Harnessing FinTech for sustainable power: a guide to Scope 2 emissions reporting

Harnessing FinTech for sustainable power: a guide to Scope 2 emissions reporting

In a world increasingly conscious of the environmental impact of business operations, reporting electricity usage is now a crucial part of corporate responsibility. Compliance with the Greenhouse Gas Protocol demands clear documentation of purchased electricity, a challenge Position Green seeks to simplify with a best practice approach.

ESG FinTech company Position Green recently explained how companies can measure and report electricity consumption.

The Greenhouse Gas Protocol delineates two methodologies for Scope 2 emissions reporting, a process also known as “dual reporting”. Both the location-based and market-based methods offer unique perspectives on electricity grid usage and facilitate comparison, it said.

Under the location-based method, emissions are quantified using data on average energy generation within a specific geographical area, typically a country. This calculation encompasses both renewable and fossil fuel energy sources. All generated electricity within the country is collectively measured, with emissions divided amongst all kilowatt-hours consumed by users, creating a standard emission factor for the location-based calculation within that country.

In contrast, the market-based method focuses on the emissions from electricity that the reporting company specifically purchases from certain suppliers within a defined region. The Energy Attribute Certificates (EACs) trace the origin of the electricity. Should a company not purchase certificates, the remaining electricity mix, the “residual mix”, is used.

EACs are pivotal in documenting and establishing ownership of one megawatt-hour of renewable energy, allowing for zero emission claims in market-based calculations. These certificates are associated with project details that outline where the electricity is generated. To utilise EACs for disclosure, a valid EAC must be cancelled through a cancellation statement, ensuring that the energy can only be counted once.

Around the globe, various forms of EACs exist: Renewable Energy Certificate (REC) in North America, Guarantee of Origin (GO) in Europe, International Renewable Energy Certificate (I-REC) in several countries in Asia, Africa, the Middle East, and Latin America, and National Systems, which are unique to certain countries.

At Position Green, companies track performance using both location-based and market-based methods. This data is included in the inventory, with companies presenting one option as the main calculation and the other as supplementary information.

For location-based calculations, the country-specific grid average emission factor is applied, irrespective of where within the country the reporting company is located. To compute the market-based emissions, the approach varies based on the EAC. If the EAC is purchased by the company, the emission factor equals zero, and the company must validate the purchased electricity with a cancellation statement.

In cases where EACs are accessible but not purchased, the residual mix emission factor is used. Occasionally, companies purchase EACs for part of the year, and for the remainder of the year, a residual mix emission factor is used. In countries where EACs can’t be issued, the country specific grid average emission factor is used for market-based emissions.

Position Green utilises emission factors from AIB for companies purchasing electricity within Europe, and for those outside Europe, IEA is the preferred source. In striving to maximise comparability, Position Green circumvents calculating Scope 2 emissions with supplier-specific data, opting instead for public sources like AIB and IEA.

Read the full report here.

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