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Spend-based PCF Calculation

Short summary

One way to calculate PCFs is not activity-based, whereby a product's life cycle is analyzed from resource extraction via production and distribution to use and EOL - but spend-based, whereby the product's price and its product category serve as sole indicators.
--> unit: kg CO2e / spent
spend-based EF are expressed in basic prices (price at the factory gate without taxes) and incorporate upstream emissions

Spend-based vs. activity-based PCF calculation

SPEND BASED
ACTIVITY BASED
low effort - low accuracy
high effort - higher accuracy - higher risk
higher comparability because 1 source covers all
comparability depends on assumptions: can differ between sources of emission factors
data is mostly available (from procurement or accounting department)
due to complex supply chains and limited traceability product data is often unavailable proxies needed can lead to inaccurate results

Advantages and disadvantages of spend-based calculation

ADVANTAGES
DISADVANTAGES
easy and quick starting point to calculate PCFs or Scope 3 emissions
very generic: no differentiation between products in one product category
spend is a bad proxy: volatility of CO2e results due to externalities (e.g., inflation, price reductions)
--> when a price discount is offered, the PCF decreases, while in reality nothing changes --> higher priced goods, luxury brands lead to a higher PCF compared to no-name products
not possible to base climate action on this --> no hotspot analysis --> no quantification of reduction measures

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