Navigating energy management in an evolving landscape

Why embracing digitizing and granularity is a good idea when it comes to your energy and emissions data

Simone Accornero, co-founder and CEO of FlexiDAO, outlines key trends within energy and emission management.

As the world progresses in digitalization, data granularity, and carbon-free energy research, the way companies manage their emissions is getting more strategic, sophisticated and complex.

There are a number of important evolutions when it comes to managing and accounting for energy supply that could have a big impact on the role of an energy manager - exposing them to new risks but also opening up new leadership opportunities.

These are some of the key trends and how you can stay ahead of them.

Evolution 1: Mandatory reporting standards are being introduced

Starting in 2024, both the EU and the US will require mandatory reporting of carbon emissions, ushering in a new era of accountability for many businesses that have not been disclosing their emissions impact thus far. The recent EU regulatory frameworks put forward by EFRAG require emissions reporting to be performed alongside financial disclosures and will affect approximately 50 000 companies.

Over in the US, every publicly listed company will need to start disclosing climate-related information alongside financial filings due to SEC’s proposed rules to enhance and standardize climate-related disclosures for investors.

Evolution 2: Stricter emission calculations and calls for accuracy with voluntary accounting

Alongside this new enforcement when it comes to mandatory reporting, voluntary industry standards are evolving to ensure better measurement of emissions to reflect real decarbonization impact:

1. The Greenhouse Gas (GHG) Protocol is the foundational guidance for voluntary carbon accounting programs like CDP and leadership schemes like RE100 and SBTi (see below). It also underpins the recent EU and US regulatory frameworks on mandatory emissions reporting.

The World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBSCD) have initiated a public consultation to gather insights from stakeholders on potential updates to the GHG Protocol.

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These discussions reflect the growing need to align accounting standards with actual achievements in emissions reduction. This is because the current market-based accounting principles, which permit the use of Energy Attribute Certificates (EACs), have faced criticism for failing to recognize the physical realities of electricity grids and potential double-counting of emission benefits.

Concerns have been raised by environmental organizations, academic studies and the media, highlighting the limitations of market-based accounting.

2. The Science Based Targets Initiative (SBTi) provides companies with a clearly-defined path to reduce emissions in line with the Paris Agreement goals. The initiative has recently proposed not to accept unbundled EACs anymore in the GHG Protocol’s Scope 2 guidelines, which could have a knock on effect for the 2,000 companies who are now members of the scheme.

3. RE100 is a global initiative bringing together the world's most influential businesses committed to 100% renewable electricity. It now requires organizations to meet mandatory additionality requirements, disclose the origin of their renewable energy, and undergo thorough claims verification. These measures ensure that companies actively contribute to new renewable energy capacity, promote transparency in sourcing, and uphold the credibility of their renewable energy claims

If regulations and standards change, companies may suddenly have to report higher emissions than they are accustomed to. A recent study by FlexiDAO found that respondents reported less than half of their emissions using the current Scope 2 accounting principles compared to what would be reported using more granular Scope 2 accounting principles (If respondents were required to match their electricity consumption with electricity generated in the same grid region and same hour as consumption).

Only 2% of the respondents reporting zero market-based emissions following the GHG Protocol's current Scope 2 market-based guidelines could reach the same result considering more granular criteria (same grid region, same hour).

Whereas current guidelines have been highly successful in incentivizing and developing a vast community of corporate buyers contracting renewable energy, the report clearly shows that this also creates a false sense of achievement, failing to provide organizations with the right information to understand the real carbon footprint of their energy supply.

In order to avoid reputational and financial losses that may occur due to a lack of preparedness for regulatory change, energy managers can ensure they have the right tools in place to accurately account for their Scope 2 reporting, both now and if more granular requirements are included.

Evolution 3: Complexity of energy & emissions portfolio management

Managing energy & emissions portfolios has become increasingly intricate due to the proliferation of new quality and technical criteria requirements (see RE100 changes in previous section), additional scrutiny and verification, increasing costs, and more.

Energy managers must monitor and analyze these diverse components to make carbon-aware decisions about energy procurement.

However, existing manual processes, fragmented data, and inadequate data quality often hinder their efforts. Over a third of companies are also still reliant on manual data collection for carbon emissions management and reporting.

The solution: Reliable, granular energy and emissions data and analytics

To address the challenges, energy and sustainability managers can embrace reliable, granular energy and emissions data alongside advanced analytics capabilities. By leveraging such tools, organizations can achieve the following:

1. Accurate measurement and reporting Granular data and analytics help energy managers meet emerging regulations such as the Corporate Sustainability Reporting Directive (CSRD) voluntary disclosure, as well as the Securities and Exchange Commission (SEC) or the European Financial Reporting Advisory Group’s (EFRAG) mandatory requirements. Organizations can anticipate future changes, such as if hourly and location-sensitive matching or avoided emissions requirements are introduced, by implementing robust granular data management practices.

2. Efficient carbon-free energy portfolio management Digital tools can be used to facilitate monitoring of contract performance and enable data-driven decision-making for energy procurement. Energy managers can analyze optimization scenarios and leverage granular data to make informed choices regarding their energy sources.

3. Time savings and improved decision-making By streamlining data collection, analysis, reporting, and decision-making processes, energy and sustainability teams can save valuable time. Automating analytics transforms raw data into actionable insights, empowering organizations to make informed choices promptly and allowing for smoother cross-team collaboration.

As energy and sustainability managers navigate the evolving energy landscape, embracing reliable, granular energy and emissions data becomes crucial. By leveraging advanced analytics tools (such as FlexiDAO’s CFE Inventory) and adopting best practices, organizations can accurately measure, report, and reduce energy-related emissions.

By staying ahead of these trends and embracing sustainability as a strategic imperative, energy managers can lead their organizations toward a more sustainable future, positioning their organization as leaders in a new zero-carbon economy.