Transaction-based carbon footprints vs counterparty emissions data: which does your bank need?

Both, for different customers. A transaction-based carbon footprint multiplies each card or account payment by an emissions factor for the spending category and country, and shows the customer the result inside the banking app. It is built for retail customers at scale. Counterparty emissions data is the emissions figure of a company you lend to or invest in, calculated from what that company itself has disclosed, and it is built for the business book: underwriting, pricing, engagement and PCAF reporting. The mistake is to carry the first into the second, because a business customer's footprint produced from its transactions is the sector's figure with that customer's spending attached, and no decision about that specific company can rest on it.

What is a transaction-based carbon footprint?

A transaction-based carbon footprint is an estimate of the emissions behind a payment, produced by multiplying the transaction amount by an average emissions intensity for the merchant category in that country. The intensities come from environmentally extended input output (EEIO) models, which distribute a country's sector emissions across its economic output to give a figure such as kilograms of CO2e per pound spent on groceries. Map a merchant category code to a sector, multiply, and every transaction has a footprint within milliseconds.

The method is the GHG Protocol's spend-based method applied at the level of an individual payment: spend multiplied by a secondary, sector-average factor. It needs nothing from the merchant and nothing from the customer beyond the transaction feed, which is why it can run across millions of accounts.

Where does a transaction-based footprint work?

For retail customers, and for engagement. A footprint against every purchase turns an abstract subject into something a customer can see in the app they already use, and the tips and nudges that sit beside it are a legitimate retail proposition. The customer is an individual, the purchases are consumer categories, and nobody is underwriting a loan on the result. At that scale and for that purpose, a sector-average estimate is the appropriate tool, and the customer is told it is an estimate.

Where does it stop?

At the business customer. Run a company's transactions through the same method and the result is the emissions intensity of its sector multiplied by what it spent. Two engineering firms with the same turnover in the same country get the same footprint whatever their operations look like. The figure moves when the company spends more or less, or when the sector factor is revised. It does not move when the company installs solar, changes its fleet or switches supplier, because none of that is visible in a payment feed.

For the bank that is a problem on four fronts. The number cannot support a lending or pricing decision about a specific business, because it says nothing specific about the business. It cannot support engagement, because there is nothing the customer can do to change it except spend less. Under PCAF it is an economic activity estimate, data quality score 4 at best, and a book built from it stays there. And a business customer that has already published an emissions figure, as many mid-market and large private companies have, is being shown a number that is not theirs and is usually wrong.

What is counterparty emissions data?

Counterparty emissions data is the emissions figure of a specific organisation, built from what that organisation has disclosed. Three kinds of disclosure produce a company-specific (primary) figure: the company's own reported greenhouse gas inventory, a published carbon footprint for a product or service it sells, and activity data about what it consumed. A sector factor applied to revenue is the fallback where none of those exists, and the record says so.

DitchCarbon holds verified emissions data for over 2 million organisations, built on primary emissions data wherever it exists, private companies and SMEs included, matched to a bank's counterparties through entity resolution against DUNS, LEI and ISIN identifiers. The disclosure coverage view shows what proportion of a business book publishes emissions data at all, and each record states which of four methods produced its figure: the company's own reported inventory, product data, activity data, or industry data where nothing better exists. Industry data is fourth of four. The book total toggles between organisation-specific and industry factors, and every figure carries its source and change history, so a line in the business book links to the document the number came from.

How do the two compare?

The rows on inputs and scale are shared ground: both run on data the bank already holds and both work across a whole customer base. The difference is entirely in the first row, and everything else follows from it.

Can a bank use both?

Yes. The transaction-based footprint stays in the retail app, where it belongs. For business customers, the same DitchCarbon counterparty record that feeds the PCAF model can feed the business banking journey: the customer sees its own published figure where it has one, with the source, rather than a category estimate, and a customer that has not published sees a prepopulated request to confirm and correct on a profile it then owns. Nothing about the retail tool changes.

What happens after the business book has a figure?

The figure becomes something to act on. Each counterparty carries a forecast against its own target trajectory, aggregated to portfolio or sector level, so the bank can see where the book lands against its sector targets as well as where any one customer does. Targets register with SBTi-validated separated from self-declared. The 0 to 100 score carries a criterion-level breakdown, and filtering to the unearned criteria turns it into an engagement list for relationship managers, which is the green lending origination conversation with a number the customer recognises as its own.

The forecast is projection rather than measurement and carries a reliability notice where the underlying disclosure is thin; the calculator verification described below does not extend to it.

How can the bank rely on the counterparty figures?

By opening the source. Every DitchCarbon figure links to the document it came from and carries its change history, so an auditor or a risk analyst can sample a counterparty and see the same number in the company's own report. The calculation behind the data is verified to ISO 14064-3, limited assurance, by UL Solutions, renewed annually, and DitchCarbon data has been used in emissions reports that were subsequently assured by ten different third-party assurance providers, including Big Four firms. The declarations are in the trust centre.

The short version

A transaction-based carbon footprint is a sector average per payment, and it is the right instrument for showing a retail customer the shape of their spending. A business customer is a company, and a company has a figure of its own, published or obtainable, that the bank can underwrite, price, engage and report on. DitchCarbon supplies that figure wherever the company has disclosed, states the method behind every line, and shows the share of a book still resting on a sector average as a number rather than a footnote.

See the split on a sample of your business customers

Send a representative sample of counterparties. What comes back: for each, whether a reported figure exists, where it sits in the PCAF hierarchy, and the document behind it. Request a walkthrough.