Executive Summary (The 30-Second Brief)

The Threat: ESRS E1 now legally mandates dual Scope 2 reporting (location-based and market-based). After 10 years of this requirement, 49% of companies still cannot comply and only 17% give equal prominence to both methods.

The Friction: Most companies have one emission calculation system producing one number. Japan's unique J-Credit and JEPX NFC instruments add complexity that global carbon tools ignore entirely.

The Marupass Solution: Marupass uses AI to extract data from raw PDFs and locks it on a Blockchain Audit Trail, instantly generating dual-method ESRS E1 Scope 2 reports without manual entry.

The Number That Means Two Things

You calculate your Scope 2 emissions using the standard method. You take your electricity consumption (500 MWh), multiply by Japan's grid emission factor (0.421 kg CO2/kWh), and report 210.5 tonnes CO2e.

Your buyer calculates their Scope 2 emissions using a different method. They purchased Renewable Energy Certificates equal to their total electricity consumption. They report zero tonnes CO2e.

You both consumed electricity from the same grid. The grid delivered the same mix of coal, gas, nuclear, and renewable power. The atmosphere absorbed the same amount of CO2.

You reported 210.5. They reported zero. Both numbers are "correct" under GHG Protocol rules. And when their auditor tries to reconcile your Scope 3 data with their Scope 2 framework, the numbers do not add up.

This is the Scope 2 dual reporting crisis. And it is about to become legally mandatory.

49% Still Cannot Do It

The GHG Protocol has required companies to report Scope 2 emissions using both methods since 2015:

Location-based: Electricity consumed × regional grid emission factor. Reflects the physical reality of what the grid delivers.
Market-based: Electricity consumed × the emission factor of your specific contractual instruments (PPAs, RECs, green tariffs). Reflects procurement choices.

A 2025 academic study in Carbon Management analyzed 102 European chemical and pharmaceutical companies over five years. The findings reveal systematic non-compliance:

Year	Both Methods Reported	Not Labeled	One Method Only
2019	23%	32%	8%
2023	62%	23%	15%

After ten years of the dual reporting requirement, 49% of companies still do not comply. Only 17% gave equal prominence to both figures in their reporting.

The problem is not awareness. It is architecture. Most companies have one emission calculation system that produces one number. Producing two numbers from a single electricity consumption record requires a system that understands both methods and applies both sets of factors.

The Widening Gap

The divergence between market-based and location-based figures is not stable. It is growing.

MSCI analysis of FY2019-FY2024 data shows an increasing share of companies reporting market-based Scope 2 emissions materially below their location-based totals. The gap is widest in financial services and service-oriented sectors where Scope 2 dominates the emissions profile.

The mechanism creating the gap: unbundled Renewable Energy Certificates (RECs).

A company consumes 100 MWh from a coal-heavy grid
The company buys 100 MWh of unbundled RECs from a solar farm in another region
Under market-based accounting, the company reports zero Scope 2 emissions
Under location-based accounting, the company reports the full grid factor emissions

Amazon reported emissions 3x lower than reality by relying on unbundled RECs — 52% of their claimed green electricity in 2022 came from unbundled certificates. Google acknowledged in 2024 that AI operations drove corporate emissions up 13% and backed away from carbon neutrality claims.

A Nature Climate Change paper warned that "renewable energy certificates threaten the integrity of corporate science-based targets" — finding that unbundled RECs combined with Scope 1+2 targets may delay actual decarbonization.

The cost of a zero-emission claim: less than $1/MWh for unbundled RECs. No operational change required.

ESRS E1 Makes Both Mandatory

The reconciliation problem is no longer optional. ESRS E1 explicitly requires disclosure of Scope 2 using both the location-based and market-based methods simultaneously. This is now a legal obligation for CSRD-reporting companies.

The cascading impact on suppliers:

Your buyer must report both Scope 2 methods in their CSRD disclosure
Their Scope 3 calculation (your emissions) must be consistent with their Scope 2 framework
If you report location-based and they use market-based — the numbers diverge
Their auditor flags the inconsistency
Your buyer asks you to provide both methods

The supplier who can produce both a location-based figure (using Japan's 0.421 kg CO2/kWh grid factor) and a market-based figure (adjusting for J-Credit or JEPX NFC certificates) from a single verified dataset eliminates the reconciliation problem.

The supplier who provides a single unlabeled number — or a number calculated using the wrong method for the buyer's framework — creates audit friction that delays reporting and erodes trust.

Japan's Scope 2 Landscape

Japan has a unique Scope 2 complexity that most global carbon calculators do not handle:

J-Credit Scheme

The J-Credit scheme certifies GHG reductions and removals within Japan. 331 registered participants as of June 2025, with 380,000 tonnes of total carbon traded through Tokyo Stock Exchange under GX-ETS. J-Credits can be used for market-based Scope 2 adjustments.

JEPX Non-Fossil Certificates (NFCs)

NFCs are traded quarterly on the Japan Electric Power Exchange. They represent the largest share of Energy Attribute Certificates in Japan. FIT NFCs cover solar, wind, small and medium hydro, geothermal, and biomass. They are the primary instrument for market-based Scope 2 reductions in Japan.

Grid Emission Factor

Japan's electricity grid factor (FY2023-24) is 0.421 kg CO2/kWh — down approximately 5% from 0.437 the prior year. The 2030 target is 0.25 kg CO2/kWh.

A Japanese SME supplier needs a system that understands all three: the grid factor for location-based, J-Credits for market-based adjustments, and NFCs for market-based renewable claims. A global carbon tool that applies a single Japan emission factor and ignores J-Credit and NFC instruments produces incomplete Scope 2 data.

Offensive Weapon: The supplier who can produce BOTH Scope 2 methods — location-based using Japan's grid factor AND market-based with J-Credit/NFC adjustments — from a single verified electricity consumption record solves a problem that 49% of companies still cannot solve. That is not compliance. That is a competitive advantage.

The Supply Chain Reconciliation Nightmare

The dual reporting problem creates a specific operational crisis at the supply chain level.

Scenario: Your buyer reports their Scope 2 using market-based accounting. They bought enough RECs to claim zero Scope 2 emissions. When they calculate their Scope 3 Category 1 (purchased goods and services), they need your emissions data.

You report location-based: 210.5 tCO2e.

Their auditor now faces a contradiction. The buyer claims zero operational electricity emissions (market-based). But their supply chain — buying electricity from the same grid — reports significant emissions (location-based). The buyer's "green" Scope 2 does not make their supply chain green. The auditor flags the methodological inconsistency.

The reverse scenario is equally problematic. You purchase J-Credits and report market-based Scope 2 of 50 tCO2e. Your buyer uses location-based accounting for their Scope 3. They see your location-based number (210.5 tCO2e) — higher than your market-based claim. Your J-Credit investment becomes invisible to your buyer's accounting framework.

Neither buyer nor supplier has done anything wrong. The methods are both legitimate. But they are incompatible when used across the supply chain boundary. This is why ESRS E1 requires both — and why the supplier who can produce both methods eliminates the reconciliation problem entirely.

The GHG Protocol Reform Process

The GHG Protocol launched a Scope 2 review process in 2023, with public consultation on revised guidance in 2025. The revised draft retains the dual reporting requirement and considers additional quality criteria for market-based instruments — potentially restricting the use of unbundled RECs.

Any tightening of market-based accounting rules will increase the importance of location-based reporting as the primary comparability metric. The supplier who has both methods ready today is positioned for any policy outcome.

The Japan-Specific Dual Reporting Challenge

Japan's electricity market creates a uniquely complex dual reporting landscape:

Location-based: Japan's national grid emission factor (0.421 kg CO2/kWh, 2024) is relatively high among developed economies due to post-Fukushima fossil fuel dependence. Location-based Scope 2 for Japanese manufacturers is therefore typically higher than European equivalents
Market-based instruments available: J-Credits (voluntary government carbon credits) and JEPX NFC (Non-Fossil Certificates traded on the Japan Electric Power Exchange) allow companies to claim reduced market-based emissions
SSBJ alignment: Japan's SSBJ standards (published March 2025) align with ISSB/IFRS S2, which requires disclosure of both location-based and market-based Scope 2 — matching the ESRS E1 dual requirement

The challenge for Japanese manufacturers supplying EU buyers: your J-Credit purchases reduce your market-based Scope 2 in your SSBJ report, but your EU buyer's ESRS report may weight location-based more heavily for supply chain comparisons. Without providing both numbers, the buyer cannot properly classify your emissions under their methodology.

A Japanese SME that invests in J-Credits but only reports the resulting market-based number has effectively hidden their location-based reality from their EU buyer. When the buyer discovers the location-based number is significantly higher, trust erodes — even though both numbers are legitimate.

How Marupass Resolves the Dual Reporting Problem

図解を読み込み中...

Marupass's architecture is designed for dual Scope 2 from a single data entry.

Single Data Entry

You record your electricity consumption once in the Universal ESG Ledger — 500 MWh from your regional utility, timestamped, source-referenced to the utility bill.

Dual Calculation

The Global Emission Factor Engine stores both:

Location-based factors: Japan grid average (0.421 kg CO2/kWh), plus 17 other regional grids
Market-based adjustments: J-Credit retirement records, JEPX NFC certificates, PPA-specific factors

From the same 500 MWh record, the engine calculates:

Location-based: 500 × 0.421 = 210.5 tCO2e
Market-based: 500 × (0.421 − NFC adjustment) = adjusted figure

Dual Export

The compliance framework adapters export both figures in the format each buyer requires:

ESRS E1: Both methods, side by side, as required
CDP: Both methods, as requested in the climate questionnaire
SSBJ: Location-based primary with market-based adjustment disclosure

One electricity bill. Two verified Scope 2 numbers. Both auditable. Both traceable to the same source document.

Consistency Verification

The Adversarial AI Auditor checks that:

The location-based and market-based figures derive from the same consumption data
Certificate claims do not exceed actual consumption
The same consumption record produces the same two numbers across all framework exports
Year-over-year trends are consistent across both methods

The Reconciliation That Wins Contracts

49% of companies cannot produce dual Scope 2. Only 17% give equal prominence to both methods. The gap between market-based and location-based is widening. Unbundled RECs create accounting loopholes that regulators are closing.

Your buyer needs both numbers. ESRS E1 makes it mandatory. Their auditor will check. And when 10 suppliers are competing for a contract and only 3 can produce dual Scope 2 from a single verified source — those 3 eliminate a reconciliation problem that costs the buyer time, money, and audit risk.

49% non-compliance. 17% give equal prominence. The gap is widening. ESRS E1 makes dual Scope 2 mandatory. The supplier who produces both methods from a single verified electricity record solves a problem their buyer cannot solve themselves. Location-based shows grid reality. Market-based shows procurement choices. Both from one data entry. Both verified. Both auditable. That is not compliance. That is an offensive weapon against the Scope 2 chaos.

Watch the Magic Trick. You don't need another sales call. Watch our 3-minute interactive demo to see exactly how our AI turns a raw PDF into a verified dual-method Scope 2 report instantly.

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