It is difficult to get excited about updates to international accounting standards, but this one, for scope 2 greenhouse gas reporting, will have a big impact on how companies report their indirect emissions from electricity use.
It was four years in the making. I was a delegate at the London kick-off workshops back in January 2011. The vision was to provide internationally accepted GHG accounting and reporting guidance on the contentious area of green power purchases and energy-related instruments. I think the new guidance will achieve this, and more importantly, the rules will help channel corporate purchasing power towards low carbon and renewable electricity, and away from coal and gas.
The GHG Protocol counts because it’s the protocol we use to prepare greenhouse gas or carbon footprint reports. Over 85 percent of the world’s largest companies have their carbon accounts prepared using this protocol. The scope 2 guidance addresses electricity which accounts for around 40 percent of global greenhouse gas emissions. 50 percent of electricity is used by business and commerce.
Most companies will now have to report two scope 2 numbers for GHG emissions from electricity. For companies with any operations in markets providing product or supplier-specific data in the form of contractual instruments, companies shall report scope 2 according to a location-based method, i.e. using the grid average emissions factor for the country or state, and a market-based method, based on the actual supply arrangement and contract they have in place for their electricity.
Companies shall choose which method’s results to use for goal setting and other benchmarks, though annual carbon disclosure platforms such as CDP are updating their own reporting guidance in this respect.
The new GHG accounting and reporting requirements, as well as the ‘Scope 2 Quality Criteria’ will affect whether a given energy label, green power program, or other instrument can be used in corporate GHG inventories, and will influence the type of energy products and information companies request. A residual mix conversion factor shall apply to any electricity usage not meeting the necessary quality criteria.
In its new form the guidance should support more distributed and innovative electricity supply markets. This has to be a good thing given the current domination of the market by a small number of providers.