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Governance Authority
Category: Sustainability and ESG

Scope 2 Emissions

Also known as: Scope 2, Indirect emissions from purchased energy
Simply put

Scope 2 emissions are the indirect greenhouse gas emissions that come from the energy an organization buys and uses, such as electricity, steam, heat, or cooling. Although these emissions physically occur at the facility where the energy is generated rather than at the buyer's own site, they are attributed to the organization that purchases and consumes that energy. This makes Scope 2 distinct from Scope 1, which typically covers emissions from sources an organization directly owns or controls.

Formal definition

Scope 2 emissions are indirect greenhouse gas (GHG) emissions associated with the generation of purchased or acquired electricity, steam, heat, and cooling consumed by a reporting organization. Under the GHG Protocol's Scope 2 Guidance, these emissions are quantified and reported separately from Scope 1 (direct) emissions; they physically occur at the facility where the energy is produced but are allocated to the entity that purchases the energy. The precise methodologies, boundaries, and calculation approaches applied are generally governed by the applicable emissions accounting framework, and reporting obligations vary by jurisdiction, sector, and entity type. This entry is educational and not legal, audit, or compliance advice.

Why it matters

Scope 2 emissions often represent a significant portion of an organization's overall greenhouse gas footprint, particularly for entities whose operations depend heavily on purchased electricity, steam, heat, or cooling rather than on-site combustion. Because these emissions are typically measured and reported separately from Scope 1 (direct) emissions under the GHG Protocol's Scope 2 Guidance, they give boards, management, and stakeholders a clearer picture of the climate impact tied to an organization's energy procurement decisions. For governance purposes, distinguishing Scope 2 from Scope 1 matters because the levers available to reduce each differ: Scope 2 reductions generally flow from energy purchasing choices and efficiency measures, whereas Scope 1 reductions involve sources the organization directly owns or controls.

The accuracy and completeness of Scope 2 accounting have grown in importance as emissions disclosures come under greater scrutiny from regulators, investors, and other stakeholders. Reporting obligations, however, vary by jurisdiction, sector, and entity type, and the specific methodologies, boundaries, and calculation approaches applied are governed by the applicable emissions accounting framework. Organizations that misclassify emissions across scopes, or that apply methodologies inconsistently, risk producing disclosures that are difficult to compare or that may be challenged.

Because the GHG Protocol's Scope 2 Guidance standardizes how organizations measure emissions from purchased or acquired energy, adherence to a recognized framework helps support the credibility and comparability of reported figures. This entry is educational and not legal, audit, or compliance advice; whether and how a particular organization must report Scope 2 emissions depends on the facts, the applicable framework, and the relevant jurisdiction.

Who it's relevant to

Boards and audit or risk committees
Directors and committee members with oversight of ESG and climate-related disclosures need to understand how Scope 2 emissions are measured and reported so they can assess the credibility and consistency of the organization's emissions data. Oversight of disclosure quality sits with the board and its committees, while the underlying measurement and reporting is generally executed by management.
Sustainability, ESG, and reporting teams
The functions responsible for preparing emissions inventories apply the relevant accounting framework, such as the GHG Protocol's Scope 2 Guidance, to quantify indirect emissions from purchased energy and to report them separately from Scope 1. These teams must track how methodologies and boundaries are applied and how obligations differ by jurisdiction, sector, and entity type.
Compliance and legal functions
Where emissions reporting is subject to binding requirements, compliance and legal teams help determine what obligations apply to the organization and monitor that disclosures meet them. Because requirements vary by jurisdiction and entity type, these functions assess whether Scope 2 reporting is mandated or voluntary in a given context.
Internal and external assurance providers
Auditors and assurance providers reviewing emissions disclosures evaluate whether Scope 2 figures have been prepared in line with the stated framework and whether the methodologies have been applied consistently. Their role is to provide independent assurance, distinct from management's responsibility for producing the underlying data.

Inside Scope 2 Emissions

Indirect Emissions from Purchased Energy
Scope 2 covers greenhouse gas emissions associated with the generation of electricity, steam, heating, and cooling that an organization purchases and consumes but does not generate on-site. The emissions physically occur at the facility that produces the energy, which is why they are classified as indirect from the reporting entity's perspective.
Location-Based Accounting Method
An approach that quantifies emissions using average emission factors for the electricity grid on which energy consumption occurs, typically reflecting the generation mix of a defined geographic area. It generally does not account for any contractual instruments the entity may hold.
Market-Based Accounting Method
An approach that reflects emissions from electricity the entity has purposefully chosen or contracted for, often using instruments such as energy attribute certificates or supplier-specific factors. Under widely used greenhouse gas accounting guidance, organizations are typically encouraged to report both location-based and market-based figures where relevant.
Boundary and Consolidation Considerations
Scope 2 depends on how an organization defines its reporting boundary and consolidates operations it owns or controls. The activities and facilities included generally follow the same organizational boundary applied across an entity's broader emissions inventory.
Relationship to Scope 1 and Scope 3
Scope 2 sits between Scope 1 (direct emissions from owned or controlled sources) and Scope 3 (other indirect emissions across the value chain). Purchased energy is treated separately from on-site combustion and from upstream or downstream value-chain emissions to avoid double counting within a single entity's own inventory.

Common questions

Answers to the questions practitioners most commonly ask about Scope 2 Emissions.

Are Scope 2 emissions a governance matter, or purely an environmental reporting technicality?
Scope 2 emissions, the indirect greenhouse gas emissions associated with purchased electricity, steam, heating, and cooling consumed by an organization, are increasingly treated as a governance and disclosure matter, not just an operational or environmental one. In many jurisdictions and under certain frameworks, the board or a designated committee has oversight responsibility for the integrity of emissions-related disclosures, while management typically owns the measurement, data collection, and reporting processes. Whether Scope 2 reporting is a binding legal requirement or a voluntary practice depends on the jurisdiction, sector, entity type, and the specific disclosure regime that applies. This entry is educational and not legal, audit, or compliance advice.
Is Scope 2 just a subset of Scope 1, so that reporting one covers the other?
No. Scope 1 and Scope 2 are distinct categories and are not interchangeable. Scope 1 generally refers to direct emissions from sources owned or controlled by the organization, while Scope 2 generally covers indirect emissions from purchased energy that the organization consumes but does not generate on-site. Reporting one does not satisfy the other, and many frameworks expect them to be disclosed separately to avoid double counting and to preserve transparency. The precise boundary definitions and consolidation approaches depend on the framework or standard applied and on facts specific to the reporting entity.
Who within the organization should own Scope 2 measurement and reporting?
Accountability generally divides along governance lines. Management, often supported by sustainability, facilities, procurement, or finance functions, typically owns the operational task of collecting energy consumption data, applying calculation methodologies, and preparing disclosures. The board or a relevant committee generally holds oversight responsibility for the reliability of those disclosures and for ensuring adequate processes exist. Where the entity applies a three lines model, assurance functions such as internal audit may review controls over emissions data without owning the reporting itself. The specific allocation depends on the entity's structure, sector, and applicable requirements.
What controls help support the reliability of Scope 2 data?
Organizations commonly consider controls over the completeness and accuracy of energy consumption data, the consistency of calculation methodologies applied period to period, the source and vintage of emission factors used, and the reconciliation of reported figures to underlying utility or supplier records. As with any control environment, it is useful to distinguish control design from operating effectiveness: a well-designed control still needs evidence that it operates as intended over the reporting period. The appropriate control set depends on materiality, data availability, and the assurance level sought.
How should an organization approach location-based versus market-based reporting choices?
Some frameworks contemplate more than one method for quantifying Scope 2 emissions, and the choice affects comparability and the story the numbers tell. Organizations generally document which method they use, apply it consistently, and disclose the basis of preparation so users can interpret the results. Because methodology selection can materially affect reported figures, this is often a matter for management to decide with appropriate governance oversight and, where relevant, input from assurance providers. The specific methods available and any preference among them depend on the framework applied.
How does Scope 2 reporting intersect with an organization's risk management processes?
Emissions data can connect to enterprise risk management where the organization has identified climate-related or disclosure-related risks within its risk universe. Practically, this may involve considering the likelihood and impact of data errors or misstatement separately, assessing residual risk after controls are applied, and reflecting the organization's stated risk appetite and tolerance for disclosure inaccuracy. Whether and how Scope 2 features in ERM depends on the entity's risk profile, materiality judgments, and applicable requirements, and remains a matter for the organization's own professional judgment.

Common misconceptions

Scope 2 emissions occur at the reporting organization's own facilities.
The emissions physically occur at the power or utility plant generating the purchased energy, not at the consuming organization's site. They are attributed to the purchaser because the purchaser's consumption drives the demand, but the source is external, which is why they are categorized as indirect.
There is a single correct way to calculate Scope 2 emissions.
Commonly applied greenhouse gas accounting guidance recognizes more than one method, notably location-based and market-based approaches, which can yield materially different results. Which figures an organization reports, and how it reports them, can depend on the applicable framework, the availability of data and contractual instruments, and the entity's own judgment.
Disclosing or measuring Scope 2 emissions is universally legally mandatory.
Whether emissions reporting is a binding legal requirement or a voluntary practice varies by jurisdiction, sector, and entity type. Many organizations report against non-binding frameworks or best-practice guidance, while others may be subject to specific disclosure obligations; practitioners should confirm what applies to their own circumstances.

Best practices

Clearly define and document the organizational boundary and consolidation basis used, and apply it consistently between Scope 1, Scope 2, and Scope 3 to avoid gaps or double counting.
Report both location-based and market-based figures where the applicable framework and available data support doing so, and disclose the methods and emission factors used for transparency.
Retain supporting evidence for any contractual instruments relied upon in market-based accounting, so that the basis for reported figures can be reviewed and assured.
Confirm which disclosure obligations, if any, are legally binding in the relevant jurisdiction and sector, and distinguish these from voluntary framework-based reporting when setting internal requirements.
Assign clear accountability for data collection and calculation to the appropriate management function, while positioning independent review or assurance separately from those who prepare the figures.
Treat these entries as educational rather than as legal, audit, or compliance advice, and seek qualified professional input where the correct treatment depends on specific facts or applicable requirements.