Moving Beyond Spend Based Scope 3 Accounting: A Practical Guide to Improving Purchased Goods and Services Emissions Data Over Time

For many companies, Scope 3 Category 1 Purchased Goods and Services is the single largest source of greenhouse gas emissions in their inventory. It is also the category that causes the most frustration, uncertainty, and skepticism.

If you are early in your Scope 3 journey, you are probably using spend based emission factors. That is not a failure. It is often the only realistic starting point. The real problem arises when companies stay there year after year, even as expectations around data quality, auditability, and decision usefulness continue to rise.

The goal of Scope 3 accounting should not be perfection in year one. The goal should be continuous improvement. This article walks through a realistic, step by step path to move from spend based estimates to activity-based data and eventually to supplier specific emissions. This is the same progression I have used with clients for years and the same approach we designed into the North Star platform.

Why Spend Based Data Is Only a Starting Point

Spend based Scope 3 accounting uses financial data and environmentally extended input output emission factors. In simple terms, dollars spent are multiplied by an average emissions intensity for a given sector.

There are real advantages to this approach.

1. It is fast and relatively low effort
2. It allows companies to establish a first baseline
3. It can cover a broad range of suppliers with minimal data collection

But spend based data has clear limitations.

1. Emissions are driven by price, not physical activity
2. Supplier specific improvements are invisible
3. Year over year changes often reflect inflation more than real emissions changes
4. It is difficult to defend under audit or regulatory scrutiny

Spend based data answers one question reasonably well. Roughly how big is our Scope 3 footprint.

It does not answer the questions stakeholders increasingly care about.

Where are emissions actually coming from? Which suppliers matter most? What actions will meaningfully reduce emissions?

To answer those questions, companies need to evolve their approach.

Step One: Prioritize Before You Improve

One of the biggest mistakes I see is companies trying to improve everything at once. That approach usually fails. Instead, start with prioritization.

Begin by ranking your Purchased Goods and Services by spend and by estimated emissions using your existing spend based data. In almost every organization, a small number of suppliers account for a disproportionate share of spend and emissions.

A practical rule of thumb is to start with suppliers that represent 60 to 80 percent of total spend in this category. That often means focusing on as few as 10 to 30 suppliers.

This allows you to improve data quality where it matters most without overwhelming internal teams or suppliers.

Step Two: Move From Spend Based to Activity Based Data

Activity based data replaces dollars with physical units. Instead of emissions per dollar, you are now calculating emissions per unit of product or service.

Examples include:

1. Kilograms of raw materials purchased
2. Liters of chemicals or fuels
3. Tons of packaging material
4. Megawatt hours of purchased energy
5. Number of components or parts

This shift alone can dramatically improve accuracy. Activity based data reflects real operational drivers. It also allows you to track meaningful changes over time even when prices fluctuate. How do you get started?

In many cases, the data already exists. Procurement systems, ERP platforms, and invoices often contain quantities even if they have never been used for emissions accounting.

Start by identifying:

1. What quantity data you already have
2. Where it lives
3. How reliable it is

Then map those quantities to more specific emission factors that reflect material type, production method, or geography where possible.

You do not need perfect activity data to begin. Even partial activity coverage is a major step forward from pure spend based estimates.

Step Three: Engage Suppliers for Primary Data

Once you have activity-based calculations in place for your largest suppliers, the next evolution is supplier specific emissions data.

This is where Scope 3 accounting becomes far more valuable and far more credible.

Supplier specific data can take several forms:

1. Product level carbon footprints
2. Corporate Scope 1 and Scope 2 emissions allocated to products
3. Emissions intensity metrics provided by suppliers
4. Verified environmental product declarations

This data allows you to reflect real supplier performance rather than industry averages. It also enables meaningful engagement and reduction strategies.

The challenge, of course, is data collection. This is where structure matters.

Rather than sending ad hoc spreadsheets or emails, companies should use standardized supplier surveys that are:

1. Clear about what data is being requested
2. Aligned with GHG Protocol expectations
3. Scaled to supplier maturity levels

At North Star, we built supplier survey functionality directly into the platform so companies can send structured requests to priority suppliers, collect emissions data, and link that data directly to their Scope 3 inventory. This avoids manual reconciliation, reduces errors, and creates a clear audit trail.

Step Four: Use a Hybrid Approach and Be Transparent

A common misconception is that once you collect some supplier specific data, you must have it for everyone.

That is not true. In reality, most companies will operate with a hybrid Scope 3 model for many years.

1. Supplier specific data for priority suppliers
2. Activity based estimates for others
3. Spend based estimates as a fallback where nothing else exists

This is acceptable as long as you are transparent.

Document assumptions clearly. Identify which data is primary and which is estimated. Track coverage improvements year over year.

Transparency builds trust with auditors, regulators, and stakeholders. It also makes future improvement far easier.

Step Five: Improve Incrementally Every Year

The most important mindset shift is recognizing that Scope 3 improvement is a multi-year process.

You do not need to solve everything today. Instead, set clear improvement goals such as:

1. Increasing supplier specific coverage by a defined percentage each year
2. Expanding activity-based data to additional spend categories
3. Improving data quality scores for priority suppliers
4. Aligning supplier engagement with procurement and sourcing decisions

Each year, your inventory should become more accurate, more actionable, and more defensible. That is progress.

Why This Matters More Than Ever

Regulatory expectations, investor scrutiny, and customer demands are all moving in the same direction. Companies are being asked not just to report Scope 3 emissions, but to explain them.

Spend based data alone will not support that conversation. Companies that invest now in better data, better processes, and better supplier engagement will be far better positioned as requirements continue to evolve.

Final Thoughts

If you are currently using spend based Scope 3 data, you are not behind. You are at the beginning.

The key is having a clear plan to move forward. Start with prioritization. Shift to activity-based data where possible. Engage suppliers thoughtfully. Use hybrid models transparently. Improve year over year.

That is how Scope 3 accounting becomes more than a compliance exercise. It becomes a tool for real decision making and real emissions reduction.

At North Star, our goal is to make that journey manageable, scalable, and defensible. Not perfect overnight, but meaningfully better every year.

If you are ready to take the next step beyond spend based Scope 3 accounting, start small, stay focused, and keep moving forward.