Sustainability teams have a common set of questions when it comes to CDP reporting.
What environmental claims will we be able to make if we go 100 percent renewable energy? And what is the guidance from leading NGOs?
The response: When a company purchases renewable energy to match 100 percent of its global operational electricity load each year — and has bundled, verified and retired energy attribute certificates (EACs) that match the purchase — the organization should be able to claim that it's 1) fully powered by renewable energy and 2) has zero Scope 2 emissions.
All of these conditions must be met in order to make these claims. Companies that purchase less than 100 percent, purchase only for a specific period of time or don’t buy enough EACs to match their global load, must be careful to ensure their claims are accurate. For example, a company that is purchasing renewable energy certificates (RECs) for all of its North American load could make a claim that its regional emissions are zero carbon, but not for the rest of its global load.
These parameters apply to companies using onsite generation, offsite power purchase agreements (PPAs), EAC purchases or other contracting mechanisms. It is the EAC piece of renewable electricity that carries the clean generation’s environmental attributes; without ownership and retirement of EACs in a corresponding volume to the clean energy purchased, other entities can claim the benefits of that generation.
Companies must also be careful not to make carbon neutrality claims when using renewable energy. Achieving true carbon neutrality across Scope 1, Scope 2 and Scope 3 emissions is difficult. Using renewable electricity, even at 100%, typically enables zero-carbon claims only for Scope 2 emissions.
While many NGOs have been vocal on the credibility of renewable energy claims, the foundation for these positions comes from the Scope 2 guidance issued by the World Resource Institute (WRI). This guidance defines purchase of renewable electricity in the form of PPAs and EACs to be a market-based method of electricity reporting known as a contractual instrument.
Specific direction on the quality of the contractual instrument used to address emissions, as well as clarification on reporting requirements, can be found in the Scope 2 guidance. CDP follows WRI’s leadership on Scope 2 reporting in its annual disclosure questionnaires.
Notably, commercial, industrial, and institutional (C&I) buyers often have a secondary environmental goal for their purchase: additionality. Additionality is the claim that, “But for our involvement, this project would not have taken place.” For many C&I buyers, the right to say that their role in a project made a material difference is significant.
To date, there has been little specific guidance on what makes an additionality claim. New projects are typically considered additional (since they help displace grid emissions by shifting the overall electricity mix in favor of renewables), as are high-value EACs in many global markets due to the financial role they play in building those markets.
Many participants in a renewable deal — ranging from the buyer to the developer — can claim additionality. It is also distinct from emission reduction claims, as additionality is not tied to the retirement of EACs. For more detail on accurate reporting, download the whitepaper on clean energy claims, reviewed and edited by WRI, which provides helpful guidance on these nuanced issues. Or contact a sustainability expert.