Documentation for Climate Reporting

Spend-based approach

In this approach, we combine financial data from a company's general ledger with spend-based emission factors into CO₂-equivalents. A general ledger is a set of numbered accounts a business uses to keep track of its financial transactions. Each account in the ledger contains debit and credit transactions, along with detailed information such as date, description and amount. 

In Norway, most accounting software use a standard chart of accounts maintained by Regnskap Norge, while some are based on resources from Standard Norge. These standards serve as blueprints for organising financial information, but companies are ultimately responsible for their own accounts  and can change them as they wish. The one common denominator is the SAF-T account ID which must be assigned to all accounts in order to produce a tax report - if requested by Skatteetaten. All Norwegian accounting software can therefore output an interchangeable SAF-T report file. SAF-T account IDs (version 1.1 and 1.2) can be used as the basis for a simple yet comprehensive and comparable greenhouse gas accounting. 

We map each SAF-T account  with either a match 1-to-1 to an emission factor or a mix of emission factors. To take an example, account 7000 contains travel-related expenses like hotel stays, travel tickets and food. Therefore, for this account, we have used emission factors which correspond to the expenses mentioned above. Exactly what goods and services have been purchased cannot be known just from data in the accounting system.

The logic flow for spend data:

1. The customer’s financial report is made available to Climate Reporting.  This can be done in one of two ways:
   1. Climate Reporting fetches data directly from the Business NXT API
   2. The customer uploads their financial report to Climate Reporting as a SAF-T file
2. Relevant information for calculating greenhouse gas emissions is extracted. This means transactions from expense related accounts, including
   1. Account IDs (in the SAF-T format)
   2. Amounts (in a defined currency)
   3. Dates
3. The net amount per SAF-T account per month is calculated by summing all transactions
4. The aggregated transactions are sent to our internal API endpoint for greenhouse gas emission calculations
   1. The emission factor for a particular account for a month is fetched from the database
   2. The net amount per account per month is multiplied by the relevant emission factor for that month
5. Sensitive data such as monetary transaction data is removed, and the resulting emissions are stored in our secure database
6. All of this happens automatically as the user logs in for the first time or after a file has been uploaded
7. A  report can now be exported, containing
   1. The greenhouse gas emissions (in tons of CO₂-equivalents) associated with each account
   2. Total scope 1, 2 and 3 greenhouse gas emissions (in tons of CO₂-equivalents)
   3. Breakdown of total energy consumption by fuel type and renewable share

Activity-based approach (coming soon)

The activity-based method estimates the greenhouse gas emissions of a product and service by converting activity data in physical units (litres of fuel, kWh of electricity or kilometres driven in a car) into CO₂-equivalents. Emissions calculated from activity data are more precise than the spend-based method, given that there are good routines for collecting activity data. In cases where a business has activity data available, this information can be combined with more specific emission factors from life cycle assessments and will override corresponding spend-based data. Typical areas where activity data is collected are energy consumption, fuel use, distance travelled, and waste generated. 

Activity data is combined with corresponding emissions factors and converted into CO₂-equivalents. If activity data is provided for energy consumption, fuel use or distance travelled, we use the activity-based approach to calculate scope 1 and 2 greenhouse gas emissions. If no activity data is provided, we estimate scope 1 and 2 emissions using financial data.

The logic flow for activity data:

1. The customer’s activity data is made available to Climate Reporting.  This can be done in one of two ways:
   1. Climate Reporting fetches data directly from an electricity provider and the Visma Expense API (coming soon)
   2. The customer adds activity data to Climate Reporting manually (coming soon)
2. Relevant information for calculating greenhouse gas emissions is extracted. This means activity data including
   1. Activity type (in defined categories)
   2. Activity quantity (in defined units)
   3. Dates
3. The net quantity per activity per month is calculated
4. The aggregated quantities per activity type are sent to our internal API endpoint for greenhouse gas emission calculations
   1. The emission factor for a particular activity type for a month is fetched from the database
   2. The net amount per activity type per month is multiplied by the relevant emission factor for that month
5. The greenhouse gas emissions (in tons of CO₂-equivalents) associated with each activity are merged into total scope 1, 2 and 3 greenhouse gas emissions (in tons of CO₂-equivalents)
6. Updated data is now available to get an overview and export reports

Emission factors

An emission factor is a term that describes the rate at which a given activity emits greenhouse gases into the atmosphere. In order to convert an activity into CO₂-equivalents, it must be supplemented with a factor in units like kilometres or litres.

The emission factors for the activity-based approach are obtained from various sources: life cycle assessment studies, emission factor databases (DEFRA, ADEME, IEA etc.) and environmental products declarations. Life cycle assessment (LCA) is a tool to assess potential environmental impacts throughout a product's life cycle. It can be used to study the environmental impact of either a product or the function a product is designed to perform. More information on activity-based emission factors can be found here. 

The emission factors for the spend-based approach are extracted from Exiobase 4, an environmentally extended multi-regional input-output (MRIO) table. An input-output table documents the economic activity by recording the flow of money in and out of different sectors of the economy.  “Multi-regional” simply means that the economy of many countries is included, so that imports and exports can be modelled accurately. In an environmental extended input-output  analysis, emissions and activity data for a standard selection of business sectors are used to calculate the emissions caused by a given purchase within each sector. By using these, we can estimate what the use of a financial unit (e.g. NOK) within a sector of an economy will generate in terms of greenhouse gas emissions.  Exiobase provides data at a consistent detail in terms of sectors, products, emissions, and resources and covers 43 countries (95% of the global GDP) with over 150 smaller countries combined in five ‘Rest of the World’ groups by continent. It was therefore chosen as the dataset for this purpose.

A few spend-based emission factors are calculated using a bottom-up approach, whereby we combine emissions based on life cycle assessment and corresponding price and spending data, to calculate the emissions per unit of spending.

The emission factors are updated monthly. We account for inflationary effects using monthly inflation data from Eurostat.  Prices are assumed to be the purchaser's price, that is, including any sales tax.

Output report format

Climate Reporting outputs a simple spreadsheet file to enable simple and efficient use and manipulation. The report outputs the following:

• Monthly greenhouse gas emissions per scope
• Monthly greenhouse gas emissions per SAF-T account
• Breakdown of energy consumption into energy sources
• Renewable share

The report is based on the GHG Protocol Corporate Accounting And Reporting Standard Revised.

What scopes have been included and excluded?

Reporting boundaries for scope 1

Reporting boundaries for scope 2

Reporting boundaries for scope 3

Scope 3 is broken into 15 categories by the Greenhouse Gas Protocol to help companies comprehensively assess and manage their indirect GHG emissions. The first eight categories are upstream of the company (related to purchased goods and services) and the last seven downstream (related to sold goods and services). We currently include  all categories of scope 3 emissions where spend-based data is available and accounts are categorised with SAF-T IDs. For reference, please see the list below. 

In the current version, we only include purchases that are not defined as operating assets. Purchases of 30,000 NOK or more, that are long-lasting and intended for internal use, are recorded as assets and amortised according to accounting regulations. Consequently, these purchases are gathered under asset accounts which are not currently mapped to greenhouse gas emissions. We are working on functionality to include assets in our GHG accounting.