At the start of 2016, World Resources Institute (WRI) and World Business Council for Sustainable Development released the Greenhouse Gas (GHG) Protocol Scope 2 Guidance, an amendment to the GHG Protocol Corporate Standard. The guidance is intended to address gaps and concerns in past Scope 2 reporting such as consistency in Scope 2 calculation methodologies and minimum quality standards for Scope 2 energy and renewable energy purchases. Adapting your inventory to the new guidance may not be easy.

With the guidance out since last year, reporting frameworks and third-party verifiers will expect to see it reflected in your 2015 inventory. CDP updated its annual climate change questionnaire to reflect the new guidance; The Climate Registry recently updated its General Reporting Protocol (Version 2.1).

There are three major changes to the guidance that you should consider as you develop your inventory:

1. Dual Reporting. The most significant change is a requirement to report two Scope 2 emissions totals, using a location-based method and a market-based method. The location-based method considers average emission factors for the electricity grids that provide your electricity. The market-based method considers contractual arrangements under which you buy power from specific suppliers or sources, such as renewable energy.

2. New GHG Goals. GHG goals that include Scope 2 emissions can be based on either the location- or market-based method, though you should identify which is used. Your choice of method will impact the opportunities available to reduce Scope 2 emissions once a goal is published. Some reduction opportunities, such as making energy efficiency improvements, will impact location- and market-based emissions totals. Others, such as establishing a power purchase agreement or selecting a low-emissions supplier, will impact market-based emissions only.

3. Sourcing Contractual Instruments. The new quality criteria for instruments requires that they are purchased from the same market in which they are applied. The guidance defines a market as a specific geography that has a common system for trading and retiring instruments. Markets are defined more by national borders than by electricity grid boundaries. As an example, the U.S. is considered a single market despite regional grid boundaries. The guidance also indicates that a single country can be an appropriate market, even if there are electricity grid interconnections between countries, unless countries have defined a common system for instrument trading. The EU is one example of a common system that crosses country borders.

To educate our clients on implementation of the new Scope 2 accounting procedures, we developed a guidance document called Navigating the GHG Protocol Scope 2 Guidance. This document is based on our team’s role on the WRI technical working group that developed the guidance, the questions we’ve received from clients since last year, and our ongoing implementation of the new procedures on behalf of our clients.