Understanding Scope 2 Emissions – A Practical Briefing

Effective climate action starts with understanding what are the major emissions sources and how emissions can be reduced. The GHG Protocol divides greenhouse gas emissions into three categories:

• Scope 1: Direct emissions from owned or controlled sources

• Scope 2: Indirect emissions from purchased energy

• Scope 3: Indirect emissions across the value chain

A company’s carbon footprint consists of all three: Scope 1, Scope 2, and Scope 3 emissions. In this article, we take a closer look at Scope 2 emissions, which are typically quite straightforward to identify and calculate.

What Are Scope 2 Emissions?

Scope 2 emissions are greenhouse gas emissions generated from the production of energy that a company purchases and consumes. These emissions are indirect, meaning they occur at the energy production facility—not within the company’s own operations.

Scope 2 emissions arise from the production of:

• Purchased electricity
• Purchased heat
• Purchased steam
• Purchased cooling

This distinguishes Scope 2 from Scope 1, which covers direct emissions from sources owned or controlled by the company.

Location-Based vs. Market-Based Accounting

Scope 2 calculations rely on two complementary methods: location-based and market-based accounting. Understanding the difference is essential for transparent reporting and credible climate action.

1. Location-Based Accounting

The location-based method reflects the actual greenhouse gas intensity of the grid or district heating network where the energy is consumed. It answers the question: “What emissions are associated with the average energy mix in the region where my company operates?”

Key characteristics:

• Uses national or regional grid average emission factors published by authorities or energy agencies.
• Reflects the physical energy mix, such as shares of nuclear, renewable, or fossil energy.
• Depends on the geographical location of the facility and the type of energy consumed.

Example: A company operating in Finland uses the Finnish national grid emission factor when calculating its location-based Scope 2 emissions from purchased and consumed electricity.

This method provides a consistent baseline for comparing Scope 2 emissions across companies in the same region.

2. Market-Based Accounting

The market-based method reflects the emissions from energy products and contracts the company has intentionally chosen. It answers the question: “What emissions result from the specific energy purchases documented in my supply contracts?”

Key characteristics:

• Uses emission factors provided by energy suppliers, guarantees of origin (GOs) or renewable energy certificates (RECs).

• Highlights the impact of active energy procurement decisions.

• Often results in significantly lower Scope 2 emissions if the company buys certified renewable electricity.

• Requires clear and auditable documentation.

This method reveals the effectiveness of a company’s sustainability-driven procurement choices.

Why Report Both Methods?

The GHG Protocol encourages reporting both location-based and market-based results, as they provide complementary insights:

• Location-based emissions reflect the company’s operational carbon footprint based on the physical energy system.

• Market-based emissions highlight strategic procurement decisions and their impact.

Reporting both:

• Increases transparency

• Enhances comparability across industries

• Supports audit-ready carbon accounting

• Aligns with CSRD, the ESRS standards, and other sustainability reporting frameworks

Together, they offer a complete and credible picture of a company’s Scope 2 emissions.

Common Challenges in Scope 2 Calculation

While Scope 2 calculations are generally straightforward, practical challenges may arise:

• Access to energy data can be limited, especially for companies with several locations across different countries.

• Landlord-managed properties can be difficult to assess if energy source information is not available.

• Supplier-specific emission factors are not always provided by electricity or district-heating providers.

• Regional emission factors may vary, and selecting the correct factor is essential for accurate reporting.

Expert support helps ensure reliable calculations, proper boundary-setting, and correct application of emission factors.

Why Scope 2 Emissions Matter

Managing Scope 2 emissions provides a clear and often fast opportunity to reduce a company’s climate footprint:

• Although Scope 2 emissions may represent a smaller share of total emissions, energy choices can significantly reduce them—often even to zero.

• Many companies have achieved zero market-based Scope 2 emissions by purchasing exclusively renewable electricity.

• Transparent energy reporting strengthens stakeholder trust and sustainability communication.

• Reporting both methods makes renewable energy purchases visible and credible—supported by GOs or RECs where required.

Robust Scope 2 reporting demonstrates responsible energy management and supports long-term climate strategy.

Reliable Scope 2 Calculation With Tofuture

With Tofuture’s carbon accounting tool, Scope 2 emissions are calculated accurately and at the level of detail needed for effective emissions reduction planning.

Get in touch with us, and we’ll help systematize your carbon footprint calculation and strengthen your sustainability reporting.