12 Feb 15

Everything you should know about the new GHG Protocol Scope 2 Guidance

Powersupply-1The GHG Protocol’s Corporate Accounting and Reporting Standard is the leading global methodology for calculating the emissions of corporate organisations. As well as providing guidance for organisations on how best to report emissions in a consistent and transparent way, the standard underpins our software solutions at Greenstone. We use the GHG Protocol to apply location-based emissions factors and in doing so automate and streamline the use of the Standard for our clients.

What’s new for Scope 2?

The announcement of new guidance on Scope 2[1] reporting has been four years in the making and after a lengthy collaborative process with 200 organisations across 23 countries, it is now available for organisations to use. The new Scope 2 Guidance has been published as a response to the rapid growth in renewable energy and offers organisations a new approach for reporting how low-carbon electricity purchases contribute to their carbon footprint.

To date, organisations have reported emissions from Scope 2 (electricity, steam, heating, and cooling) using a location-based approach. National or regional emissions factors are published using grid mix calculations and then applied to an organisation’s Scope 2 consumption. Although still a valid approach, the new Scope 2 guidance now offers a more comprehensive market-based alternative approach.

How should the new market-based approach be used?  

For companies with operations in markets without a choice in electricity supplier, there is no change to reporting your Scope 2 emissions. For those with a choice of supplier, a market-based approach to reporting emissions should now be taken alongside the traditional location-based approach.

Practically this means reporting the specific emissions associated with your procurement of energy from a contracted supplier. Low-carbon electricity supplies, power purchase agreements, electricity contracts and renewable energy certificates (RECs) are examples of instruments that provide companies with an opportunity to report emissions under the market-based approach.

For those reporting under the market-based approach, there are three new requirements:

1. Dual reporting (reporting emissions using both location-based and market-based methodologies)

2. Scope 2 Quality Criteria (details on the contractual instruments, such as RECs, should be included)

3. Recommended additional disclosures (information on instrument labels, power plant features and policy context should be included where available)

Why is reporting Scope 2 emissions important?

Scope 2 emissions account for around 40% of global GHG emissions[2]. Managing and reducing Scope 2 emissions is essential for companies but for many, green purchasing decisions have not been captured in the most accurate way to date. A location-based approach to calculating Scope 2 emissions has meant that for organisations to reduce their Scope 2 emissions, they need to reduce their consumption (energy efficiency). Although accurate, this does not provide the opportunity for companies to acknowledge the proactive procurement of low-carbon electricity supplies.

The new GHG Scope 2 guidance looks to bring this complicated reporting challenge under a consistent and robust methodology. The GHG Protocol, developed by the World Resources Institute (WRI) and World Business Council on Sustainable Development (WBCSD), estimate that investment in instruments to facilitate renewable energy increased to $310 billion in 2014 (compared to $60 billion a decade ago) and the new guidance, therefore, offers welcome progress in corporate sustainability reporting.

Should you start using the new approach?

There is no official commencement date for the Scope 2 Guidance but now that it is published the WRI and WBCSD are encouraging organisations to use it as soon as they can. Many organisations will consider this new approach in their next reporting cycle but the GHG Protocol has already been working with companies including Mars, Facebook, Google and EDF Energy to pioneer the use of the new Scope 2 approach. CDP will require organisations to report using the new methodology from 2016 and will likely be a driver for many companies to consider how a market-based approach could offer greater reporting accuracy.

Download our guide on 'Reporting Scope 2 market-based emissions'.

At Greenstone, our solutions will continue to offer companies a robust tool for calculating emissions in accordance with the GHG Protocol. As well as maintaining the existing location-based methodology, we can provide clients with the opportunity to record emissions from renewable energy instruments under the new Scope 2 guidance to ensure complete compliance with the GHG Protocol. 

Not sure how the new Scope 2 GHG Protocol Guidance impacts your organisation? Talk to us.

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[1] Reference 1
[2] Reference 2

Non-Financial Reporting , GHG Protocol