A contractual instrument is any contract that demonstrates a claim to specific attributes about purchased energy, such as coming from renewable sources, regardless of whether the energy purchased is the energy consumed. Entering a contractual instrument clarifies your energy use and environmental impact and helps determine the relevant location- and market-based emissions.

A Renewable Energy Certificate (REC) is a market-based instrument that certifies that the bearer owns a claim to one megawatt-hour (MWh) of electricity generated from a renewable energy source and fed into the power grid. RECs allow organisations to claim the environmental benefits of renewable energy - even if they actually consume electricity from non-renewable sources - by purchasing certificates equivalent to their energy usage. This system incentivises renewable energy production by providing a revenue stream for producers.

Depending on your region, the contractual instrument used to certify usage of renewable electricity may also be called:

On-site renewables refer to renewable energy systems that generate electricity for direct use, which are installed at the facilities your company owns or has a lease contract with. The most common example is rooftop solar panels on your office building - if your panels generate 50 MWh annually, you can directly claim these zero-emission benefits in your market-based scope 2 calculations. Unlike with RECs, you directly consume the renewable electricity you generate.

This is the actual emissions rate from your electricity supplier's generation mix, which can be used in market-based calculations if you have a direct contract with them. Supplier-specific emission factors represent the average emissions intensity of the electricity that your chosen supplier provides to the grid and reflects their specific energy generation mix (e.g., how much comes from renewable, nuclear, or fossil fuel sources). For example, if you purchase 1,000 kWh monthly, your provider commits to supplying the grid with this amount of energy, so for market-based calculations, the supplier’s emission factor can be used instead of the grid average. This emission factor must be backed by contractual instruments that ensure no double-counting of renewable attributes.

Whichever department is able to provide your energy consumption information should be able to provide information on the contractual agreements associated with the energy. However, this may not always be the case and different types of contractual instruments may be organised by different departments.

To verify if your company has RECs, check with the Procurement department as they typically manage renewable energy purchases. Similarly, sustainability teams also often drive the purchase of RECs, so whoever is leading on emissions data may already have the data within your data collection team.

They can confirm REC ownership by reviewing purchase agreements, invoices from REC vendors, or contacting energy suppliers who issue certificates.

The Facilities or Operations department is the best place to check for on-site renewable energy installations. They often oversee energy infrastructure and can confirm whether solar panels, wind turbines, or other renewables are installed.

They can verify this through system records, maintenance logs, or by consulting the third-party installer or utility interconnection agreements.

Procurement and Finance departments usually manage electricity contracts and supplier agreements.

They can determine if the company has supplier-specific emission factors by reviewing electricity contracts, reviewing the providers website for (or directly requesting) emission factor documentation, or checking utility disclosures on purchased energy sources.

To determine whether your contractual instrument qualifies for market-based scope 2 reporting, please review it against the Greenhouse Gas (GHG) Protocol requirements (Scope 2 Quality Criteria) outlined on pages 5–6 of the GHG Protocol Scope 2 Guidance Executive Summary.

A valid contractual instrument must meet the Scope 2 Quality Criteria, which includes:

For a full list of requirements, please refer to the GHG Protocol documentation.