Investors call for updates on Scope 2 emissions reporting

Global investors demand faster action on carbon reporting standards

Investors controlling £1.2 trillion in assets have called on the GHG Protocol to accelerate proposed changes to how companies report emissions from purchased energy. Their argument is straightforward. Better reporting standards would increase transparency and direct more capital toward clean energy projects.

The GHG Protocol sets the global standard for corporate greenhouse gas accounting. After nearly three years of development, it released draft updates to its Scope 2 Guidance in October 2025. Scope 2 covers indirect emissions from purchased electricity, steam, heat, or cooling.

Companies currently report these emissions using two methods. The location-based method uses average grid carbon intensity. The market-based method accounts for renewable energy credits and similar instruments. However, these approaches were designed for simpler energy markets.

Consequently, the proposed revisions aim to reflect modern grid realities. Energy grids are now cleaner, more complex, and increasingly interconnected. The changes would reduce double-counting of renewable energy and improve accuracy across corporate reporting.

Public consultation extends to January 2026

The GHG Protocol opened its first public consultation on 20 October 2025. Initially scheduled to close on 19 December 2025, the consultation period was extended to 31 January 2026. This extension allowed more stakeholders to submit feedback on the technical proposals.

A Technical Working Group developed the draft updates. The group included experts from business, academia, and civil society organizations. Their work builds on the original 2015 Scope 2 Guidance, which has governed corporate energy emissions reporting for nearly a decade.

The protocol plans a second consultation for late 2026. Final standards are expected in 2027, with compliance requirements likely taking effect no earlier than 2028. Therefore, companies have time to prepare, but the timeline suggests implementation is approaching quickly.

The Independent Standards Board is currently analyzing consultation responses. No final decisions have been announced as of early 2026. Meanwhile, related regulations are creating additional pressure for standardized methods.

Hourly matching replaces annual averaging for renewable energy claims

The core reform shifts market-based reporting from annual to hourly matching. Under current rules, companies can claim zero emissions if they purchase renewable energy credits covering their annual consumption. This approach allows mismatches between when renewable energy is generated and when it is actually used.

The proposed changes require temporal and geographical alignment. Renewable energy credits must match consumption on an hourly basis and come from deliverable sources. In other words, companies could only claim zero-emission benefits when renewable energy is actually available on their grid at the time they use power.

Additional technical updates include more precise location-based factors. These would incorporate time-matching and actual grid mix data. The proposal introduces standard supply service proportional claims and revised residual mix factors.

Notably, if data is unavailable, the default residual mix would assume fossil-only generation. The protocol also establishes eight Quality Criteria for instruments and recommends enhanced disclosure practices. These changes collectively aim to align corporate reporting with physical grid realities rather than paper transactions.

Investor coalition argues reforms enable genuine decarbonization

The investor coalition supports these changes because they provide clearer signals about genuine decarbonization efforts. Current reporting methods can obscure whether companies are actually reducing emissions or simply purchasing credits. Enhanced granularity would help investors distinguish between meaningful climate action and greenwashing.

This view aligns with broader stakeholder perspectives. Many argue that hourly matching curbs inflated renewable energy claims. However, critics including WattTime have raised concerns. They warn that hourly rules could raise compliance costs substantially without delivering proportional climate benefits.

Furthermore, some organizations worry these requirements might actually hinder renewable energy adoption. Small and medium enterprises may struggle with the data collection and verification burden. Legacy renewable energy contracts could become less valuable under the new framework.

The debate centers on additionality. Proponents want to ensure renewable energy purchases actually displace fossil fuel generation when power is needed. Critics argue the added complexity may slow the transition without guaranteeing better outcomes. This tension between rigor and practicality runs throughout the consultation feedback.

California emissions reporting law adds regulatory pressure

California’s SB 253 creates parallel momentum for standardized reporting methods. The law mandates Scope 1 and 2 emissions reporting for entities with over $1 billion in revenue doing business in California. The California Air Resources Board approved implementing regulations.

Companies face their first reporting deadline on 10 August 2026. This requirement applies regardless of where a company is headquartered. Consequently, many UK businesses with California operations will need robust emissions accounting systems in place within months.

The California law amplifies global pressure for consistent methodologies. As states and countries adopt different standards, companies operating internationally face a patchwork of requirements. Harmonized global standards would reduce compliance complexity and costs.

Therefore, the GHG Protocol revisions carry weight beyond voluntary reporting. They may influence mandatory disclosure regimes worldwide. Investors recognize this dynamic and want standards that support both regulatory compliance and capital allocation decisions.

SMEs face disproportionate compliance burden under proposed rules

Small and medium enterprises may struggle most with the proposed changes. Hourly matching requires granular energy consumption data that many businesses do not currently collect. Installing interval meters and verification systems represents significant upfront investment.

The protocol has proposed exemptions and thresholds to address this concern. Legacy contract clauses and simplified load profiles may help smaller businesses comply without excessive burden. However, the details of these accommodations remain under discussion.

Moreover, existing renewable energy credit markets may face disruption. Annual renewable energy credits could lose value if hourly matching becomes standard. This shift would affect companies that have already made long-term commitments based on current rules.

Professional services firms including EY and KPMG have noted these implementation risks. They highlight increased complexity in data collection, verification requirements, and shifts in energy procurement strategy. Stakeholder feedback during the consultation period emphasized these practical challenges repeatedly.

Market-based innovation could emerge from tighter standards

Despite implementation concerns, the reforms may drive market innovation. Demand for hourly renewable energy certificates could accelerate development of battery storage and flexible generation. Energy suppliers might create new products that help companies match consumption with clean generation.

Financial markets already show interest in time-matched renewable energy. Several exchanges and platforms are developing trading systems for hourly certificates. This infrastructure could mature substantially before 2028 compliance requirements take effect.

In addition, improved data transparency helps investors allocate capital more effectively. Companies that demonstrate genuine emissions reductions should attract more investment than those relying on paper offsets. This market signal could direct trillions toward actual decarbonization rather than accounting exercises.

The European Financial Reporting Advisory Group and other standard-setters are watching these developments closely. If the GHG Protocol successfully implements hourly matching, other reporting frameworks may follow. This creates potential for global alignment around consequential accounting principles.

Corporate reporting requirements now demand greater specificity

• Investors controlling £1.2 trillion in assets support proposed GHG Protocol reforms to Scope 2 emissions reporting for purchased energy.
• The core change requires hourly and geographical matching between renewable energy credits and actual consumption, replacing annual averaging methods.
• Final standards are expected in 2027 with compliance likely required from 2028, following two rounds of public consultation.
• California’s SB 253 mandates Scope 1 and 2 reporting by 10 August 2026 for companies over $1 billion revenue, adding regulatory pressure.
• Small and medium enterprises may face disproportionate compliance costs despite proposed exemptions and simplified approaches for smaller businesses.
• The reforms aim to ensure renewable energy purchases genuinely displace fossil fuel generation rather than serving as accounting instruments.
• Critics warn that increased complexity and costs could slow renewable adoption without delivering proportional climate benefits before 2030.

Balancing rigorous standards with practical implementation

The proposed reforms represent a fundamental shift in how companies account for energy emissions. Moving from annual averaging to hourly matching changes the nature of renewable energy claims. This approach prioritizes physical impact over contractual arrangements.

However, the transition creates genuine challenges for UK businesses. Companies with operations in California face immediate reporting deadlines. Those preparing for mandatory UK climate disclosures need clarity on which standards will apply. The consultation period revealed significant disagreement about implementation timelines and exemptions.

Ultimately, the reforms test whether corporate accounting can keep pace with energy market evolution. Modern grids integrate variable renewable generation, battery storage, and interconnectors. Accounting methods designed for simpler systems may not reflect these realities accurately.

The investor coalition sees this clearly. Better data enables better capital allocation. Companies that can demonstrate genuine emissions reductions should have easier access to capital at lower costs. Meanwhile, those relying on paper instruments to mask ongoing fossil fuel consumption face growing scrutiny.

For businesses tracking these developments, the message is consistent. Energy emissions reporting is becoming more granular, more technical, and more material to investment decisions. The 2028 timeline may seem distant, but preparation requires systems changes that take time to implement properly.

Our compliance support services help businesses navigate evolving carbon reporting requirements, including Scope 2 emissions accounting under both current and proposed GHG Protocol standards.

Further reading

The GHG Protocol website provides the draft Scope 2 Guidance documents and consultation materials for businesses reviewing the proposed changes in detail.

The California Air Resources Board maintains guidance on SB 253 implementation and reporting deadlines for companies with California operations.

Energy market participants can access technical resources through the International Energy Agency, which publishes analysis on grid decarbonization and renewable energy integration globally.