Scope 2, energy flexibility and BESS: What finance and ESG should align on

When a company considers a battery energy storage system, two functions often sit with different expectations. Finance looks at the hosting terms and the market-dependent share of operating profit. ESG looks at what the system means for climate impact and reporting. Those two pictures can pull in different directions if they are not discussed together, and one of the places where misunderstandings arise most often is the relationship between a battery and the company's Scope 2.

This article is written to give finance and ESG a shared starting point. It explains what Scope 2 is and how it is accounted for, what a battery actually does to electricity consumption, where a system can and cannot affect the Scope 2 figure, and how the financial model and the sustainability narrative can be brought into alignment. At the end there is a sober checklist that can be used before becoming a host with sustainability as the primary argument.

Scope 2 in brief

Scope 2 is the part of a company's greenhouse gas inventory that covers purchased energy, primarily the electricity the company buys from the grid. The central point is that Scope 2 concerns what is purchased, not how it is used internally.

Under the international standard in this area, Scope 2 can be accounted for in two ways. One is a location-based method that uses the average emissions intensity of the grid on which consumption occurs. The other is a market-based method that builds on the contractual instruments the company has chosen, for example an electricity agreement or certificates. The two methods answer different questions: location-based describes the grid one is physically connected to, while market-based describes the purchasing choices one has made.

The difference is not academic. Companies in markets with contractual product data must account for Scope 2 in both ways and label each result by method, which is called dual reporting. A company can therefore have two Scope 2 figures at the same time, and they can move differently depending on whether it is the grid mix or the company's own agreements that change.

What a battery actually does to consumption

Here lies the nuance that most often disappears. A battery energy storage system does not in itself change how much energy a company uses. It changes when that energy is drawn from the grid. The battery can store electricity in hours with a lot of solar and wind and release it again when demand is higher, so that consumption and production are better balanced over the day. That is a time shift, not a reduction in the total volume of purchased electricity.

That distinction is decisive for Scope 2. The standard specifically recommends that one account for total consumption in kWh or MWh separately, because that makes it clear whether a change is due to consumption or supply. A battery that moves consumption from expensive to cheaper hours changes the time profile of purchasing, but not necessarily the total number of kilowatt-hours the company buys over a year.

There is also a practical point that finance and ESG should agree on from the start: the consumption figures a Scope 2 inventory rests on come from the electricity meter, not from the battery. In Denmark, a company can access its own consumption data, including hourly consumption, via Energinet's DataHub. Energinet is Denmark's national transmission system operator, and DataHub is the central platform for electricity meter data. The battery's own operational data describe the system's operation, but are not the same as the company's purchased electricity, and the two quantities should be kept separate. Which operational data a system can deliver for reporting is covered separately in the article on ESG data from a battery.

Where a battery can affect Scope 2, and where it cannot

When the battery shifts consumption in time without changing the total volume, what does that mean for the two Scope 2 figures?

For the location-based figure, the effect is indirect. The method builds on the grid's average emissions intensity, and that intensity varies over the day because the grid mix changes. If a system consistently draws electricity in hours with a lot of renewable energy rather than in peak-load hours, the composition of the hours in which consumption lands can look different. But that is a systemic and assumption-heavy effect, not a guaranteed reduction, and it depends on how location-based factors are calculated in practice.

For the market-based figure, the most direct path does not go through the battery at all, but through the company's contracts. The market-based method builds on contractual instruments, including guarantees of origin. Under EU rules, a guarantee of origin has the function of showing a final customer that a given quantity of energy was produced from renewable sources, and it can be transferred independently of the electricity to which it relates. In other words, a company can change its market-based Scope 2 figure by entering into an electricity agreement or acquiring certificates, independently of whether there is a battery on the site.

That leads to the honest conclusion that both finance and ESG should note: a battery is not a direct Scope 2 reduction. The contractual instruments that affect the market-based figure must also meet a set of quality criteria to be used as an emissions factor, and that is a documentation and purchasing discipline, not a result of the battery's physical operation. The question of when one can speak at all of a battery "moving green electricity" is covered in more depth in the article on CO₂ displacement.

When the financial model and the sustainability narrative need to align

If the battery is not a direct Scope 2 line item, where does it belong? The answer is that it belongs in the energy strategy and in the financial case, and that the sustainability narrative should be built on top of that, not beside it.

The financial model for a battery concerns how the system uses price differences and flexibility over time. We cover that calculation separately in our material on the financial case for BESS, and the point here is not to repeat the numbers, but to establish that flexibility primarily enters that financial model. The same flexibility can support better utilisation of renewable energy on site, depending on grid connection and consumption profile, without that in itself making the company CO₂-neutral.

On the ESG side, the reporting frameworks ask for quantities that finance already knows. The European standards require that a company, where relevant, disclose its total energy consumption and energy mix stated in megawatt-hours, including the share from renewable sources. That is volume and composition, meaning kWh, MWh and contracts, not a battery's internal results. Precisely for that reason there is a natural shared language: both the financial model and the reporting talk about consumption over time and about where the electricity comes from.

Alignment therefore means, concretely, that the two functions should agree on what the battery is and what it is not before anything is communicated. A system can support an energy strategy and better use of solar and wind, which we expand on in the article on BESS and renewable energy. But an external claim that the system has made the company greener must be documentable under the Danish Marketing Practices Act, and responsibility sits with the company as the sender. The Danish Consumer Ombudsman (Forbrugerombudsmanden) oversees these rules. A narrative that promises more than the financial and methodological reality can carry is both a compliance risk and a credibility problem.

A checklist before becoming a host "for ESG's sake"

If sustainability is the primary argument for hosting a battery, there are some questions finance and ESG should clarify first. The purpose is not to talk a system up or down, but to ensure that the decision basis is honest.

• What is the real purpose? Is the hosting arrangement justified by economics and flexibility, by security of supply, or by an expected effect on reporting? The three justifications are not equally strong, and they should not be mixed together.
• Which Scope 2 method are we talking about? An expected effect looks different depending on whether it concerns the location-based or the market-based figure, and the market-based figure is primarily affected by contracts, not by the system.
• Does the system change our total consumption or only the time profile? A battery typically shifts consumption in time. If the argument assumes lower total consumption, it rarely holds without other measures.
• Where do the figures come from? Consumption figures come from the meter and DataHub, contractual instruments from the electricity agreement, and operational data from the system. A claim that mixes the sources together is hard to stand behind.
• Can we document what we want to say externally? Any external green claim must be documentable, and for companies covered by the European rules, sustainability disclosures must also be assured.
• Who is responsible for the final inventory? Method choice and reporting belong with the company's own ESG adviser or auditor, not with an equipment supplier.

If those questions can be answered soberly, the decision basis is solid, whether the conclusion is a yes or a no. If they cannot, it is usually the narrative that needs adjusting, not the facts.

ZynexGroup's approach to system assessment

Our role is bounded, and it should be described as such. We develop, deliver and optimise industrial BESS systems and make operational data available. We are not ESG advisers or CSRD consultants, and we do not prepare sustainability reports for the customer.

In practice, that means we deliver the data that describe the system's operation, while method choice and the final inventory belong with the customer and the customer's own adviser. That also applies to Scope 2. For companies covered by the EU rules on sustainability reporting, the disclosures are subject to an assurance requirement and must be published together with a statement from an auditor or independent assurance provider. A data provider cannot take over that task, and we therefore also do not make a displacement figure available that we cannot stand behind methodologically.

ZynexGroup finances, builds, owns and operates the battery. The host provides a small outdoor area and site rights and receives a monthly share of operating profit. See the indicative space requirement in the battery calculator. The share depends on the market and operating results and is never guaranteed. Economics are assessed for the specific site. Battery export requires the grid company’s permission, which is not guaranteed. The financial model does not establish a Scope 2 figure or a climate effect, and those two questions should be kept separate. How finance and ESG can talk together about this forms part of our overall approach to pragmatic sustainability with BESS.

Overall perspective

Scope 2 concerns purchased electricity and is accounted for either location-based, from the grid average, or market-based, from the company's contracts. A battery shifts consumption in time, but does not in itself reduce the total volume of purchased electricity or the reported Scope 2 figure. The most direct path to a greener market-based figure goes through electricity agreements and certificates, not through the system.

For finance and ESG, the usable conclusion is that the battery belongs in the energy strategy and the financial case, and that the sustainability narrative must be built on top of that, honestly and documentably. A system can support flexibility and better utilisation of renewable energy, but it does not in itself make a company CO₂-neutral, and that distinction is precisely what the two functions should align on before becoming a host and communicating.

Have the potential for your facility assessed

If you want clarity on what a battery can realistically contribute on your site, and how that connects to your energy strategy, we are happy to have a data-based conversation. We start from your own data: grid connection, consumption profile and history. On that basis we make an initial assessment of whether there is a match, and we are clear that method choice, reporting and any external claim belong with you and your own adviser, not with us. You are welcome to contact us.