Almost every guide to this presents two methods and asks which you should pick. Under IFRS S2 that is the wrong shape. The location-based figure is required by paragraph 29(a)(v), and the market-based figure is not an alternative to it: it is additional information that becomes relevant when you hold contractual instruments. The practical difference is what evidences each. A location-based number rests on consumption and an emission factor. A market-based number is a claim about contracts, and only contracts can support it.
Key points
- Under IFRS S2 the location-based figure is required. Paragraph 29(a)(v) asks for it and the application guidance repeats it.
- The market-based figure is not an alternative to it. It is an additional disclosure that depends on the contractual instruments you hold.
- A market-based number is a claim about contracts, so it is evidenced by contracts rather than by meter readings.
- The dual-reporting idea comes from the GHG Protocol Scope 2 Guidance, which is where the instrument quality criteria sit.
- Most first-cycle trouble here is documentary: the certificates exist, the link from certificate to reported figure does not.
The framing almost everyone uses is wrong
Search for this and you will be offered a comparison: two methods, their pros and cons, and advice on which to pick. That framing is convenient and it does not survive contact with the standard.
Under IFRS S2 you do not choose. Paragraph 29(a)(v) requires the location-based figure, calculated with grid-average emission factors for the grids you drew power from, and the application guidance restates it. There is no branch of the standard where a market-based number is reported instead.
What genuinely varies is what you disclose in addition, and that is not a preference either. It follows from the contractual instruments you hold. Hold none and there is nothing further to report. Hold unbundled certificates, a power purchase agreement or a supplier-specific rate, and a market-based figure becomes information a user needs, together with the basis for it.
We built a four-question selector that works this out for your situation and gives you a link you can send to whoever owns the methodology. It runs in the browser with no signup.
Where the two numbers come from
The two-method structure is not an ISSB invention. It comes from the GHG Protocol Scope 2 Guidance, which introduced dual reporting so that a company procuring low-carbon electricity could show the effect of that procurement without obscuring the physical intensity of the grid it actually sits on.
The two numbers answer different questions. The location-based figure answers: what does electricity cost the atmosphere where this company operates. The market-based figure answers: what has this company contracted for. Both can be true at once, and a large gap between them is not an error. It is the point.
This is why the location-based figure is the one the standard fixes. It is comparable across filers in a way a contractual claim is not.
What actually evidences a market-based figure
Here is the part the comparison articles skip, and it is the part that causes trouble in a first cycle.
A location-based figure is evidenced by consumption data and a published emission factor. The chain is short: meter or invoice, kilowatt hours, factor, version of the factor, result. It is the kind of arithmetic finance teams already know how to support.
A market-based figure is a different kind of claim. It asserts that specific attributes were contractually conveyed to you, for the electricity you consumed, in the market where you consumed it, over the period you are reporting. Nothing about a meter reading demonstrates that. The evidence is the instrument itself and its characteristics: what was purchased, in which market, for which vintage, and whether the volume claimed matches the volume consumed.
The Scope 2 Guidance sets out quality criteria that contractual instruments are expected to meet, which exist precisely because the claim is otherwise unverifiable. The practical consequence for a preparer is that the certificate register is not administrative paperwork. It is the support for a disclosed number, and it needs the same retention discipline as an invoice behind a Scope 1 figure.
Three failures we would expect an assurer to find
Volume that does not reconcile. Certificates are held for a volume that does not match consumption for the same period and market. Often the total is right at group level and wrong per market, which is where it matters, because attributes cannot be moved across market boundaries to suit the arithmetic.
Vintage drift. Instruments from one period are used to support a claim about another. The register shows the purchase, not the period it was applied to, so nobody can demonstrate which year the attributes were retired against.
The orphaned claim. The market-based figure exists in the report and the certificates exist in a procurement folder, and there is no record connecting one to the other. Both halves are real and the link is missing, which is the hardest version to fix after the fact, because the person who made the connection did it mentally in a spreadsheet that has since been overwritten.
That last one is the same failure we describe in reproducing a figure eighteen months later: nothing is wrong with the data, and nobody can show the path.
What to keep, per reported figure
For the location-based number: the consumption data and its source, the emission factor and the version of it, the calculation, and a named approver. For the market-based number, everything above plus the instruments, their market and vintage, the volume they cover, and the record connecting them to the consumption they are claimed against.
Emission factors deserve a specific note, because they are revised and reissued. A figure calculated with one version of a factor is not reproducible against a later version, and "we used the published factor" is not a version reference. Keeping the factor file itself alongside the calculation is cheaper than reconstructing which one was current on the day.
This is the part our product holds. Auditably attaches evidence to each figure and hashes it on upload, records who prepared, reviewed and approved it, and writes every change to a log that cannot be edited afterwards, so the certificate and the factor sit against the number rather than in a folder somewhere. It does not calculate emissions and it is not a carbon accounting engine: bring the figure and the working. The boundary is on the coverage page, the price is on the pricing page, and the append-only claim can be tested on a live tenant without an account.
Common questions
Which Scope 2 method does IFRS S2 require?
The location-based figure. Paragraph 29(a)(v) requires it and the application guidance repeats the point. A market-based figure is not an alternative to it; where you hold contractual instruments it is additional information, disclosed alongside.
Do I have to report both numbers?
It depends on what you hold rather than on preference. With no contractual instruments there is no market-based figure to report. Where you hold unbundled certificates, a power purchase agreement or a supplier-specific rate, the market-based information becomes relevant and the basis for it has to be disclosed. Requirements also differ between jurisdictions adopting the standard, so check the rule that applies to you.
What counts as a contractual instrument?
Any contract for energy bundled with generation attributes, or for unbundled attribute claims. In practice that means unbundled certificates such as RECs, GOs or I-RECs, power purchase agreements and direct generator contracts, and supplier-specific products.
How do I evidence a market-based figure?
With the instruments rather than the meter. You need what was purchased, in which market, for which vintage, the volume it covers, and a record connecting those instruments to the consumption they are claimed against for the reporting period.
Does a large gap between the two numbers look bad?
No. A gap is the expected result of procuring low-carbon electricity on a carbon-intensive grid, and showing both is the reason dual reporting exists. What causes difficulty is a gap nobody can explain, or a market-based figure whose supporting instruments cannot be produced.
Where do you stand against IFRS S2?
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Run the free diagnostic →How we sourced this
The paragraph reference for the location-based requirement and the definition of contractual instruments follow the same reading we use in our Scope 2 method selector, which is built on IFRS S2 and its application guidance. The dual-reporting structure and the instrument quality criteria come from the GHG Protocol Scope 2 Guidance, linked above. The IFRS Standards sit behind the IFRS Foundation's registration wall, so we cite paragraph numbers rather than reproduce the text.
The three failure modes described are the ones the structure of the requirement makes likely, and are presented as expectations rather than as observed findings from client engagements. We have no customers yet and therefore no engagement data, and we have not implied otherwise. This is a general summary and not advice on your own methodology.