Attribution
Environmental, Social, and Governance (ESG) reporting is essential for organizations to transparently disclose their global impacts and make strategic sustainability decisions. Among the key methodologies used for quantifying environmental impacts are the Bottom-Up Method and the Top-Down Method, which help attribute these impacts to specific products or revenue streams, respectively. These methods are crucial for stakeholders assessing a company's sustainability performance and are foundational to the ESG reporting glossary.
Bottom-Up Method (Product-Based Attribution)
Definition This method involves calculating the environmental impact of individual products or services through their entire lifecycle, from production to disposal. It typically uses lifecycle assessment (LCA) indicators for each product at a specific point in the supply chain (e.g., Delivered At Place or DAP) and combines these with shipping volumes or production data to determine the total environmental impact attributable to the sourced goods or services. This approach is granular and allows companies to pinpoint specific areas within their product lines that are responsible for higher levels of environmental impacts.
Common Usage: Often used in product-specific reporting and detailed supply chain management to enhance sustainability practices at the product level and improve transparency in customer communications.
Top-Down Method (Revenue-Based Attribution)
Definition: This method assigns a proportion of a company's total environmental impact to its various products or services based on their share of the company's total revenue. This approach simplifies the allocation by using financial metrics as a proxy for environmental impact distribution across different business units or product lines.
Common Usage: Useful for broader strategic decisions and corporate-level reporting where detailed product-specific data is unavailable or unnecessary for the intended reporting purpose. It helps in illustrating the impact relative to economic performance but may be less precise in targeting specific environmental interventions.
