The GHG Protocol Scope 2 Guidance, published in 2015, introduced a dual-reporting requirement that created a persistent source of confusion in sustainability reporting: two different methods for calculating the same thing, producing different numbers, both of which are valid. CSRD inherits this complexity and makes it an explicit disclosure requirement.
The question compliance teams ask most often is: "which number should we report?" The answer is: both. But understanding why both are required, what each represents, and where the data comes from to calculate them is worth working through carefully — because getting Scope 2 wrong is one of the more common limited assurance findings in first-year CSRD submissions.
Location-based Scope 2: what it measures and why it matters
The location-based method calculates Scope 2 emissions using the average emission intensity of the electricity grid in the region where each facility is physically located. It answers the question: given the actual electricity mix that flowed through the grid to this facility, what was the average carbon intensity?
For a German facility consuming 1,400 MWh of electricity in 2024, the location-based calculation uses the German national average grid emission factor for that year. The Umweltbundesamt publishes this figure annually; the 2023 value was approximately 0.380 kg CO2e/kWh, placing it among the higher European grid intensities due to the coal and gas generation mix during the energy transition. The calculation: 1,400 MWh × 0.380 tCO2e/MWh = 532 tCO2e.
Location-based calculation requires two data inputs: utility invoices showing kWh consumed per facility per billing period (readily available from your AP invoices in the ERP or from uploaded utility bills), and the national or regional grid factor for the reporting year (published by IEA, national energy regulators, or the AIB European grid factor series).
The appeal of location-based is simplicity and comparability across sites: every facility in the same country uses the same factor, making year-on-year trends visible without the complication of changing contract status.
Market-based Scope 2: what it measures and why it's more complex
The market-based method uses the emission rate specific to the electricity supply contract or certificates the company holds. It answers the question: given the electricity procurement decisions this company made — the supplier chosen, the certificates purchased — what was the carbon intensity of the electricity they contractually acquired?
For the same German facility holding a Guarantee of Origin (GO, called Herkunftsnachweis under the German EEG framework) covering 1,400 MWh of renewable generation for the reporting year, the market-based emission factor is 0 kg CO2e/kWh for that contracted volume. Market-based result: 0 tCO2e. This is the mechanism by which renewable energy procurement programs — PPAs, RECs, GOs — reduce a company's reported Scope 2 emissions on a market-based basis, even when the physical electricity delivered through the grid is a mix of generation sources.
For facilities with no contractual instruments — no GOs, no PPAs, no supplier-specific renewable tariff — the fallback market-based factor is the residual mix factor for the country of operation. The residual mix factor, published annually by the Association of Issuing Bodies (AIB) in the European Residual Mixes document, represents the emission intensity of the electricity volume that was not claimed by certificate holders. This is a consistently misunderstood concept: the residual mix factor is not the same as the average grid factor, and it is not lower.
Because all renewable generation in the European Energy Certificate System (EECS) is fully allocated to certificate holders who claim zero-emission electricity, the residual — the electricity left for consumers with no contractual claims — has a higher carbon intensity than the grid average. In markets with substantial renewables capacity (Austria, Norway, Sweden), this effect is pronounced: the residual mix factor can be significantly above the location-based average because nearly all the low-carbon generation has been claimed. For a company with facilities in Austria holding no GOs, the market-based figure will often be higher than location-based, not lower.
What ESRS E1 actually requires
ESRS E1-4 (paragraph 40a) requires disclosure of gross Scope 2 GHG emissions, with both market-based and location-based figures disclosed where they produce materially different results. EFRAG's application guidance clarifies that for companies operating in European electricity markets — where EECS-compliant GOs and supplier-specific contracts are available — reporting both methods is standard practice and expected by assurance providers.
We are not saying that CSRD mandates market-based as the primary Scope 2 figure. The standard does not make that choice. What it requires is transparency: both methods shown in the GHG inventory table, with documentation of the contractual instruments held and the residual mix factors applied where applicable.
Your ESRS E1 disclosure will contain two Scope 2 rows in the GHG inventory — one market-based, one location-based. Your assurance provider will request the documentation to support both calculations: utility invoices for kWh consumed, GO certificates with MWh volumes and validity periods matched to reporting year consumption, and residual mix factor source documentation for uncovered consumption.
The practical data challenge: REC documentation completeness
The most common Scope 2 data quality issue in first-year CSRD disclosures is incomplete contractual instrument documentation for market-based calculation. The pattern: a company has been purchasing GOs for several years through an energy supplier or broker, but the documentation — individual GO certificates with vintage year, generation technology, and MWh volume — is scattered across supplier portals, email attachments, and finance system payment records without a systematic archive.
For limited assurance purposes, the assurance provider needs to verify that GOs applied in the market-based calculation are:
- Within the EECS-valid vintage year range (GOs must be used within 12 months of the generation date)
- Covering the reporting year's consumption volume (not a prior or future year's purchase applied to the current year)
- From generation in the same electricity market area as consumption (cross-border GO use has specific geographic requirements under EECS rules)
If you cannot produce this documentation for a portion of your claimed GO coverage, the market-based calculation for that portion defaults to the residual mix factor — which typically increases the market-based figure.
For companies with facilities across multiple EU countries — the Netherlands, Germany, Poland, Romania — this documentation exercise becomes a multi-country data collection task. Residual mix factors differ by country and change year to year. AIB publishes them annually, typically in the second quarter following the reporting year. For a 2024 reporting year disclosure submitted in mid-2025, the 2024 residual mix factors should be available in time, but verify the publication timeline for your specific countries before finalizing the disclosure.
How to get both calculations from your existing data
For the location-based calculation, your data sources are:
- Utility invoices showing kWh consumed per facility per billing period — available from AP module invoice data or uploaded PDF invoice parsing
- National/regional grid emission factors for the reporting year — IEA Emissions Factors annual publication, national energy agency publications (Umweltbundesamt for Germany, RTE for France, etc.), or AIB European grid factors
- Site-level cost center mapping to confirm which invoices belong to which geographic location
For the market-based calculation, you additionally need:
- GO or REC certificates: MWh volume, generation technology (hydro, wind, solar), vintage year, and expiry date — exported from your energy supplier's certificate portal or from a certificate registry such as AIB's EECS registry
- PPA contracts if applicable: contracted MWh volume, contracted emission factor (typically 0 for renewable PPAs), and contract period
- AIB European Residual Mixes annual publication for each country of operation — for consumption volumes not covered by certificates
Greenopsiq reads utility invoices from AP data or PDF invoice uploads and applies both location-based and market-based factors automatically. GO and REC certificate documentation is uploaded to the platform and matched against consumption period and volume. Where certificate coverage is partial, the residual mix factor is applied to the uncovered portion. The output ESRS E1 disclosure package shows both figures in the required GHG inventory table format, with a coverage percentage and factor source documentation for each.
If GO documentation is incomplete or residual mix factors for a specific country are not yet published for the reporting year, the gap analysis dashboard flags these as pending data items so the disclosure can be finalized once the data is available — rather than submitted with undocumented assumptions that an assurance provider will flag during review.
