Spherics Methodology

Forewarning, there will be some unavoidable use of technical terms here but where jargon is necessary, we’ll give you a link to our glossary.

Spend analysis applies carbon intensity factors to procurement categories (such as postage, accommodation, electricity, travel, etc.) to estimate your carbon footprint. This approach is widely used and is recognised by the GHG Protocol. Spherics takes this approach to another level by linking to your bank account and analysing the emissions associated with your activities automatically.

All carbon footprints are compiled in essentially the same way: record all the things you do, measure the impact of each and add it all up. If you run a multinational corporation with a dedicated sustainability team, you can do this through a highly detailed and time-consuming process of material and process assessments, but supply chains are so complex and changeable that this is rarely practical. Most companies use the much simpler approach of spend analysis.

Financial activity equals environmental impact

Money that moves between you, your customers and your suppliers has a measurable impact on the environment - purchasing materials, paying your energy bills and organising staff travel for example.

Connecting with your accounts

Spherics connects with your accounting software and extracts these data points from your transactions:

Supplier name
Account name/code
(determined by your finance team)
Amount spent
01

Converting the data

This spend data is combined with our extensive carbon intensity database to convert pounds spent with a merchant into an estimated carbon dioxide equivalent.

Jargon buster: Carbon intensity is the measure of kg.CO2e produced per £ of spending in a given category.
02

Applying calculations

Applying defined carbon intensities to the economic value of goods and services is known as the ‘spend-based’ method of estimating emissions, as defined by the GHG Protocol.

03

Building layers of information

The Spherics platform has been designed to capture data points and build them up in layers of increasing detail. Throughout the process, we seek to add accuracy, completeness and specificity to your emissions estimate.

Accuracy

The extent to which a data point provides an accurate representation of the actual associated emissions from the activity.
01

Completeness

A measure of how many data points have been gathered from the total possible.
02

Specificity

How readily a data point can be attributed to a specific source.
03

Accounting categories

The process starts by establishing a basic emissions profile. Your first-pass carbon footprint estimate is calculated by:

01

Automatically mapping each of the accounting codes we find in your bookkeeping records to an associated environmental category in our database (e.g. travel).

02

Applying a carbon intensity to each environmental category.

03

The total spend in each environmental category is multiplied by the associated carbon intensity to produce an estimate of the resulting CO2e emissions.

Matching merchants with an industry-average carbon intensity

The next level of specificity we can apply to your purchase transactions is to allocate a carbon intensity to the associated merchants based on their Standard Industrial Classification (SIC) code:

01

As your transactions are imported and analysed, we extract the names of the merchants you have purchased goods and services from.

02

We identify the merchant and search their Companies House record which contains the SIC code(s) for their business.

03

In some cases where we can’t locate Companies House records, our team of researchers investigate the merchant and identify the most appropriate SIC code.

04

Automatically mapping each of the accounting codes we find in your bookkeeping records to an associated environmental category in our database (e.g. travel).

Applying a specific carbon intensity for merchants

As more companies engage with measuring and publishing their carbon footprints, we can apply a specific carbon intensity to a merchant when the data is available. In this case, all transactions with such a merchant will be converted to a carbon dioxide equivalent using a factor that is representative of their actual carbon footprint rather than an industry average, increasing the specificity and accuracy of the calculation.

Activity data

After we have established your baseline, you’ll be asked to submit supplementary activity data. This is voluntary, but highly encouraged.

Activity data can be used in conjunction with carbon conversion factors to produce a more accurate emissions estimate than is obtainable with spend-based analysis. For example, knowing how much you have spent with an energy supplier gives us a good indication of the emissions produced, but giving us a meter reading is much more accurate.

Wherever possible, replacing spend-based calculations with activity-based calculations results in a better estimate of your emissions. Further to this, not all business activities will be found in your spending (staff commuting for example), so gathering activity data also helps us fill the gaps in your emissions model:

In key activity areas (e.g. energy, vehicle use), we will ask you to provide supplementary information such as meter readings or litres of fuel purchased in a given period of time.
01
We gather other characteristics of your organisation (headcount, location, building types etc.) to create emissions estimates using published data sources (e.g. working from home emissions - https://info.eco-act.com/en/homeworking-emissions-whitepaper-2020)
02
Where we have supplementary data in activity areas, we will replace the spend-based calculations with activity-based ones.
03

Coping with Scoping

There are a number of different environmental reporting standards businesses can use to assess their greenhouse gas emissions. Adopting a recognised standard means that your calculations will be robust, consistent and comparable with others.

The Greenhouse Gas (GHG) Protocol is widely recognised as the definitive standard for emissions accounting for businesses and their supply chains. Their Corporate Standard defines three main emissions categories:

1

Scope 1

Direct emissions that result from activities within your organisation’s control.

2

Scope 2

Indirect emissions from any electricity, heat or steam you purchase and use.

3

Scope 3

Other indirect emissions from sources outside your direct control.

In most cases, it’s not too hard to work out the Scope 1 and 2 emissions for a business. Scope 3 emissions on the other hand are much more complex and hard to measure, yet are most often the larger component of the carbon footprint for a business. The typical consumer company’s supply chain has a far greater impact than its own operations, accounting for more than 80% of greenhouse gas emissions (McKinsey, 2016). When food giant Kraft mapped its emissions, they saw that over 90% of their total emissions were Scope 3 (GHG Protocol, 2011).

In the past, many businesses and widely used footprinting tools tended to focus only on direct emissions, ignoring Scope 3 entirely. According to CDP, only one-third of the companies that reported their greenhouse gas emissions provided even a partial Scope 3 inventory in 2015, but this had increased to an average of 88% by 2018. (CDP, 2015).

We have made it our mission to tackle the complexity of measuring Scope 3 emissions head-on.

At Spherics, we have made it our mission to tackle the complexity of measuring Scope 3 emissions head-on. In fact, we’re so committed to demystifying Scope 3, it’s the first thing we do for you when you connect your accounting software. By analysing your purchasing patterns, we take the first major step in quantifying your value chain emissions, helping you to understand the Scope 3 component of your carbon footprint.

Using transaction data gathered from accounting software, we can make working estimates of the greenhouse gases emitted in the process of producing the goods and services an organisation purchases.  Emissions that fall under scope 1 (directly controlled) or scope 2 (directly influenced) are then identified by the supplier’s business category, or if necessary by asking you a few questions, and by allowing you to enter more detailed information directly.