Introduction

The GHG protocol scope 2 guidance introduces a dual reporting requirement for corporate greenhouse gas (GHG) inventories. Companies must report scope 2 emissions using both the location-based method—reflecting average grid emissions—and the market-based method—reflecting emissions from contractual energy purchases. This approach aims to increase transparency, consistency, and accuracy in emissions reporting. The guidance also introduces Scope 2 Quality Criteria to evaluate contractual instruments used in market-based accounting.

Business goals

The guidance helps organisations identify GHG-related risks, such as regulatory exposure, reputational impacts, and fluctuating energy costs. Opportunities include improving operational efficiency, driving innovation, and enhancing stakeholder trust. Comprehensive scope 2 reporting enables goal-setting and performance tracking. It supports collaboration with energy suppliers to lower emissions and facilitates engagement in low-carbon energy markets. Transparent reporting using both methods enhances comparability and credibility.

Accounting and reporting principles

Five key principles underpin scope 2 accounting: Relevance, completeness, consistency, transparency, and accuracy. These ensure that reported emissions reflect actual corporate activities and inform decision-making. Where trade-offs exist (e.g., between completeness and accuracy), companies should strike a balance aligned with their business goals.

Scope 2 accounting methods

Two accounting methods are codified. The location-based method applies universally, using average grid emission factors to estimate emissions from electricity use. The market-based method reflects emissions from electricity explicitly purchased via instruments like energy attribute certificates or supplier-specific contracts. Each method provides different insights and supports varied decision-making contexts.

Identifying scope 2 emissions and setting the scope 2 boundary

Scope 2 emissions cover purchased electricity, steam, heat, and cooling. Companies must define organisational and operational boundaries for these emissions. Double counting is addressed by clarifying distinctions between scope 1 (owned generation) and scope 2 (grid-delivered energy). Accurate boundary setting ensures emissions are correctly attributed and prevents overstatement.

Calculating emissions

Emissions are calculated by multiplying activity data (e.g., electricity consumption) by emission factors appropriate to each method. For market-based accounting, contractual instruments must meet Scope 2 quality criteria. If such instruments are unavailable, fallback emission factors from a defined hierarchy are used. Biofuel emissions must also be considered and reported where relevant.

Accounting and reporting requirements

Companies must report scope 2 emissions using both methods when operating in markets where contractual instruments are available. Required disclosures include total electricity consumption and the emission factors applied. Optional disclosures can improve clarity and transparency. Reporting should clearly identify which method underpins reduction targets or other claims.

Recommended reporting on instrument features and policy context

To enhance transparency, companies should disclose attributes of energy purchases such as certification type, energy source, and policy environment. This helps stakeholders assess the legitimacy and impact of reported emissions reductions, especially in voluntary markets.

Setting reduction targets and tracking emissions over time

The guidance outlines how to set base years, recalculate baselines, and establish reduction or energy targets. Organisations can set absolute or intensity targets using one or both accounting methods. Clear target setting enables better tracking of progress and more robust engagement in low-carbon energy initiatives.

Key concepts and background in energy attribute certificates and claims

Energy attribute certificates (e.g., RECs, GOs) enable market-based claims on electricity sources. The guidance explains certificate tracking, uses, and interactions with supplier disclosure and regulatory policies. These instruments underpin credible market-based emissions accounting.

How companies can drive electricity supply changes with the market-based method

Market-based purchasing allows consumers to influence electricity generation by signalling demand for low-carbon sources. The guidance details how contractual choices and additionality can lead to real-world supply changes, particularly when linked to long-term procurement commitments or investment in new projects.