Overcoming challenges in Scope 3 emissions calculation with ESP’s spend based module

With a growing focus on and legislation around sustainable practices, there is an increasing need for companies to manage and report their greenhouse gas emissions effectively. However, many businesses struggle with this task, especially when it comes to capturing Scope 3 emissions - those indirect emissions that are a consequence of a company’s activities, but which occur from sources not owned or controlled by the company.  

In a recent Climate Leader’s Coalition Masterclass, ESP's Dan Tomlinson, Head of Markets and Partnerships, discusses the common challenges and how the new spend-based emissions calculation tool can help overcome them. Watch his segment below or read on for a written summary of his findings and advice. 

Understanding the landscape: motivators and challenges 

A recent survey of 230 global companies conducted by the Science-Based Targets Initiative and the Boston Consulting Group gives us crucial insights. The participating companies, 85% of whom had science-based targets, were early adopters of sustainability measures. The findings shed light on the drivers behind companies' endeavours to capture Scope 3 emissions: 

• Anticipation of future regulation: The majority of respondents were not currently responding to regulatory requirements but rather pre-empting potential future regulations. 
• Increasing expectations: Whether from ESG investors requiring ESG data or customers concerned about greenwashing, the call for businesses to improve their transparency and effect change over time is growing louder. 

On the flip side, the report also highlighted one extremely common challenge: 

• Data access: Companies often struggle to collect the data required to calculate value chain emissions. They find that suppliers are often unable to provide data, or it is poor quality and difficult to reconcile. As for data coming from internal systems, this can be challenging particularly for companies that have grown through acquisitions and have multiple, disparate legacy systems. 

Advancing towards effective emissions reporting: recommendations 

Given these observations, Dan made several key recommendations for businesses aiming to tackle Scope 3 emissions: 

• Start now: The task may seem daunting, but it is advisable to start now rather than delay. There might be some unpleasant surprises along the way, but potential opportunities will also arise. 
• Embrace continuous improvement: Aim for steady progress rather than immediate perfection. This should be part of your regular reporting process, with each reporting cycle offering opportunities for improvement. 

• Stay flexible and think long-term: Start with estimations using financial spend for an initial sense check and gradually move closer to activity data or supplier-specific emission factors as they become available. Don’t get locked into a single way of doing things too early. 
• Don't shortcut on quality data: Better data leads to better decisions. Always opt to collect more or better data when possible. It’s okay to make trade-offs, but don’t fall into the trap of taking too many shortcuts. 
• Collaborate: Engage closely with internal and external parties to capture more data directly from your value chain. Encourage transparency and collaboration for the best results. 

Introducing ESP’s spend-based emissions calculation module 

To specifically assist companies in navigating these challenges, ESP has developed a new tool within its enterprise carbon accounting software suite: the spend-based emissions calculation module. This tool is aimed at overcoming the issues typically associated with the spend-based methodology, including: 

• Scale of data: The vast amount of financial data that needs to be processed can be overwhelming. The spend-based module can automate data ingestion, making it easier to manage the volume of supplier emissions data. 
• Data categorisation: Aligning company-specific organisation methods (like GL codes) with specific emission factor groups can be tricky. The spend-based module uses advanced hierarchies and tagging to ensure you always know where data is from. 
• Emission factors: Ensuring correct application of emission factors is often a challenge. The new spend-based module can automatically apply emissions factors to the appropriate emissions sources based on an initial setting, cutting down on admin time and freeing up more resource for decarbonisation efforts. 
• Security concerns: With spend based methodologies, one can be working with sensitive financial information. There may be security concerns around integrating with a third-party system. We’ve architected our approach to address these concerns to keep CTOs and CIOs comfortable. 

ESP's solution is a simple SaaS tool designed to streamline data collection, offer intelligent categorisation of spending into the right categories, and manage emission factors effectively. The aim is to reduce areas of uncertainty, help businesses quickly identify key emission sources, and enable them to take more effective action. 

Want to know more? 

Please reach out to us if you're interested in using ESP's spend-based emissions calculation tool in your business or in a consultancy role. Your journey towards more effective emissions management and reporting starts here.