Balancing Accuracy and Simplicity: A Scalable Approach to Supplier Emissions with Hybrid Scope 1 & 2 Assessment
What is the Hybrid Scope 1 & 2 Assessment?
The hybrid assessment is a method for calculating Scope 1 and 2 greenhouse gas (GHG) emissions for suppliers using spend data. This approach combines spend-based data with pricing data to create a more robust and scalable way to assess supplier emissions.
Why Use a Hybrid Approach Instead of Other Methods?
There are three primary methods for calculating Scope 2 GHG emissions:
- Quantity-Based: Uses physical quantities (e.g., kWh of electricity) for precise calculations.
- Spend-Based: Relies solely on financial spend data, which introduces more uncertainty.
- Hybrid-Based: Combines spend data with pricing data for a balance of precision and scalability.
The ideal method is the quantity-based approach because it delivers the most accurate results. However, gathering detailed quantity data from suppliers can be time-consuming and burdensome, particularly when engaging with a large number of suppliers.
The hybrid approach offers the best trade-off between accuracy and ease of use, allowing suppliers to submit comprehensive spend files without requiring additional data collection.
How Does the Hybrid Approach Compare to Other Methods?
The graph above shows a comparison of results from different methods for calculating Scope 2 emissions, based on an example from one company's data (and is therefore purely illustrative).
While the spend-based approach shows significant deviations from the expected results of a quantity-based method, the hybrid approach offers a much closer approximation.
What Are the Challenges of the Hybrid Approach?
The main source of uncertainty in the hybrid approach comes from pricing data. For instance, what a reporting customer pays for a unit of energy might differ from the commercial/industrial energy prices reported by national energy bodies. This variance can be influenced by factors such as:
- Geographic differences in electricity prices.
- Time-specific fluctuations in energy costs.
- Variations in energy sources (e.g., fossil fuels vs. renewable energy).
How Do We Reduce Uncertainty in the Hybrid Approach?
To minimize uncertainty, we:
- Use pricing data that is as close to the time period of purchase as possible.
- Ensure the pricing data reflects the geographic context of the purchase.
- Leverage granular datasets, such as state-level electricity prices in the U.S. or quarterly national-level data from the International Energy Association.
This ensures that the results remain reliable while maintaining a "light touch" approach for ease of implementation at scale.
Why Is This the Best Approach for Supplier Engagement?
The hybrid approach strikes a balance between accuracy and practicality. It aligns with our goal of making data submission straightforward for suppliers while maintaining robust and reliable GHG results. By reducing the burden on suppliers and ensuring high-quality data, this method supports effective collaboration and large-scale emissions tracking.