Scope 2 emissions are the indirect greenhouse gas (GHG) emissions from the consumption of purchased energy (archived here). These emissions occur at the facility where the electricity or heating is produced, not at the point of use. However, they are attributed to the organization that consumes the energy because the demand for energy drives these emissions. Scope 2 emissions are a special category in that they encompass only purchased energy.
Examples of Scope 2 Emissions
- Purchased Electricity: The electricity your organization buys from a local utility to power your buildings and operations. For instance, the electricity used to light office spaces, run computers, and power machinery.
- Purchased Steam: Steam bought from an external provider for use in industrial processes or heating systems. A pharma company for example, which uses external steam to sterilize its equipment will place the emissions caused by its generation into Scope 2.
- Purchased Heating: Heating energy sourced from an external supplier, such as district heating systems that provide heat to multiple buildings from a central plant.
- Purchased Cooling: Cooling energy obtained from an external source, like district cooling systems that supply chilled water for air conditioning in large buildings.
For example, a cheese factory with electric boilers for water heating, such emissions fall into Scope 2. Emissions from gas-heated boilers that are fired by biogas produced from on-site waste fall into Scope 1.
Importance of Scope 2 Emissions
Scope 2 emissions are a critical component of an organization’s carbon footprint. They often represent a significant portion of total GHG emissions, especially for companies with high energy consumption. Reporting these emissions is essential for several reasons:
- Transparency and Accountability: By disclosing Scope 2 emissions, companies demonstrate their commitment to transparency and accountability in their environmental impact.
- Regulatory Compliance: Many regulatory frameworks and sustainability standards including Switzerland require the reporting of Scope 2 emissions.
- Stakeholder Trust: Investors, customers, and other stakeholders increasingly demand detailed ESG reporting. Accurate Scope 2 emissions data can enhance stakeholder trust and confidence.
- Benchmarking and Performance Improvement: Tracking Scope 2 emissions allows organizations to benchmark their performance against industry standards and identify opportunities for improvement.
Calculating Scope 2 Emissions
The calculation of Scope 2 emissions involves determining the amount of energy consumed and applying appropriate emission factors. Emission factors convert energy consumption data into GHG emissions. There are two primary methods for calculating Scope 2 emissions:
- Location-Based Method: This method uses average emission factors for the grid where the energy consumption occurs. It reflects the average emissions intensity of the grid.
- Market-Based Method: This method uses emission factors based on the specific energy contracts and sources an organization has. It accounts for the purchase of renewable energy certificates (RECs) or guarantees of origin (GOs).
Strategies to Reduce Scope 2 Emissions
Reducing Scope 2 emissions is crucial for organizations aiming to lower their overall carbon footprint. Here are some effective strategies:
- Energy Efficiency: Implementing energy-efficient technologies and practices can significantly reduce energy consumption. This includes upgrading lighting, heating, ventilation, and air conditioning (HVAC) systems, and industrial processes.
- Renewable Energy: Transitioning to renewable energy sources, such as solar, wind, or hydroelectric power, can drastically cut Scope 2 emissions. Organizations can purchase green energy directly or invest in renewable energy projects.
- Energy Management Systems: Implementing robust energy management systems helps monitor and optimize energy use, leading to reduced consumption and emissions.
- Power Purchase Agreements (PPAs): Entering into PPAs with renewable energy providers ensures a stable supply of green energy and can help offset Scope 2 emissions.
Reporting Scope 2 Emissions
Accurate and transparent reporting of Scope 2 emissions is essential for effective ESG reporting. Organizations should follow established frameworks such as the Greenhouse Gas Protocol, which provides comprehensive guidelines for calculating and reporting GHG emissions. Additionally, third-party verification of emissions data can enhance credibility and ensure accuracy.
Conclusion
Scope 2 emissions are a vital aspect of ESG reporting, reflecting the indirect emissions from an organization’s energy consumption. By understanding, calculating, and reducing these emissions, companies can improve their environmental performance, comply with regulations, and build trust with stakeholders. Embracing energy efficiency, renewable energy, and robust reporting practices are key steps towards a sustainable future.
