of CO₂e would a specific measure actually save?

These questions can only be answered to a limited extent using purchasing spend alone.

This is why a purely monetary Scope 3 footprint, used as the sole data basis, reaches its limits when further steps are meant to build on it, for example:

• Developing a robust climate strategy and concrete reduction measures – this requires visibility into which products, materials or processes actually cause emissions and where the relevant reduction levers are.
• SBTi target-setting and validation – a physical greenhouse gas inventory plays an important role here, linking emissions more closely to the underlying activities.
• ESRS transition planning – companies not only need to disclose their emissions, but also describe concrete decarbonisation levers and their contribution to target achievement, for example material efficiency, product substitution or process changes.
• Further improving climate performance within EcoVadis – the more clearly emission sources and reduction measures can be traced, the more robustly a company’s climate performance can be improved and documented.
• Building product-related data structures with the Digital Product Passport in mind – the DPP fundamentally relies on structured, up-to-date and product-specific data. Which information is required in detail will be defined on a product-specific basis.

The more a carbon footprint is intended to be used as a management tool, the more important the link between emissions and the actual products, materials and processes becomes.

When monetary data can still be useful

This does not make monetary accounting inherently inferior.

It can be a pragmatic approach, for example:

• for an initial Scope 3 screening,
• for less relevant emission categories, or
• when sufficient activity data is not yet available.

The key is not to stop at monetary values for the main emission sources if the footprint is intended to support future decarbonisation efforts.

We have explored in more detail which level of data depth is appropriate in which situation in our article “Not every CO₂e question requires the same level of data detail”.

Our approach: enabling a pragmatic start while keeping future development in mind

At Fokus Zukunft, we offer both monetary and activity-based calculations.

Not every company starts from the same point. Our quality standard therefore does not begin with always using the most complex method.

It begins with considering, from the outset, how the results are intended to be used later on.

That is why we select the calculation method to match the company’s starting point and objectives. This creates a footprint that meets current needs while remaining suitable for further development as requirements evolve.