Navigating Changes to GHG Protocol Scope 2 Emissions: Impacts on Industries and Reporting Practices

The Greenhouse Gas (GHG) Protocol is a cornerstone for corporate emissions reporting worldwide. Recently, the public consultation on proposed updates to the Scope 2 emissions guidance has drawn significant attention. These changes could reshape how companies measure and report their indirect emissions from purchased electricity. Understanding the consultation’s key points, stakeholder feedback, and potential impacts is essential for businesses preparing to adapt their sustainability strategies.

Data centre infrastructure illustrating high electricity use and emissions reporting challenges

Key Areas of Focus in the Public Consultation

The consultation on GHG Protocol Scope 2 emissions primarily aims to improve clarity, accuracy, and consistency in reporting. It addresses several critical areas:

• Market-based vs. Location-based Reporting

The consultation seeks to refine the distinction between these two methods. Market-based reporting reflects emissions through contractual instruments such as renewable energy certificates (RECs) or power purchase agreements (PPAs), while location-based reporting relies on average grid emissions.

• Renewable Energy Certificates and Contractual Instruments

Stakeholders debated how to treat RECs and other instruments, especially regarding their environmental impact and additionality. The consultation proposes more precise criteria for recognising these instruments in emissions claims.

• Data Quality and Transparency

There is a push for enhanced data quality standards and transparency requirements to reduce inconsistencies and improve comparability across companies and sectors.

• Timeframes and Real-Time Data

The consultation explores incorporating more granular, real-time data to reflect actual emissions better, moving beyond annual averages.

Stakeholder Feedback Highlights

Feedback came from a broad range of participants, including corporations, environmental groups, and industry associations. Key points included:

• Support for Stronger Additionality Requirements

Many stakeholders want to ensure that renewable energy claims represent genuine emission reductions, not just accounting shifts.

• Concerns About Increased Reporting Complexity

Some businesses, especially smaller ones, worry that new requirements could add burdens without clear benefits.

• Calls for Sector-Specific Guidance

Several respondents requested tailored guidance for industries with unique energy profiles, such as data centres and manufacturing.

How These Changes May Impact Businesses and Reporting Practices

The proposed updates will likely affect how companies approach emissions accounting and sustainability strategies. Here’s what to expect:

Increased Scrutiny of Renewable Energy Claims

Businesses relying heavily on RECs or bundled renewable energy purchases may need to reassess their claims. The consultation’s emphasis on additionality means companies must demonstrate that their renewable energy procurement leads to new clean energy generation rather than simply reallocating existing resources.

Shift Toward Real-Time and Granular Data

Companies may need to invest in more robust energy monitoring and data management systems. Real-time data can provide a more accurate picture of emissions, but requires technological upgrades and potentially new partnerships with utilities or data providers.

Greater Transparency and Documentation

Expect more detailed disclosures about energy contracts, certificate types, and calculation methods. This transparency aims to build trust and comparability but will require enhanced internal controls and reporting processes.

Sector-Specific Implications

Industries with high electricity consumption or complex energy sourcing strategies will face the most significant adjustments.

Most Impacted Sectors

• Data Centres and Cloud Providers

These facilities consistently consume vast amounts of electricity. Often using REC-heavy strategies to claim renewable energy use. The new rules could require more rigorous proof of additionality and real-time emissions tracking.

• Manufacturing and Heavy Industry

Energy-intensive processes mean Scope 2 emissions form a large part of their carbon footprint. Changes in reporting could affect how these companies plan energy procurement and investments in efficiency.

• Pharmaceuticals and Chemicals

These sectors rely on stable, high-quality power supplies. Adjustments to Scope 2 accounting may influence their sustainability targets and supply chain requirements.

• Food and Beverage Processing

With significant energy needs for refrigeration, processing, and packaging, these companies will need to align their reporting with updated standards.

• Telecommunications Networks

Network operations and data transmission consume substantial electricity. Enhanced reporting requirements may push telecoms to adopt more transparent energy sourcing.

• Large Commercial Real Estate Portfolios

Building owners and managers will need to track emissions across multiple sites, often with varied energy contracts.

• Retail Chains with Large Store Footprints

Retailers with many locations will face challenges in aggregating and verifying energy data under the new guidance.

Moderately Impacted Sectors

• Professional Services

Typically moderate electricity users, these firms may see some changes but less operational impact.

• Public Sector Buildings

Government and institutional buildings will need to update reporting, but often have access to centralised energy data.

• SMEs with Moderate Electricity Use

Smaller companies may face increased reporting requirements, but generally have simpler energy profiles.

Least Impacted Sectors

• Organisations Using Little Electricity

Small offices or boutique firms with minimal energy use will see limited changes.

• Companies Using Real-Time, Deliverable PPAs

Businesses already engaged in real-time power purchase agreements are well-positioned to meet new standards.

Case Studies Illustrating the Implications

Data Centre Operator Adapting to New Guidance

A leading cloud provider recently piloted real-time emissions tracking across its facilities. By integrating smart meters and energy management software, it improved reporting accuracy and identified opportunities to shift workloads to cleaner energy periods. This approach aligns with the consultation’s direction and positions the company as a sustainability leader.

Manufacturing Company Revising Renewable Energy Strategy

A heavy industry firm traditionally relied on bundled RECs to support its renewable claims. After reviewing the consultation proposals, it decided to invest in a direct PPA with a new solar farm, ensuring additionality and securing long-term price stability. This shift also enhanced stakeholder confidence in its sustainability reporting.

Preparing for the Future of Scope 2 Reporting

Businesses should start by reviewing their current Scope 2 accounting methods and energy procurement strategies. Key steps include:

• Assessing Renewable Energy Contracts

Verify that contracts meet emerging additionality and transparency criteria.

• Investing in Data Systems

Upgrade energy monitoring to capture more granular, real-time data.

• Engaging Stakeholders

Communicate changes and implications with investors, customers, and suppliers.

• Training Reporting Teams

Ensure staff understand new requirements and can implement them effectively.

Final Thoughts

The public consultation on GHG Protocol Scope 2 emissions signals a move toward more precise and credible emissions reporting. Industries with high electricity use, such as data centres and manufacturing, will face the most significant challenges but also the chance to lead in sustainability. By embracing these changes early, companies can improve their environmental impact, meet stakeholder expectations, and stay ahead of regulatory trends.