How to Reduce Scope 2 Emissions: Strategies for Energy Efficiency and Cost Savings

They arise indirectly, but can be influenced directly: through better electricity contracts, your own PV systems, or smart efficiency measures. This guide shows you how to reduce your emissions and save on energy costs at the same time—with an overview of legal requirements, measurement methods, and a comparison of the best actions. An example: A manufacturing company with high electricity consumption for its machinery finds that 60% of its total CO₂ emissions are attributable to Scope 2 emissions. These count as indirect emissions and impact both the environment and a company’s operating costs. According to the International Energy Agency, electricity and heat production account for over 40% of global CO₂ emissions, highlighting the significance of addressing Scope 2 emissions for both environmental and financial reasons (IEA Global Energy & CO₂ Status Report).

Why are they important?

• Cost savings: Lower energy consumption reduces operating costs. In fact, the IEA Energy Efficiency 2023 report notes that businesses implementing energy efficiency measures can reduce energy bills by up to 30%.
• Achieving climate goals: Reducing emissions is essential for sustainable strategies, aligning with global efforts like the Net-Zero Coalition and the Paris Agreement targets.
• Competitive advantage: Companies with climate-friendly measures are more attractive to customers and investors. Recent research by McKinsey shows that organizations with robust sustainability strategies are more likely to outperform peers in long-term value creation.

How can Scope 2 emissions be reduced?

• Use green electricity: Switch to electricity from renewable sources. The U.S. EPA Green Power Partnership highlights that sourcing renewable energy can cut Scope 2 emissions to near zero.
• Increase energy efficiency: Measures such as LED lighting or energy management systems. The IEA reports that LED lighting uses at least 75% less energy than traditional incandescent lighting.
• Generate your own energy: Install photovoltaic systems. According to IRENA, solar PV is now one of the most cost-effective sources of electricity for businesses.
• Collaborate with energy suppliers: Sign Power Purchase Agreements (PPAs) for sustainable energy sources. PPAs provide price stability and guarantee renewable sourcing (CDP: What is a Power Purchase Agreement?).

Comparison of measures

The reduction of Scope 2 emissions is a key step towards greater sustainability and economic efficiency. Companies of all sizes can reduce their CO₂ footprint and save costs through targeted measures, with many actions offering a rapid payback period (IEA).

Scope 2 emissions can be calculated in two ways:

• Location-based: Based on the public emission factors of the local electricity mix. For example, a company in Germany uses the average emission value of the German grid—even when purchasing green electricity.
• Market-based: Uses contract-specific emission factors (e.g., via certificates of origin such as “Guarantees of Origin”) that reflect the company’s actual electricity mix. This approach is recommended by the GHG Protocol Scope 2 Guidance for more accurate reporting.

For both methods, you need:

• Electricity consumption in kWh (from the energy bill)
• Valid emission factors
• Certificates of origin for green electricity (e.g., hydropower from Norway)

The chosen method directly impacts your CO₂ balance—especially in reporting under CSRD (Corporate Sustainability Reporting Directive), which emphasizes transparency and accountability in sustainability reporting.

5 min overview of electricity attribution rules for scope 2 carbon accounting

Steps to reduce Scope 2 emissions

Consider which locations incur particularly high electricity costs or which processes are especially energy-intensive. This is exactly where reducing Scope 2 emissions pays off twice—for your balance sheet and for the climate. Here are some example approaches to specifically lower Scope 2 emissions:

Use of renewable energies

Switching to green electricity tariffs with certificates of origin can directly reduce Scope 2 emissions. According to the U.S. EPA Green Power Partnership, this is one of the most effective ways to lower a company’s indirect emissions.

Increasing energy efficiency

Energy efficiency measures offer a simple way to reduce energy consumption. These include:

• Optimizing buildings and processes using energy management systems
• Training employees to promote energy-saving behavior

Combined with on-site energy generation, CO₂ emissions can be reduced even further. The IEA estimates that global implementation of best-practice efficiency measures could avoid over 1.5 gigatonnes of CO₂ emissions annually by 2030.

On-site energy generation

Installing photovoltaic systems on site can significantly reduce the need for external electricity. According to IRENA, solar PV installations have become increasingly affordable, with payback periods for commercial systems often under 7 years.

Collaboration with energy suppliers

Companies can also lower their emissions by cooperating with energy suppliers. Examples include:

• Signing long-term contracts for electricity from renewable sources
• Using Power Purchase Agreements (PPAs) to secure sustainable energy sources. There are different types of PPAs: With a physical PPA, electricity is delivered directly from the producer to the company, often via the public grid. A virtual PPA (VPPA) is a financial contract where the company receives or pays the difference between an agreed price and the market price. For more, see CDP: What is a Power Purchase Agreement?.

Measures for small businesses

Smaller companies can also pursue similar approaches, tailored to their size and capabilities:

1. Analysis of the current state
   First, current energy consumption and the associated emissions should be recorded. Fiegenbaum Solutions supports SMEs in data collection and the creation of life cycle assessments.
2. Development of a zero-emissions strategy
   Here, concrete and measurable goals are defined and the most cost-effective measures are selected based on abatement costs.

   Measure	Cost efficiency
   LED lighting	High
   Smart thermostats	Medium
   Energy management systems	High

3. Implementation and monitoring
   The planned measures are implemented and regularly reviewed to ensure progress.

Marginal Abatement Cost Curve: Which measures are really worthwhile?

Not every reduction measure is equally efficient. The so-called MAC curve (Marginal Abatement Cost Curve) compares investments and savings potential. This allows companies to see which steps will help them avoid the most CO₂ per euro invested. For a practical overview, see the McKinsey MAC curve.

Comparison of emission reduction methods

To find out which measures deliver the best results, approaches to reducing Scope 2 emissions are compared in terms of investment required, savings potential, and implementation effort. An analysis of Marginal Abatement Costs (MAC) uses consumption data and emission factors from the chapter “How to measure Scope 2 emissions” to identify and prioritize the most cost-effective measures [1].

Overview of methods by investment and savings metrics:

• Green electricity tariffs: Low investment, immediate CO₂ reduction. According to the EPA, switching to green tariffs can reduce Scope 2 emissions by up to 100%.
• LED lighting: Low cost, high savings potential. LED upgrades can pay for themselves in less than two years (IEA).
• Energy management systems: Medium investment, comprehensive benefits. For example, an energy management system can optimize the energy consumption of heating, ventilation, and air conditioning (HVAC) systems by adjusting temperatures in different zones of the building and aligning operating times with actual usage.
• Photovoltaic systems: High initial investment, long-term energy independence. The IRENA notes that commercial PV systems can provide 20+ years of low-carbon electricity.
• PPAs (Power Purchase Agreements): Moderate effort, stable planning. PPAs are increasingly popular for securing renewable energy at predictable prices (CDP).

A MAC curve provides a solid foundation for data-driven decisions. In addition, government incentive programs and a rising CO₂ price are improving the profitability of many of these options (IEA).

German reporting guidelines

After selecting and prioritizing measures, mandatory reporting follows. In the next section, we present the current German requirements.

Current regulations

Starting in 2026, things get serious: With the new Corporate Sustainability Reporting Directive (CSRD), large companies and, in the medium term, many medium-sized companies will be required to systematically record and disclose their Scope 2 emissions. The principle of double materiality applies: companies must present both the impact of emissions on the environment and society and the risk significance for their own business model.

For Scope 2 reporting, market-based values are preferred—that is, contractually documented certificates of origin for renewable energy.

Documentation requirements

Create a digital overview of all energy purchases, including invoice data (kWh, emission factor) and certificates of origin. These documents must be kept for at least ten years, as required by the BAFA guidelines.

German standards

Use DIN EN ISO 14064-1 for preparing greenhouse gas inventories and ISO 50001 for energy management. For standardized reporting, it is recommended to apply the GHG Protocol Scope 2 Guidance.

Summary

• Strategic alignment: Align business models more closely with climate protection and resource conservation. This also includes systematically recording and reducing Scope 2 emissions.
• Net-zero strategies: Set clear emission reduction targets and prioritize CO₂ reduction measures using MAC curves.
• Risks and value creation: Identify climate-related risks—both regulatory and physical—and analyze the ecological footprint along the value chain.

FAQ

Here you’ll find clear answers to frequently asked questions about Scope 2 emissions. The answers summarize key points from the previous chapters and provide references to relevant sections for further details.

What are Scope 2 emissions?

Scope 2 emissions arise from the consumption of purchased electricity, district heating, or steam. They count as a company’s indirect energy consumption. For more, see the GHG Protocol.

What challenges exist in collecting data for Scope 2 emissions?

One challenge is obtaining accurate data from energy suppliers, especially when it comes to emission factors. It’s important to carefully check data sources and, if necessary, conduct your own measurements. The IEA recommends regular audits and supplier engagement to improve data quality.

How can Scope 2 emissions be reduced?

Switching to green electricity with certificates of origin and implementing measures to increase energy efficiency are particularly effective. For more details, see the section “Steps to reduce Scope 2 emissions” or consult the EPA Green Power Partnership.

What savings are possible?

With LED lighting and smart building control, CO₂ emissions can be reduced by 30–50%. The use of photovoltaic systems can reduce the need for external electricity by up to 40%, as reported by IRENA.