How to reduce your company's Scope 2 emissions?

Tackling climate change requires businesses to address all aspects of their carbon footprint. While many companies focus initially on their direct emissions, scope 2 emissions represent a significant and often overlooked opportunity for impactful decarbonisation. These indirect emissions from purchased electricity, steam, heating, and cooling account for approximately 15-20% of most companies' total carbon footprint, making them a crucial piece of the climate puzzle.

In addition to demonstrating environmental leadership, reducing scope 2 emissions also creates tangible business benefits. These benefits include cost savings through improved energy efficiency, enhanced resilience against energy price volatility, and stronger positioning to meet increasing regulatory and stakeholder expectations.

This article provides a comprehensive guide to reducing your organisation's scope 2 emissions, from understanding calculation methodologies to implementing practical reduction strategies that deliver real results.

Understanding scope 2 emissions: the foundation for reduction

Before diving into reduction strategies, it's essential to understand what scope 2 emissions are and how they're calculated.

Definition

Scope 2 emissions represent the greenhouse gas emissions associated with the generation of purchased energy that a company consumes but does not directly produce itself.

Unlike scope 1 emissions (direct emissions from owned or controlled sources) or scope 3 emissions (all other indirect emissions in a company's value chain), scope 2 emissions occupy a unique middle ground – they're indirect but typically more controllable than the complex web of scope 3 emissions.

The dual calculation approach

The GHG Protocol requires companies to calculate and report scope 2 emissions using two distinct methods:

Location-based method: This approach uses grid average emission factors for the regions where energy consumption occurs, reflecting the average emissions intensity of the electricity grid serving your facilities.
Market-based method: This method accounts for contractual instruments like renewable energy certificates (RECs), power purchase agreements (PPAs), and supplier-specific emission factors, reflecting the emissions from electricity that companies have purposefully chosen.

This dual reporting requirement ensures transparency while allowing companies to demonstrate the impact of their renewable energy procurement efforts.

Calculation formula

The basic formula for calculating scope 2 emissions is:

Activity data (energy consumption in kWh or MWh) × Emission factor (CO₂e per unit of energy) = Scope 2 emissions (CO₂e)

For example, if a facility in Denmark consumes 3,000 MWh of electricity, and the grid emission factor is 0.3152 metric tonnes CO₂ per MWh, the location-based scope 2 emissions would be 945.63 metric tonnes CO₂e.

Facility Location	Energy Consumption	Emission Factor	Scope 2 Emissions
Denmark office	3,000 MWh	0.3152 mtCO₂/MWh	945.63 metric tonnes CO₂e
California data center	5,000 MWh	0.2285 mtCO₂/MWh	1,142.50 metric tonnes CO₂e
Singapore manufacturing	8,000 MWh	0.4085 mtCO₂/MWh	3,268.00 metric tonnes CO₂e

Why reducing scope 2 emissions matters for business

Reducing scope 2 emissions isn't just an environmental imperative – it makes strong business sense for multiple reasons.

Financial benefits

Energy costs represent a significant operational expense for most businesses. By implementing energy efficiency measures to reduce scope 2 emissions, companies can achieve substantial cost savings. These savings often provide attractive returns on investment and improved operational efficiency that directly impacts the bottom line.

Regulatory compliance

Scope 2 emissions disclosure is increasingly mandated by regulations worldwide. From the EU's Corporate Sustainability Reporting Directive (CSRD) to California's SB 253, companies face expanding requirements to report and eventually reduce these emissions. Getting ahead of these regulations can prevent costly compliance scrambles later.

Stakeholder expectations

Investors, customers, and employees are placing greater importance on corporate climate action. Supply chain decarbonisation efforts mean your scope 2 emissions may become part of your customers' scope 3 emissions – making your carbon management a potential factor in business relationships. According to research, supply chain emissions are on average 11.4 times larger than direct operational emissions, making addressing these emissions critical for comprehensive climate action.

Essential for net-zero goals

Companies cannot claim to have reached net-zero until they have achieved their long-term science-based targets across all scopes, including scope 2 emissions. This makes scope 2 reduction a mandatory component of any credible corporate net-zero strategy and climate leadership positioning.

Business benefits of reducing Scope 2 emissions

Energy efficiency: the first step to scope 2 reduction

Energy efficiency measures provide the foundation for any scope 2 reduction strategy. By reducing the amount of energy your company consumes, you directly reduce your scope 2 emissions while often achieving quick financial returns.

Conduct comprehensive energy audits

Begin with a thorough energy audit of your facilities to identify consumption patterns and opportunities for improvement. Professional energy audits can reveal hidden inefficiencies and prioritise interventions based on potential impact and cost-effectiveness.

Energy audits should examine:

Heating and cooling systems performance
Building envelope integrity (insulation, windows, doors)
Lighting efficiency
Equipment and machinery energy consumption
Operating schedules and occupancy patterns
Data center and IT infrastructure efficiency

Implement building efficiency upgrades

Once you've identified opportunities through auditing, implement targeted efficiency upgrades:

Lighting upgrades: Replace outdated lighting with LED technology, which can reduce lighting energy consumption by up to 75% while improving light quality and reducing maintenance costs.
HVAC optimisation: Upgrade to high-efficiency heating and cooling systems, implement smart controls with zoning capabilities, and ensure proper maintenance of existing equipment.
Building envelope improvements: Enhance insulation, seal air leaks, and install energy-efficient windows to reduce heating and cooling loads.
Smart building systems: Deploy building management systems (BMS) that optimise energy use based on occupancy, weather conditions, and time of day.

The EU Taxonomy for Sustainable Activities considers building renovations substantial contributors to climate change mitigation when they achieve at least a 30% reduction in primary energy demand, which can be implemented through successive measures within a maximum of three years.

Optimise data centers and IT infrastructure

For many service-oriented businesses, data centers and IT equipment represent significant energy consumers and Scope 2 emission sources:

Implement server virtualisation to reduce the number of physical servers
Adopt efficient cooling strategies such as hot/cold aisle containment
Establish equipment power management policies
Consider the European Code of Conduct on Data Centre Energy Efficiency as a framework for best practices

Employee engagement for behavioral change

Beyond technical solutions, engaging employees in energy conservation efforts can yield significant results:

Develop clear energy-saving guidelines and training
Create incentive programs for departments or teams that reduce energy use
Install energy use displays in common areas to raise awareness
Implement regular communication about energy goals and progress

Plan A's carbon management platform helps organisations identify energy efficiency opportunities by providing detailed visibility into energy consumption patterns across different facilities, departments, and activities. With comprehensive data dashboards and analytics, companies can pinpoint the most impactful areas for efficiency improvements and track the resulting emissions reductions.

Renewable energy procurement: transforming your energy supply

While energy efficiency reduces the amount of energy consumed, renewable energy procurement addresses the carbon intensity of the energy you do use. Various approaches exist, each with different impacts, complexities, and benefits.

Power purchase agreements (PPAs)

Power Purchase Agreements are long-term contracts to purchase renewable electricity directly from generators:

Physical PPAs: Direct purchase of energy from specific renewable projects, typically requiring proximity to your facilities.
Virtual PPAs (VPPAs): Financial contracts that support renewable generation without requiring physical delivery of the electricity.

PPAs offer several advantages:

Long-term price stability and potential cost savings
Strong environmental claims and credibility
Support for new renewable energy projects (additionality)
Potential hedge against future carbon pricing

Renewable energy certificates (RECs)

Definition

RECs (also known as Guarantees of Origin in Europe) represent the environmental attributes of renewable electricity generation.

One REC represents that 1 MWh of electricity was generated from renewable sources.

Best practices for REC procurement include:

Ensuring certificates are from the same market or region where you operate
Prioritising newer generation sources
Matching certificates to the same time period as your energy consumption
Verifying that certificates are retired properly to avoid double-counting

Green tariffs and utility programs

Many utilities offer green power purchasing options:

Premium green power products with certified renewable content
Utility green tariff programs that allow larger customers to purchase bundled renewable electricity
Community solar programs that enable participation in local solar projects

On-site renewable generation

Installing renewable energy generation at your own facilities offers unique advantages:

Direct reduction of purchased electricity
Visible demonstration of climate commitment
Protection against grid disruptions
Potential for excess generation revenue

Common on-site options include:

Rooftop or ground-mounted solar photovoltaic systems
Small-scale wind turbines for suitable locations
Combined heat and power systems using renewable fuels

Science-based targets for renewable electricity

The Science-Based Targets initiative recommends that companies set targets to actively procure at least 80% renewable electricity by 2025 and 100% by 2030. Between these years, companies should follow minimum thresholds that increase progressively:

2025: 80%
2026: 84%
2027: 88%
2028: 92%
2029: 96%
2030: 100%

How we help

Plan A's decarbonisation module helps companies develop and implement comprehensive renewable energy strategies by setting science-aligned targets, evaluating different procurement options, and tracking progress toward renewable energy goals. It also supports the calculation of emissions reductions achieved through various renewable energy instruments.

Strategic energy management for sustained reduction

Beyond efficiency measures and renewable procurement, strategic energy management approaches can further reduce scope 2 emissions through operational changes and innovative practices.

Load shifting and demand response

By shifting energy-intensive operations to times when grid electricity has lower carbon intensity, companies can reduce their location-based scope 2 emissions even without changing their total energy consumption:

Schedule energy-intensive processes during off-peak hours or periods of high renewable generation
Participate in utility demand response programs that incentivise reducing load during peak demand periods
Implement energy storage solutions to enable more flexible energy use patterns

Facility location decisions

When expanding operations or relocating facilities, consider the carbon intensity of local electricity grids:

Research grid emission factors in potential location regions
Evaluate local renewable energy availability and policies
Consider proximity to renewable resources for potential on-site generation
Factor energy costs and carbon pricing into location decisions

Electrification of thermal processes

Converting processes that use fossil fuels directly (creating scope 1 emissions) to electric alternatives can centralise emissions under scope 2, where they can be more easily addressed through renewable electricity:

Replace natural gas heating with electric heat pumps
Convert process heating from fossil fuels to electric alternatives
Transition vehicle fleets from internal combustion to electric vehicles

Heat pump installations with a seasonal performance factor (SPF) greater than 1.15 × 1/η (where η is the ratio between total gross electricity production and primary energy consumption) are particularly effective for this purpose.

Internal carbon pricing

Implementing an internal price on carbon can drive investment decisions toward lower-carbon alternatives:

Set a shadow price on carbon for capital expenditure evaluations
Create internal carbon fees that fund renewable energy and efficiency projects
Establish a carbon budget for departments or business units

Overcoming common challenges in scope 2 management

Managing and reducing scope 2 emissions comes with several challenges that companies need to anticipate and address.

Data collection challenges

Collecting accurate activity data and emission factors for scope 2 calculations can be complex:

Challenge: Obtaining energy consumption data from multiple facilities, especially in leased spaces or international operations.

Solution: Implement systematic data collection processes and work with landlords and facility managers to secure access to energy consumption data. Plan A's data collection tools can help streamline this process by automating data capture from utility providers and building management systems.

Carbon accounting data collection made easy with Plan A

Challenge: Finding appropriate emission factors for location and market-based calculations, particularly in regions with limited data availability.

Solution: Develop a hierarchy of data sources, prioritising official national or regional grid factors where available, and using international sources as backup. Keep a detailed record of all emission factors used for transparency and consistency.

Methodological complexities

The dual reporting requirement for location and market-based methods adds complexity:

Challenge: Understanding when and how to apply location-based versus market-based methodologies.

Solution: Clearly document your approach to both methods and ensure consistency in application across reporting periods. Plan A's carbon accounting software follows the GHG Protocol methodologies for both location and market-based calculations, simplifying compliance with reporting standards.

Challenge: Avoiding double counting, particularly when dealing with owned energy generation assets and grid-delivered energy.

Solution: Establish clear accounting boundaries and consistently apply GHG Protocol guidance on treatment of different energy sources.

Contractual instrument verification

Ensuring renewable energy claims meet quality criteria:

Challenge: Verifying that renewable energy certificates and other contractual instruments meet the Scope 2 Quality Criteria.

Challenge area	Specific challenge	Solution approach	Implementation considerations
Data collection	Obtaining energy consumption data from leased spaces	Work with landlords to secure access to meter data or building management system information	May require lease amendments or collaborative green lease agreements
Emission factors	Finding appropriate emission factors for international operations	Develop a hierarchy of trusted sources for emission factors by country/region	Maintain documentation of sources for audit purposes
Methodological	Applying dual reporting requirements consistently	Document clear protocols for both location and market-based calculations	Train relevant teams on both methodologies to ensure understanding
Renewable claims	Verifying contractual instruments meet quality criteria	Develop procurement requirements that include GHG Protocol quality criteria	May require supplier education and specialised procurement support

Leveraging technology and analytics for Scope 2 reduction

Advanced technologies and data analytics can significantly enhance Scope 2 emissions management and reduction efforts.

Real-time energy monitoring

Installing advanced metering infrastructure and energy management systems enables:

Continuous visibility into energy consumption patterns
Immediate detection of anomalies or inefficiencies
Identification of energy-saving opportunities
Measurement and verification of reduction initiatives

These systems can be particularly valuable when integrated with building management systems to enable automated responses to energy usage patterns.

Predictive analytics and AI

Artificial intelligence and predictive analytics can take energy management to the next level:

Forecast energy demand based on operational and external factors
Optimise building systems in anticipation of weather changes
Identify patterns and relationships in energy data that humans might miss
Provide decision support for energy procurement and use

AI-based solutions can demonstrate substantial life-cycle greenhouse gas emission savings compared to alternative technologies, making them valuable tools for Scope 2 reduction.

Digital twins and simulation

Creating virtual models of facilities enables companies to:

Test energy efficiency measures before physical implementation
Simulate different operational scenarios to identify optimal strategies
Model the impact of renewable energy integration on emissions profiles
Develop more precise forecasts of future energy needs and emissions

Plan A's carbon management platform integrates advanced analytics and visualisation capabilities that help companies identify emission hotspots, simulate reduction scenarios, and track progress toward targets. By connecting energy consumption data with emissions calculations in real-time, the platform enables more agile and effective scope 2 management.

Technology-enabled Scope 2 reduction process

Developing a comprehensive scope 2 reduction strategy

An effective scope 2 reduction strategy combines multiple approaches in a structured plan with clear targets, responsibilities, and timelines.

Assessment and baseline establishment

Begin by thoroughly understanding your current scope 2 emissions:

Calculate emissions using both location and market-based methods
Identify major sources and drivers of emissions
Establish a reliable baseline against which to measure progress
Set science-aligned reduction targets

Plan A's emissions measurement tools can help establish this baseline with accuracy and transparency, ensuring your reduction targets are built on solid data.

Strategy development

Develop a comprehensive strategy that combines different reduction approaches:

Energy efficiency measures to reduce consumption
Renewable energy procurement to address remaining emissions
Strategic energy management to optimise timing and location of energy use
Implementation of enabling technologies and systems

Prioritise measures based on:

Emission reduction potential
Return on investment and payback period
Implementation complexity
Alignment with broader business objectives

Implementation roadmap

Create a detailed implementation plan that includes:

Clear and measurable short and long-term targets
Specific actions with assigned responsibilities
Required resources and budgets
Timeline with key milestones
Monitoring and reporting protocols

Stakeholder engagement

Engage relevant stakeholders throughout the process:

Secure executive leadership support for emission reduction initiatives
Establish cross-functional teams responsible for implementation
Involve facilities management, procurement, finance, and sustainability teams
Create employee engagement programs to promote energy-saving behaviors
Communicate progress and successes to internal and external stakeholders

Monitoring, reporting, and continuous improvement

Establish robust systems for tracking progress:

Implement regular monitoring of energy consumption and emissions
Report emissions using both location and market-based methods for transparency
Conduct periodic reviews of strategy effectiveness
Adjust approaches based on results and changing conditions

The Plan A carbon management platform supports this process with comprehensive reporting capabilities that align with major frameworks and standards, ensuring your scope 2 reduction efforts are effectively communicated to stakeholders.

Target setting for scope 2 emissions reduction

Setting appropriate targets is crucial for driving meaningful scope 2 emissions reductions and demonstrating commitment to climate action.

Science-based target setting

Science-based targets align corporate emission reduction goals with the level of decarbonisation required to meet the goals of the Paris Agreement:

Targets should cover all scope 2 emissions within operational boundaries
For electric utilities, targets must include power generation activities
Companies should specify whether reduction goals are based on location-based or market-based totals
Typical science-based targets require 4.2% annual linear reduction for alignment with 1.5°C pathway

Plan A's target setting module helps companies establish science-aligned targets that are ambitious yet achievable, with customisable pathways that account for business growth and industry-specific factors.

Renewable electricity targets

In addition to overall emission reduction targets, specific renewable electricity targets are recommended:

Set targets to reach 100% renewable electricity by 2030
Follow the progressive minimum thresholds recommended by the Science-Based Targets initiative (80% by 2025, increasing to 100% by 2030)
Clearly define eligible procurement methods that meet quality criteria

Target communication and governance

Effective target setting includes:

Clear communication of targets to all stakeholders
Integration of targets into business planning and decision-making
Regular progress reporting and transparency
Executive-level accountability for achievement
Connection between target achievement and performance incentives

Target type	Description	Advantages	Considerations
Absolute reduction target	Reduce total scope 2 emissions by a specific percentage (e.g., 50% by 2030 from 2019 baseline)	Clear, straightforward measurement; directly linked to climate impact	May be challenging for growing companies; requires adjustment for acquisitions/divestments
Intensity target	Reduce emissions per unit of output (e.g., tCO₂e per million EUR revenue)	Accounts for business growth; allows comparison across business units	May still result in absolute emissions increase if growth outpaces efficiency
Renewable electricity target	Increase percentage of renewable electricity to 100% by 2030	Focused specifically on electricity; clear procurement pathway	Addresses only part of scope 2 emissions (excludes purchased heat/steam)
Science-based target	Align scope 2 reductions with pathway to limit warming to 1.5°C	Credible, externally-validated approach; demonstrates leadership	Typically requires 4.2% annual linear reduction; comprehensive approach needed

Conclusion: building a sustainable energy future

Reducing scope 2 emissions represents a significant opportunity for companies to demonstrate climate leadership while realising business benefits. By combining energy efficiency measures, renewable energy procurement, strategic energy management, and innovative technologies, organisations can make substantial progress toward decarbonisation goals.

The journey to reduced scope 2 emissions requires a comprehensive approach that begins with accurate measurement, continues with strategic planning and implementation, and sustains through ongoing monitoring and improvement. Companies that successfully navigate this journey not only mitigate climate impact but also position themselves advantageously for a low-carbon future.

As regulations tighten and stakeholder expectations increase, proactive management of scope 2 emissions will become increasingly important for business success. Organisations that act now to establish robust measurement and reduction strategies will gain competitive advantage while contributing to the global climate solution.

Take action

Plan A's comprehensive carbon management platform provides the tools, methodologies, and expert support to help your organisation effectively measure, manage, and reduce scope 2 emissions as part of a holistic decarbonisation strategy. Book a demo today to learn how Plan A can support your scope 2 emissions reduction journey.