How to Use Supplier Spend Data to Measure Carbon Emissions

Last updated: March, 2025

Introduction

As businesses face increasing regulatory and stakeholder pressure to measure and reduce their carbon footprint, understanding supply chain emissions has become a critical challenge.

Procurement teams are often responsible for tracking emissions from suppliers, but many struggle with determining how much data is needed, which methodology to use, and how accurate the reporting must be.

This article provides a practical guide on how procurement professionals can use supplier spend data to estimate carbon emissions.

It explains:

• different carbon accounting methodologies,
• outlines regulatory expectations in Australia,
• provides a decision-making framework to help businesses choose the most suitable approach

Whether you need a quick estimate using spend-based emission factors, a detailed analysis with supplier-specific data, or a hybrid approach, this guide will help you navigate the process effectively while ensuring compliance with the National Greenhouse and Energy Reporting (NGER) Scheme, Climate Active, and global frameworks like the GHG Protocol.

Understanding Carbon Accounting Methodologies

There are multiple approaches to measuring supply chain emissions, each with its strengths and limitations:

1. Spend-Based Emission Factors

   • What It Is: This method estimates emissions by applying average carbon emission factors to financial spend data in different procurement categories.

   • Where It Came From: Developed as a practical way to estimate emissions when direct supplier data is unavailable, it relies on emission factor databases from organisations like the Australian Government Department of Climate Change, Energy, the Environment and Water (DCCEEW) and the National Greenhouse Accounts (NGA) Factors.

   • Pros: Quick and scalable; requires minimal data collection.

   • Cons: Uses industry averages, which may not reflect actual supplier performance.

   • Best For: Companies needing a broad estimate of emissions.

2. Environmentally Extended Input-Output (EEIO) Models

   • What It Is: EEIO models integrate economic and environmental data to assess emissions across entire industries and supply chains.

   • Where It Came From: Developed from input-output economic models used in national accounting, these models are widely used in sustainability research and corporate reporting. Australia-specific EEIO data can be found through the Australian Industrial Ecology Virtual Laboratory (IELab) and the CSIRO Australian National Accounts Input-Output Tables.

   • Pros: Captures both direct and indirect emissions for a more comprehensive view.

   • Cons: Lacks precision for individual suppliers.

   • Best For: Large organisations needing high-level emissions insights.

3. Supplier-Specific Data Collection

   • What It Is: A primary data collection approach where emissions data is gathered directly from suppliers based on their actual operations.

   • Where It Came From: Driven by the need for precise carbon accounting, particularly in industries with strict environmental compliance requirements. The Australian Carbon Disclosure Project (CDP) and reporting requirements under the National Greenhouse and Energy Reporting (NGER) Scheme provide frameworks for collecting supplier-specific emissions data.

   • Pros: Most accurate; enables supplier engagement in carbon reduction.

   • Cons: Time-consuming and requires supplier cooperation.

   • Best For: Businesses aiming for precise emissions tracking.

4. Hybrid Approach (Combining Methods)

   • What It Is: Combines spend-based factors or EEIO for general estimates with supplier-specific data where available.

   • Where It Came From: Developed as a best practice in corporate sustainability reporting, ensuring both feasibility and accuracy. The Climate Active Carbon Neutral Standard supports hybrid approaches for improved emissions reporting in Australia.

   • Pros: Balances accuracy and feasibility.

   • Cons: Requires effort to collect some supplier data.

   • Best For: Companies looking for a scalable and practical emissions measurement approach.

How to Choose the Right Method

To assist procurement teams in deciding the best approach, consider:

• Do you have access to supplier-reported emissions?

  • If yes, prioritise supplier-specific data.

  • If no, use spend-based factors or EEIO models.

• Are you reporting under a regulatory scheme (e.g., NGER, Climate Active)?

  • If yes, ensure alignment with required methodologies.

  • If no, focus on practical implementation with a hybrid approach.

• What is your industry’s standard practice?

  • Manufacturing & mining: Hybrid approach with supplier engagement.

  • Retail & professional services: Spend-based may suffice.

  • Government & infrastructure: EEIO models for macro-level insights.

How Much Detail is Enough?

The National Greenhouse and Energy Reporting (NGER) Scheme mandates that corporations meeting specific thresholds report their greenhouse gas emissions and energy data with a high degree of accuracy. The Clean Energy Regulator provides approved measurement methodologies that companies must adhere to, ensuring reported data is reliable and auditable. Businesses are required to maintain records for five years to substantiate their reported emissions, and non-compliance, including inaccuracies, can result in regulatory action such as audits or penalties. Learn more.

Determining the appropriate level of detail in carbon emissions reporting depends on regulatory requirements, industry expectations, and business goals. Procurement teams should consider:

• Regulatory Accuracy Requirements:

  • National Greenhouse and Energy Reporting (NGER) Scheme requires large businesses to report emissions accurately using approved methodologies.

  • Climate Active allows for a mix of spend-based and supplier-specific data but expects continual improvement in accuracy.

• Materiality Principle:

  • Focus on high-emission categories rather than every small supplier.

  • Prioritise suppliers with significant contributions to your carbon footprint.

• Industry Best Practices:

  • Some industries, like mining and infrastructure, are expected to use detailed supplier-specific data.

  • Others, like professional services, may find spend-based calculations sufficient.

If unsure, a hybrid approach—starting with spend-based factors and improving accuracy over time—is often the most practical.

Next Steps

To implement an effective carbon emissions measurement strategy using supplier spend data, procurement teams should:

1. Gather Your Data

   • Collect procurement and supplier spend data from internal financial systems.

   • Identify missing or incomplete data that may impact accuracy.

2. Categorise Your Spend Data

   • Classify purchases into relevant procurement categories.

   • Map spending to appropriate emission factors or EEIO models.
     (Call us at Acquire Insights if you need assistance with this part)

3. Choose the Right Methodology

   • Use spend-based factors if you need a quick, scalable estimate.

   • Engage key suppliers to collect primary emissions data where possible.

   • Consider a hybrid approach for the most balanced and accurate reporting.

4. Align with Regulatory Requirements

   • Ensure compliance with NGER Scheme reporting standards.

   • If pursuing Climate Active certification, develop a plan to improve data accuracy over time.

5. Calculate and Analyse Emissions

   • Apply appropriate emission factors to estimate your carbon footprint.

   • Identify high-emission categories and supplier hotspots.

6. Implement Tracking and Reporting Tools

   • Utilise ESG software or carbon accounting platforms to streamline calculations.

   • Maintain records for auditability and continuous improvement.

7. Engage Suppliers and Internal Stakeholders

   • Work with suppliers to improve data quality over time.

   • Communicate carbon reduction goals internally to align sustainability efforts.

Taking these steps will help businesses move towards more accurate emissions reporting, ensuring compliance with Australian regulations and supporting broader sustainability goals.

If you need assistance with any or all of these steps, we can help you. Call Simon Thompson (+61 433 847 909) or email him at sthompson@acquireinsights.com.au

Conclusion

By using supplier spend data to estimate carbon emissions, companies can quickly establish a baseline for their carbon footprint.

However, selecting the right methodology is critical—EEIO and spend-based methods provide fast estimates, while supplier-specific data enhances accuracy.

Over time, a hybrid approach integrating both methods can help businesses track and reduce emissions effectively, aligning with Australian regulatory requirements and global ESG commitments.

Need a place to start, the team at Acquire Insights provide Carbon Reporting using Spend-Based and EEIO methods.  See more here: https://acquireinsights.com.au/the-easiest-way-to-report-on-your-scope-3-carbon-emissions/