Carbon accounting methodology

This document provides a comprehensive description of Ignite’s carbon accounting methodology, used to calculate greenhouse gas (GHG) emissions.

The methodology aligns with the Greenhouse Gas Protocol (GHGP) Corporate Standard, developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).

It serves as the foundation for calculating emissions in Scopes 1, 2, and 3, and is designed to comply with ESRS E1-6 guidelines for reporting gross GHG emissions across an organization’s value chain.

You can share this page with your auditing firm or other stakeholders for reference and transparency in your emissions reporting. This is version 2.0 of this document, updated December 5th, 2024. Earlier versions are available here.
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About Carbon Accounting

In carbon accounting, GHG emissions are divided into three scopes:

• Scope 1: Direct emissions from owned or controlled operations, such as company-owned vehicles.
• Scope 2: Indirect emissions from purchased electricity, steam, heating, or cooling.
• Scope 3: All other indirect emissions across the value chain, including upstream and downstream activities, categorized into 15 categories as outlined by the GHG Protocol Scope 3 Standard.
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Two primary methods are used to calculate GHG emissions:

1. Direct measurement, which is more accurate but challenging for indirect emissions.
2. Calculation methods, where emissions are estimated based on activity data or spend.
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For Scope 3 emissions, the most common approaches are:

1. Spend-based methods, which estimate emissions based on financial spend.
2. Activity-based methods, which calculate emissions based on physical quantities, such as fuel consumption or kilometers traveled.
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According to the GHG Protocol Scope 3 Standard, organizations should aim to include all seven GHGs covered by the Kyoto Protocol (CO₂, CH₄, N₂O, HFCs, PFCs, SF₆, and NF₃), typically expressed as CO₂ equivalents (CO₂e). The most recent Intergovernmental Panel on Climate Change (IPCC) conversion factors, such as those from the Sixth Assessment Report (AR6), should be used when calculating these emissions, applying the 100-year global warming potential (GWP100) to convert greenhouse gases into CO₂e.

The GHG Protocol outlines five guiding principles for GHG inventories:

1. Relevance: Reflect the organization’s emissions and decision-making needs.
2. Completeness: Account for all emission sources within the inventory boundary.
3. Consistency: Ensure comparability over time by using consistent methodologies.
4. Transparency: Clearly disclose relevant issues and assumptions.
5. Accuracy: Reduce uncertainty as much as possible, aiming for neither over- nor under-estimation of emissions.
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These principles form the foundation of a robust GHG inventory, balancing the need for completeness and accuracy through a flexible combination of spend-based and activity-based data.
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Scope 3 Emissions: The Importance of Coverage and Starting with Estimates

Scope 3 emissions often make up the largest portion of an organization’s carbon footprint. These emissions come from activities across the entire value chain, both upstream and downstream. For many companies, the majority of Scope 3 emissions are upstream, stemming from procurement-related emissions from purchased goods and services. Therefore, it’s crucial to begin by covering suppliers and procurement activities comprehensively.
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While activity-based data provides the most accurate measurement of emissions, it’s often unavailable for all activities and suppliers right away. So, companies should start with spend-based estimates for a broader initial assessment. These estimates are particularly useful for procurement-related emissions and can help companies quickly cover more emission sources, enabling them to prioritize key suppliers and emission categories for future data collection.
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Focus on Upstream Emissions and Supplier Prioritization

Focusing on upstream emissions allows companies to address the most significant sources of Scope 3 emissions early on. The GHG Protocol Scope 3 Standard (Chapter 7, Page 66) suggests using screening methods, such as environmentally-extended input-output (EEIO) models, to estimate emissions and identify the largest contributors within upstream categories, like purchased goods and services. This prioritization helps companies target high-impact suppliers and procurement categories for further data collection and reduction efforts.
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The ESRS calculation guidance for E1-6 (AR 39-52) further emphasizes the importance of disclosing the methodologies, assumptions, and emissions factors used, ensuring transparency upstream emissions calculations. According to AR 46 of the ESRS guidance, companies should update Scope 3 emissions estimates annually, focusing on the most significant categories, such as procurement-related emissions.
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Additionally, the GHG Protocol Scope 3 Standard (Chapter 9, Page 105) requires companies to recalculate base year emissions if there are significant changes in methodology or data sources, ensuring that any changes reflect actual reductions rather than shifts in calculation methods.
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Spend-Based Estimates: Ignite's Foundation for Supplier and Category Prioritization

Spend-based estimates are a crucial starting point for calculating Scope 3 emissions. Ignite’s methodology ensures that all relevant spend is covered using the Exiobase EEIO database, capturing every procurement-related emission source. This approach allows for efficient estimation of emissions from all upstream supply chain activities, even when detailed activity data is unavailable.
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Leveraging Spend Data to Prioritize Suppliers and Categories

Ignite’s methodology doesn’t just cover all spend—it also helps organisations prioritize their efforts by identifying areas with the most significant emissions. By matching monetary spend to Exiobase emission factors, we generate a comprehensive view of procurement-related emissions, highlighting emission hotspots within the organization. This breakdown provides sustainability and procurement teams with insights to focus on high-impact areas first.
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With this detailed breakdown, teams can see which suppliers, business units and categories are contributing most to emissions, enabling them to target supplier engagement efforts and collect more specific activity-based data over time. This step-by-step improvement follows the GHG Protocol’s recommendation (Chapter 7, Page 66) to begin with broad estimates and refine the data by engaging key suppliers.
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Improving Data Quality Over Time

After establishing a comprehensive spend-based emissions baseline, the focus shifts to improving the accuracy of these estimates. Ignite helps customers transition from generic spend-based data to supplier-specific activity data in key areas. This iterative process improves accuracy and confidence in carbon reporting.

By prioritizing high-emission suppliers and categories, organizations can more effectively manage their carbon footprint. The ESRS E1-6 guidelines (AR 39-52) support this improvement, encouraging companies to update their GHG inventories regularly, especially when more detailed supplier data becomes available.
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Emission factors and methodology

With the integration of Climatiq as our third-party provider for emission factors, Ignite’s carbon accounting methodology has made significant advancements in both precision and coverage. Key improvements include adjustments for inflation, non-deductible taxes, and trade margins in our spend-based calculations, as well as a substantial increase in emission factors for activity-based calculations from about 3,000 to 30,000 emission factors.
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Initial spend-based setup

Ignite’s spend-based estimates rely on Exiobase, a globally recognized database that uses Environmentally Extended Multi-Regional Input-Output (EE MRIO) models to estimate emissions from economic activity. This database covers 163 industries and 200 product categories across 44 countries and 5 global regions, allowing us to match financial spend with emissions factors for a wide range of goods and services. More details about spend-based emission estimates can be found in Climatiq’s article on The Science Behind Spend-Based Emission Factors.
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We provide out-of-the-box initial spend-based estimates by matching spend with emission factors from the Exiobase 3.8.2 database. Three key dimensions are mapped to the Exiobase database: year, region, and product category.
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• Year Mapping: Mapping a purchase by year is typically straightforward. The most challenging aspect is selecting the appropriate date when multiple options exist. If the reporting organization has defined reporting years in its data, that information is used to align calculations with financial reporting.‍
• Region Mapping: Matching with an Exiobase region is usually simple, as most organizations include the supplier country in their procurement data. When supplier country information is unavailable, parts of the spend are matched to regions using payment currencies. Note that the supplier country is not always the best representation of the region to be matched with the Exiobase emission factor. In Ignite, more advanced calculations can overwrite this if necessary.
• Product Category Mapping: Mapping goods and services to an Exiobase product category is the most complex part. Initially, supplier industry information from third-party databases is utilized. All NACE industry codes are matched to Exiobase using a standard ruleset. For purchases not categorized this way, a weighted average based on customer-specific calculations is used as a proxy. This mapping can be improved in Ignite using our advanced classification functionality, described below.

The next iteration of matching with Exiobase emission factors involves creating rules from more accurate information, such as the general ledger (GL) account, product description, or spend categorization, depending on the data available.

In some cases, it may be possible to map all spend using a high-accuracy dimension, such as by a product master. When achievable, this should be the preferred approach.

However, prioritizing the most important categories is essential — considering spend size, emissions size, and the category's strategic importance to your organization. This iterative process helps refine accuracy.

To aid this, Ignite’s Classification Module allows rulesets to be built for each dimension, with specific precedence assigned to ensure a structured approach to improving emissions calculations.

In certain cases, Exiobase data may contain outliers or missing values, particularly in combinations of categories and regions with limited statistical data. Additionally, there is often a tail-spend left unmapped to Exiobase categories. Both issues are resolved with a customer-specific weighted average emission factor, derived from the mapped spend-based estimates.
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Spend-Based Calculations: Adjusting for Inflation and Margins

Using Climatiq’s Procurement Calculation Endpoint, our spend-based emission estimates account for currency conversion, inflation, non-deductible taxes, and trade margins. These adjustments ensure the estimates reflect the true economic cost of goods and services, leading to more accurate emission data.
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Automatic Updates to Past Spend and Future Comparability

To maintain consistency and ensure accurate comparisons over time, Ignite automatically updates all spend data to reflect the updates to the spend-based methodology. This ensures that customers’ historical emissions data aligns with the updated calculations, facilitating year-to-year comparability in reports.
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While these updates adjust previously reported emissions figures, Ignite’s seamless integration simplifies the process, allowing customers to efficiently apply updated methodology in compliance with the GHG Protocol and ESRS E1-6 (AR 39-52).
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As noted in Chapter 9 of the GHG Protocol (Page 105), companies are required to recalculate base year emissions when significant changes to methodology occur. This ensures that reported reductions reflect true progress rather than differences in calculation methods. Ignite’s automatic updates streamline this compliance process.
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Activity-Based Calculations: Improving Accuracy and Enabling Full Coverage of Scopes 1-3

The switch to Climatiq has significantly expanded the scope of activity-based emissions. Previously, our customers had access to around 3,000 emission factors. Now, with Climatiq, this number has grown to 30,000, encompassing a wider variety of processes, industries, and geographies.

This increased granularity allows for more precise calculations of specific activities, such as energy use, transportation, and manufacturing. Customers gain access to highly detailed emissions data, supporting more accurate reporting. Explore the expanded dataset via Climatiq’s Data Explorer.
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Reviewing estimates

Transparency is a core principle of corporate GHG inventory reporting. In Ignite, all added activities are fully traceable, with detailed records of who made changes, when, and what edits were applied.
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Additionally, you can review the emission factors used and include descriptions or documentation for each activity as needed. For spend-mapped activities, this data is also readily available, further enhancing transparency and accuracy in emissions reporting.