Sustainability Reporting for Non-Listed SMEs: What You Need to Know About VSME
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Scope 2 Emissions Guide
The GHG Protocol is a widely adopted global framework that provides standardized guidelines for measuring and reporting greenhouse gas (GHG) emissions. It is used across various sectors, including governments, industry associations, NGOs, and businesses in both the public and private spheres.
The primary goal of the GHG Protocol is to offer a consistent accounting standard for organizations to assess and report their climate-warming emissions, enabling informed decision-making and targeted interventions to address environmental impacts.
Emissions across an electricity value chain. Source: GHG Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standard
What are Scope 2 Emissions?
In the GHG Protocol, emissions are categorized into two types (direct vs. indirect) and three scopes (Scope 1, 2, and 3).
Indirect emissions fall under Scope 2 and Scope 3. Scope 2 refers to emissions from purchased energy, while Scope 3 covers emissions from upstream and downstream activities. Energy in Scope 2 includes electricity, steam, heating, and cooling.
- Electricity: The most common type of energy, used in nearly all companies.
- Steam: Primarily used in industrial processes, such as mechanical work or directly as a process medium. Combined Heat and Power (CHP) facilities can produce various types of energy from a single combustion process.
- Heat: Required for maintaining and controlling the indoor climate of commercial buildings and the indoor equipment of industrial buildings. CHP plants often supply both heat and steam to nearby organizations.
- Cooling: Similar to heat, cooling is essential for business operations, such as chilled water and cold storage facilities.
Accounting methods for calculating Scope 2
According to the GHG Protocol, there are two accounting methods: location-based and market-based.
- Location-based method:
This method considers the average emissions of electricity generated within a specific geographic area over a specific period. It treats all entities on the grid as average consumers and assigns the local grid emission factor to all electricity use. It’s common to use the production mix — a country-specific average emission factor for electricity produced annually — in the location-based method.
Emissions = kWh of electricity used x Local grid emissions factor
- Market-based method:
This method reflects the emissions from purchased electricity based on specific contracts or agreements. In other words, the geographic location of the company’s facility does not determine the emission factor; instead, it is determined by the energy contract the company signs. The emission factor for the market-based method is provided by the energy supplier. If the supplier does not have this data, the residual mix — a country-specific average emission factor for uncertified energy — can be used.
Emissions = kWh consumed x Energy provider’s emissions factor
Determining which accounting methods to use for scope 2. Source: GHG Protocol Scope 2 Guidance
GHG Protocol’s detailed guidance can be found here.
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