EFRAG calls for a balanced and cost-effective approach to proposed GHG Protocol Scope 2 changes

In February 2026, the European Financial Reporting Advisory Group (EFRAG) published its official response to the proposed revisions of the Greenhouse Gas Protocol (GHG Protocol) Scope 2 Guidance.

EFRAG supports improvements to Scope 2 accounting but urges a balanced, proportionate, and cost-effective approach to implementation.

This article summarises EFRAG’s key technical positions and outlines the potential implications for sustainability reporting in Europe and globally.

The GHG Protocol Scope 2 Guidance defines how organisations account for indirect greenhouse gas emissions from purchased electricity, steam, heat, and cooling.

Since 2015, companies have been required to disclose Scope 2 emissions using two parallel methods:

• Location-Based Method (LBM) – based on average grid emission factors.
• Market-Based Method (MBM) – based on contractual instruments such as renewable energy certificates.

The 2025–2026 public consultation proposes revisions to improve:

• Comparability
• Environmental integrity
• Alignment with regulatory frameworks
• Temporal and geographic accuracy of electricity accounting

Given that Scope 2 reporting is embedded in European reporting regulation and referenced by the European Commission, any methodological change has direct regulatory consequences.

EFRAG’s overall position

According to its Position Paper, EFRAG supports improvements but stresses several key principles:

1. Proportionality – Reporting requirements must not impose disproportionate administrative or financial burdens.
2. Operational Feasibility – Proposed changes must reflect real-world electricity market structures.
3. Clarity Of Drafting – EFRAG requests concrete amendment wording rather than high-level conceptual proposals.
4. Sufficient Consultation Time – Given the regulatory impact, consultation periods should allow meaningful stakeholder engagement.
5. Consistency Across Frameworks – Alignment with European Sustainability Reporting Standards is essential.

EFRAG emphasises that the GHG Protocol increasingly functions as a de facto global accounting reference that influences both voluntary and mandatory reporting.

Key technical issues raised

1. Redefinition of Scope 2 boundaries

EFRAG questions how new definitions such as “physically connected to the value chain” would be operationalised. Clear technical criteria would be required to avoid inconsistent application across jurisdictions.

2. Location-based method hierarchy

The consultation proposes a stricter hierarchical approach for emission factor selection. EFRAG cautions that making this mandatory could:

• Increase data collection complexity
• Raise compliance costs
• Deliver limited incremental decision-usefulness

EFRAG suggests that enhanced granularity may be appropriate but should not automatically become compulsory in all cases.

3. Market-based method and hourly matching

One of the most debated proposals concerns tighter temporal matching between electricity generation and consumption, including potential hourly matching requirements.

EFRAG recognises the environmental rationale but warns that immediate mandatory hourly matching could:

• Disrupt renewable energy certificate markets
• Reduce flexibility for electricity buyers
• Create significant implementation challenges

EFRAG therefore suggests a phased or optional introduction.

4. Data availability and market diversity

Electricity markets across the EU and globally vary significantly in transparency and infrastructure. EFRAG highlights that:

• Granular emission factors are not universally available
• Smaller entities may face disproportionate burdens
• A one-size-fits-all solution may undermine cost-effectiveness

Implications for European sustainability reporting

Because the GHG Protocol methodology is embedded in European reporting frameworks, changes to Scope 2 guidance could directly affect:

• Corporate decarbonisation strategies
• Transition planning
• Climate-related financial disclosures
• ESRS climate reporting metrics

EFRAG therefore stresses the need for alignment between voluntary standards and regulatory requirements.

Any divergence could create confusion for preparers, auditors, and regulators.

What happens next?

The GHG Protocol will analyse all consultation responses before finalising the revised Scope 2 Guidance.

EFRAG encourages:

• Continued stakeholder dialogue
• Practical field testing
• Careful phasing of methodological changes

The final outcome will influence greenhouse gas accounting globally and shape how organisations measure and report purchased electricity emissions for years to come.

Sources