In carbon accounting, a common challenge organizations face is calculating the carbon footprint of an activity when the exact quantity of that activity isn't known. For example, how do you measure emissions without knowing the distance traveled for various types of travel throughout the year? One solution to this problem is using the spend-based method. Instead of measuring the activity itself, the expenditure on that activity can be used to estimate emissions. This can be achieved through Environmentally-Extended Input Output (EEIO) analysis.

What is EEIO Analysis?

EEIO analysis is a widely used and relatively simple methodology. It evaluates the interdependencies between economic consumption activities and environmental impacts. Most commonly extended with greenhouse gas emissions, an EEIO model produces emissions factors or intensities, which describe the quantity of carbon dioxide emissions in tonnes caused by production and consumption per financial unit of economic output.

Organizations use EEIO factors to quantify greenhouse gas emissions in various scope categories, such as Purchased Goods & Services, Business Travel, and Upstream & Downstream Transportation. The factors are spend-based and compliant with the Greenhouse Gas Protocol. Increasingly, investors leverage this methodology as part of their Scope 3.15 category Investments. The Partnership for Carbon Accounting Financials endorses this approach for measuring emissions in equity, bonds, and business loans.

There are several off-the-shelf EEIO models available in the market, including EXIOBASE, EORA, WIOD, and GTAP. These models are accessible under varying license agreements directly or via a third-party provider or consultant. Atlas Metrics has developed its own proprietary model based on the OECD’s Inter-Country Input Output tables using greenhouse gas emissions data from EDGAR and FAOSTAT.

High coverage, low effort: the advantage of EEIO analysis

EEIO factors are simple to use and require minimal resources for data collection. Organizations only need to provide financial data, such as procurement spending and revenue categorized by economic sector and country.

To calculate absolute emissions, the country and sector-specific EEIO factor is multiplied by either the spend on that supplier or the revenue of the investee company. This approach is less labor-intensive compared to activity-based, LCA, or direct disclosure-based analyses of the supply chain or an investment portfolio. This low-effort data collection typically generates 80 - 100% coverage of emissions. High coverage and low effort mean organizations can rapidly begin their carbon accounting journey and respond to regulatory and stakeholder demands.

However, this approach is not the ultimate solution. Spend-based analyses are comprehensive and compliant but are typically classified as lower-quality. Ideally, they should be used when activity-based data is unavailable. The goal for every organization is to improve data quality over time by replacing spend-based methodologies with more granular activity-based approaches.

Using the spend-based method on Atlas Metrics

Atlas Metrics supports organizations in their journey toward better data quality. Our supply chain emissions module allows users to upload their procurement ledger to the platform, instantly providing a complete spend-based estimate for the 3.1 Purchased Goods & Services category. Users can then invite material suppliers to submit their own carbon numbers, which automatically replace the spend-based estimates, thereby improving the accuracy of the supply chain footprint. Several German regional banks also use Atlas Metrics to upload financial data, receive an instant spend-based footprint of the 3.15 Investments category, and over time, replace material data points with activity-based or direct disclosures for a more accurate footprint.

In both cases, Atlas Metrics provide organizations with a comprehensive carbon footprint, delivering valuable insights into where to focus on improving data quality.

Contact us to learn more about how Atlas Metrics can help you simplify ESG compliance