What it means
Under the Greenhouse Gas Protocol, Scope 2 covers purchased electricity, steam, heating and cooling consumed by the reporting company. It sits between Scope 1, which is what the company burns directly, and Scope 3, which is everything else in the value chain.
For most office-based, retail and technology businesses, Scope 2 is the largest number they can actually influence in the short term. The distinctive feature of Scope 2 is that it must be reported two ways.
The location-based method multiplies electricity consumed by the average emission factor of the local grid, showing the physical reality of the network the company plugs into. The market-based method reflects the specific contracts the company has signed, so renewable supply agreements and energy attribute certificates change the figure.
Dual reporting exists because the two methods answer different questions. Location-based tells you what the grid around you looks like and whether efficiency is improving; market-based tells you what you have chosen to buy and rewards procurement decisions.
A company that signs a renewable power agreement will see its market-based figure fall sharply while its location-based figure barely moves. This is also where scepticism belongs.
Buying unbundled certificates can reduce a reported market-based figure without changing a single electron on the grid, which is why serious buyers favour contracts tied to specific generation assets, ideally on the same grid and matched to the hours in which they consume. Reporting both figures side by side is what keeps the claim honest.
Reducing Scope 2 usually follows a simple order of operations. Use less energy first, because efficiency cuts both figures and the bill; then generate on site where the roof space and payback allow; then contract for cleaner supply.
The last step is the most visible in a report but the least durable if the first two are skipped.
In practice
Real-world examples.
Example
A data centre operator reports Scope 2 as roughly 90% of its total footprint. It signs a long-term power purchase agreement with a nearby wind farm, cutting the market-based figure to near zero while continuing to report the unchanged location-based number for transparency.
Example
A supermarket chain installs rooftop solar across 40 stores. The electricity generated and used on site never enters Scope 2 at all, because it was never purchased, so both reported figures fall together.
Example
A professional services firm moves to a building with district heating. The purchased heat is a Scope 2 source alongside electricity, so its inventory boundary changes even though its floor area and headcount stay the same.
Think of it
“Scope 2 is emissions from the energy you buy-greenhouse gases from your electricity and heat.
Formula
Calculation
Scope 2 emissions = Electricity consumed (kWh) x Emission factor (kg carbon dioxide equivalent per kWh)
A company consumes 4,000,000 kWh of electricity across its sites in a year. On the location-based method, using a grid average factor of 0.40 kg per kWh, emissions are 4,000,000 x 0.40 = 1,600,000 kg, which is 1,600 tonnes. On the market-based method, 1,500,000 kWh is covered by a renewable supply contract with a zero-emission factor, and the remaining 2,500,000 kWh is charged at a residual mix factor of 0.45 kg per kWh, giving 2,500,000 x 0.45 = 1,125,000 kg, or 1,125 tonnes. The company therefore reports 1,600 tonnes location-based and 1,125 tonnes market-based, a difference of 475 tonnes created entirely by procurement.Case study
Seen in the real world.
The following case is illustrative and the company named is fictional. Brightmere Analytics, an invented software company, announced that it ran on 100% renewable electricity after buying unbundled certificates covering its full annual consumption of 4,000,000 kWh.
A prospective enterprise customer asked to see both the location-based and market-based figures during a procurement review. The location-based number was 1,600 tonnes, essentially unchanged from three years earlier, and the customer's own supply chain criteria specifically excluded unbundled certificates from counting. The claim did not survive the review.
Brightmere responded by running an efficiency programme across its two offices and its cloud workloads, cutting consumption by roughly 12%, and then replacing the certificates with a contract tied to a named generation asset on the same grid. The illustrative lesson is that a market-based figure is only as credible as the contract behind it, and that the location-based number is the one that shows whether real consumption has changed.
Watch out
Common mistakes.
- Reporting only the market-based figure. The Greenhouse Gas Protocol expects both methods to be disclosed, and showing only the flattering one undermines the credibility of the whole inventory.
- Putting on-site solar used on site into Scope 2. Self-generated and self-consumed renewable electricity is not purchased energy, so it belongs in neither Scope 1 nor Scope 2 as an emissions source.
- Assuming Scope 2 is always small. For data centres, cold storage operators and electrified manufacturers it is frequently the single largest category in the inventory.
Questions
People also ask.
What is the difference between the two methods?
Location-based uses the average emissions of the grid you draw from, while market-based uses the emission factors of the specific energy products you contracted to buy.
Does buying green tariffs actually reduce emissions?
It reduces the reported market-based figure, but real-world impact depends on whether the contract supports new generation rather than reallocating existing renewable output.
Where does purchased steam or chilled water go?
It is Scope 2, alongside electricity, because the fuel was burnt by the supplier rather than by the reporting company.
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