With rising international concern for global energy consumption comes the pressure to take responsibility for the reduction of carbon emissions and fossil fuel usage. Enterprise organizations are facing pressure to account for and reduce the energy—and the carbon emissions that come with it—that they produce, purchase and consume through activities related to basic operations or manufacturing.
To establish and promote sustainable operations over the long term (net zero targets are being pegged to 2040 or 2050, or even as early as 2025 or 2030), it’s important that organizations start to focus on ways to reduce all emission types. But one area companies are finding it easier to make impacts in are Scope 2 emissions, which come from purchased electricity. Creating specific strategies for measurement, compliance, and reduction can set companies up for early wins on their net zero journey.
In this article, we’ll shed light on carbon emissions from purchased sources, like heat and electricity, and offer practical ways to start reducing these sources of energy on a corporate scale.
What are Scope 2 Emissions?
According to the U.S. Environmental Protection Agency, Scope 2 emissions are a category of indirect greenhouse gas (GHG) emissions resulting from purchased fuels and energy sources like electricity, steam, heat, or cooling–used by companies for their operations but from sources owned by other entities.
Two factors play into how a company can assess and work to reduce Scope 2 emissions—the location that the procured energy is produced and the location where energy is actually consumed by the company’s operations. With that information, a company can assess if it needs to use a market-based or location-based carbon accounting (or elements of both) in how it measures emissions from its energy use and eventually procures clean power to reduce its emissions.
Importance of Reducing Carbon Emissions from Purchased Electricity
For many companies, there is increasing pressure to meet public-facing reductions goals (or even non-public ones). Shareholders, activists, policymakers, rating agencies and other stakeholders continue to apply scrutiny to companies’ carbon reduction goals and the progress they are or are not sharing with regards to emissions.
In terms of measuring Scope 2 emissions, enterprise organizations’ should be reporting in line with the Greenhouse Gas Protocol (GHG), which maintains Scope 2 reduction standards and encourages worldwide partners to be proactive for reducing carbon emissions generated from sources like electricity.
Brand Reputation and Corporate Impact
There are several other motivations for reducing Scope 2 emissions that relate more to public image and impact than they do specific legislation or compliance.
Consumers often look to support businesses that actively align with their concerns, such as air pollution, green job creation, and a cleaner energy sector. Research by the Shelton Group, a leading sustainability communications agency, has shown that in particular consumers deliberately avoid bad environmental actors, including those that actively contribute to pollution, support “dirty” power generation, or make decisions that negatively affect air quality.
The corporate impact angle is also worth noting. Large scale corporations may have more buying power and cultural prominence than individuals (although both have environmental responsibilities), but much attention is currently being paid to ESG (Environmental, Social, and Governance). ESG initiatives are focused on minimizing risks like penalties and public backlash, and those key business concerns don’t go away even if politically motivated winds shift.
3 Ways to Reduce Scope 2 Emissions in Your Organization
Reducing your organization’s Scope 2 emissions may come down to where you are on your emissions reduction journey. For instance, if you’re already proactively following GHG protocols and contemporary Scope 2 guidance for emissions reduction, you may not need to start at square one. Organizations that have yet to get started on emissions reduction steps should grasp the basics first and then move on to more elaborate measures.
Remember: in order to meet corporate sustainability goals, Scope 2 emissions reduction efforts are generally a marathon, not a sprint. However, there are many small steps to take in the present that contribute to longer-range goals in the future.
Before anything else, check with your organization’s electric utility to understand what the generation mix is in where your facilities operate. Many traditional utility providers use “brown power,” which refers to the production of greenhouse gasses as a direct result of burning fossil fuels.
Method 1: Invest in Energy Efficiency Measures
However, they or other energy retailers in your area (if your facilities are in a deregulated power market) may have options to offer, like green power purchasing or green tariff programs that enable you to .
Reducing emissions starts with avoiding emissions, by reducing the amount of energy used in your company on an absolute basis. One of the easiest ways to start reducing your organization’s Scope 2 emissions is to work with your facilities team(s) to see if energy efficiency upgrades or retrofits in your buildings can offer a cost-effective avenues for reducing energy use overall, minimizing how much energy your facilities need to draw from the grid.
As you think about opportunities, include the appliances used on site, the heating and cooling infrastructure you have in place, onsite data centers, lighting, types of insulation on the premises, and more. These aspects can all impact your energy consumption across each month and year, and by extension your Scope 2 emissions.
Method 2: Leverage Renewable Energy
Data from the United Nations shows global industry can massively reduce emissions rates by “embracing passive or renewable energy-based heating and cooling systems, improving energy efficiency, and addressing other pressing issues, like methane leaks.” Leveraging renewable energy is one of the U.N.’s six-sector solutions for climate change.
Renewable energy solutions can include the following options:
- Power Purchase Agreement (PPA) – A power purchase agreement is a contractual agreement between two parties to supply and receive a power source. PPAs can be established for clean sources like solar energy, but especially for electricity.
- Virtual Power Purchase Agreement (VPPA) – The virtual PPA is simply a financial agreement to purchase sources of power at a pre-established price, to help avoid major fluctuations in the market. With VPPAs, there is no tangible transfer of power from one supplier to another business.
- Renewable Energy Certificates (REC) – As part of power purchase agreements, buyers and energy consumers receive renewable energy certificates. RECs represent the amount of power (like electricity) produced and delivered to the grid by a renewable resource. Certificates can help organizations be more predictive in responsible energy consumption.
- Green Power Purchasing or Green Tariff Programs – Through a company’s electric utility, energy procurement teams may be able to purchase green power in the form of EACs or RECs, or a green tariff program (where the company can purchase both the electricity generated by a solar or wind farm and the associated EACs or RECs).
Method 3: Become Your Own Source of Clean Energy
Lastly, organizations can take more direct control over Scope 2 emissions by installing onsite generation at their own location and thereby reducing how much power they need to procure from outside parties or the grid. In many examples, this usually involves the use of solar panels or wind turbines. For example, Apple’s corporate headquarters has solar installations to help power their operations and physical infrastructure.
Creating your own renewable energy can be a significant undertaking, particularly for smaller businesses or those that don’t have vast resources at their disposal. Even so, a growing number of corporations are seeking to improve Scope 2 emissions numbers with similar “in-house” tactics.
How Carbon Accounting Software Can Help
Carbon accounting software like Cleartrace enables proactive carbon management and smarter clean energy procurement to support it. This process includes a real-time look at automated, auditable, and decision-useful data that contributes to better long-term decisions.
As more organizations face mounting pressure to comply with global standards and mitigate the problems associated with excess Scope 2 emissions, a solution like Cleartrace helps executives and leaders feel more prepared to solve for one of the most pressing problems of our lifetime.
Reduce Carbon Emissions with Better Visibility
Scope 2 emissions sources like electricity are climbing the ranks as a leading contributor of greenhouse gas outputs worldwide. It’s no wonder that environmentally conscious organizations want to take proactive steps to reduce these emissions sources and find modern, greener solutions.
It’s only when you have an accurate view of your full carbon emissions profile that you can take decisive measures to reduce and offset your corporate output. With a limited window of opportunity to act, the time to start measuring is now.
Interested in learning more about how energy is accounted for as Scope 2 emissions? Check out this Energy Minute segment on The Decarbonization Race podcast on market-based vs location-based carbon accounting methods.