Typical ledgers to include and exclude for spend-based GHG reporting

When calculating emissions using the spend-based method, it's important to start with your general ledger or spend data, but not all expenses contribute to greenhouse gas (GHG) emissions. Excluding certain ledger categories ensures your reporting is accurate, meaningful, and aligned with best practices.

This guide outlines common ledger items that are typically excluded from spend-based Scope 3 calculations, and why.

🔍 Why Exclude Certain Ledgers?

The spend-based method estimates emissions based on the monetary value of purchases. However, not every financial transaction reflects the purchase of goods or services with associated emissions. Including such categories could overstate emissions or misrepresent your supply chain impact.

🚫 Common Ledger Categories to Exclude

Here are categories typically excluded from spend-based calculations:

1. Internal Transfers and Intercompany Charges

• Why exclude: These are not external purchases and often reflect internal cost allocations.

• Examples: Cost center recharges, group service center fees, internal IT allocations.

2. Depreciation and Amortization

• Why exclude: These are accounting entries, not active spend.

• Examples: Equipment depreciation, intangible asset amortization.

3. Financial Expenses and Investments

• Why exclude: These are not related to purchased goods or services.

• Examples: Interest payments, foreign exchange losses, investment write-offs.

4. Taxes and Statutory Fees

• Why exclude: Government taxes and duties don’t reflect emissions-generating activity.

• Examples: VAT, income tax, customs duties

5. Employee-Related Costs (Non-Purchased Services)

• Why exclude: Salaries and wages are not third-party purchases.

• Examples: Payroll, bonuses, pension liabilities.

6. Provisions and Accruals

• Why exclude: These are future obligations or estimates, not real spend.

• Examples: Legal provisions, bonus accruals, bad debt reserves.

7. Cash Transfers and Currency Adjustments

• Why exclude: These are non-operational and don't relate to purchased goods or services.

• Examples: Bank transfers, FX gains/losses, cash pooling.

✅ Focus On What to Include

The spend-based method works best when focused on categories that reflect real-world procurement of goods and services. Prioritise ledgers like:

• Raw materials and components

• Professional and consulting services

• Packaging

• Transport and logistics

• Facilities management

• IT and telecom services

📌 Tip: Clean Data Makes Better Emissions Estimates

Before sharing your data, take the time to clean and classify your ledger data. Removing irrelevant categories increases the reliability of your reporting and helps identify meaningful reduction opportunities.