Blog

September 5, 2023

SR Inc & Members Offer Leadership on GHG Protocol

In 2022, the Greenhouse Gas (GHG) Protocol, the framework which underpins most corporate sustainability reporting, released several surveys soliciting feedback from the corporate sustainability community. These surveys evaluated satisfaction with existing GHG Protocol rules, suggestions for methodology changes, and potential system overhauls. The World Resources Institute (WRI), which manages the GHG Protocol, received an overwhelming response to these surveys from corporations determined to be involved in the adjustment process. 

The SR Inc team responded to these surveys, as did several SR Inc Member-Clients, in order to influence the GHG Protocol to maintain the current boundaries and incentives for corporate renewables procurement and create new guidance for emerging decarbonization strategies. SR Inc asked the GHG Protocol to prioritize the following changes in our review:

Topic	SR Inc Suggestion & Position
Critical nature of maintaining the existing Scope 2 market-based approach	Maintain the market-based accounting approach for Scope 2 to enable corporates to take credit for procurement of renewable energy. This accounting approach has caused an explosion in the procurement of renewable energy by companies around the world (including over 60 GW enabled by CEBA) in the regions that are most favorable financially and environmentally. Taking it away would severely hamper corporations’ (and therefore the world’s) ability to decarbonize.
Update inefficient calculation methods for Use of Sold Product Accounting	In addition to the current lifetime emissions calculation option, add an additional option to calculate Scope 3 Category 11 (Use of Sold Product) emissions yearly based on the installed base of products. This would allow companies to procure renewable energy on behalf of customers (since procurement happens on a yearly basis) and therefore decarbonize this category more effectively.
Purchaser-Caused EACs	Prioritize Energy Attribute Certificates (EACs) procured by corporates from new utility-scale systems in order to place a premium on additionality. See SR Inc’s piece on Purchaser-Caused EACs here.
Boundaries for EACs	Maintain the U.S./Canada REC boundary and the AIB GO boundary. Keeping these markets somewhat broad is key for California- and New England-headquartered companies to cause impactful carbon abatement in dirtier grids. Without these large market boundaries, companies would be forced into highly expensive local procurements for far lower carbon abatement, lowering the scale of their emissions impact.
Hourly EAC tracking	Encourage time-based granularity for EACs in order to create a market and a more feasible option for companies to pursue, as it is not currently feasible for a majority of companies to procure EACs on anything other than a yearly basis.
Scope 3 value chain mitigation	Create an approved methodology for companies to assist their value chain partners in mitigating emissions in order to reduce their own Scope 3 (i.e. through attribution of renewable energy, SAF credits, etc.).
Data availability for Purchased Goods & Services accounting	Create additional guidance on suggested Environmentally Extended Input Output (EEIO) data sources. Compile a database of supplier emissions for companies to use.
Scope 1 mitigation certificates	Create guidance on newly emerging Scope 1 mitigation strategies such as renewable thermal certificates (RTCs) and their allowed scope and usage.

WRI has been analyzing the more than 1,400 survey responses and proposals, and in May of 2023, the GHG Protocol hosted a webinar to provide updates specifically on the Scope 2 standards update process. After months of review, the Protocol is beginning to develop workplans and form governance bodies to launch the multi-stakeholder revision of standards based on the survey outcomes, which will take place throughout 2023 and 2024. 

During the webinar, the WRI team reviewed key themes proposed in responses to the Scope 2 survey, including: 

• • Transforming the reporting structure to: 
    • Dual reporting (status quo)
    • Location-based reporting only
    • Market-based reporting only 
  • For both data requirements AND market-based quality criteria requirements: 
    • Stipulating specific requirements (to minimize confusion and improve auditability) or keep interpretation flexible (to balance out lack of available data)
    • Creating granularity (e.g. hourly-based EAC reporting) or keep broad (e.g. year-based EAC reporting)
  • Introducing a third emissions impact reporting requirement (e.g. carbon abatement)
  • Developing additional guidance for new technologies
  • Aligning with policy, regulatory, and voluntary GHG disclosure programs

A May 2023 Wall Street Journal article reporting on this process indicated that Scope 2 market-based reporting may soon disappear. While some have proposed an end to the market-based standard, it’s clear from the GHG Protocol’s update that many have also strongly advocated for maintaining the market-based standard. Although some changes might go through, the SR Inc team does not expect an overhaul of the market-based system at this time. Kyla Aiuto, a Scope 2 Research Associate with WRI, explained at the end of the webinar that the team was aware that uncertainty around their work had already impacted energy projects, and clarified, “We want one message to ring clear – the GHG Protocol will continue to aim for positive impacts that reflect real world decarbonization.” 

SR Inc will continue to monitor the process and provide updates to Member-Clients, including further analysis of the written summary report released in July. Final updated standards are expected in roughly 2 years. 

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