DDBA 8522 Week 7 Renewable Indicator Critique Example

One Hundred Percent Renewable in a Single Procurement Cycle: An Indicator Critique Setting a Retailer's Market-Based Electricity Claim Beside Its Location-Based Figure and Asking What the Headline Will Represent in Ten Years

Student Name

Walden University

DDBA 8522: Seminar in Sustainability

Instructor Name

Month Day, Year

One Hundred Percent Renewable in a Single Procurement Cycle: An Indicator Critique Setting a Retailer's Market-Based Electricity Claim Beside Its Location-Based Figure and Asking What the Headline Will Represent in Ten Years

The Claim

A composite national home furnishings retailer with about 340 stores and 12 distribution centers announced in its 2025 sustainability report that it now runs on "100 percent renewable electricity." Two years earlier, the same report showed 9 percent. The change happened within one procurement cycle. No grid in the United States changed from 9 to 100 percent renewable in two years; the retailer's stores draw power from the same regional grids as before. An indicator that moves that fast is measuring something other than the electricity the stores use.

Two Ways to Count Electricity Emissions

Under the Greenhouse Gas Protocol's guidance for indirect emissions from purchased electricity, companies report two figures. The location-based figure applies the average emissions rate of the grids where the company's facilities are located. The market-based figure reflects contractual choices, such as renewable energy certificates bought separately from power, supply contracts and power purchase agreements, and can fall to zero if the company buys enough certificates (World Resources Institute, 2015). The retailer's headline uses the market-based figure.

Table 1

The Retailer's Electricity Emissions, Two Methods

Figures from the retailer's reports, composite case. Location-based decline reflects modest grid changes and reduced use.

What Changed and What Did Not

Between 2023 and 2025, the electricity the retailer actually drew from the grid fell about 2 percent, and the emissions associated with that electricity, by the location-based method, fell about 5 percent. The market-based figure fell to zero. The difference is almost entirely accounted for by unbundled renewable energy certificates: the retailer's report shows that about 85 percent of its claimed renewable electricity came from certificates bought from existing wind farms, most in regions far from its stores, and about 15 percent from two power purchase agreements signed in 2024 for new solar projects.

Brander et al. (2018) argued that the market-based method can allow companies to report reductions that do not correspond to any change in actual emissions, especially when certificates come from existing generation that would have operated anyway. Buying a certificate from a wind farm built in 2012 does not cause any additional renewable electricity to be generated.

What the Headline Will Represent in Ten Years

The question for a sustainability indicator is what it will mean over time. In ten years, if the retailer keeps buying cheap certificates, the headline will still read 100 percent while its actual grid electricity and location-based emissions change only as fast as the grids do. The indicator will have stopped moving and stopped informing. By contrast, the two power purchase agreements, though small, fund new generation that will keep producing for 20 years. Bansal and DesJardine (2014) argued that sustainability requires attention to how present choices affect future outcomes; the certificates resolve a reporting target now without changing the future grid.

Why Certificates Are Cheap

Unbundled renewable energy certificates from existing wind farms in regions with abundant wind are inexpensive, often costing a few dollars per megawatt hour. At that price, the retailer could cover all of its roughly 600,000 megawatt hours for a small fraction of its annual electricity bill. A power purchase agreement for new solar, by contrast, commits the retailer to buying power or its financial equivalent for 15 to 20 years and carries price risk. The cheap route reached 100 percent quickly; the expensive route would have taken years. The headline does not distinguish them.

What Investors and Customers Might Ask

Investors who compare companies' emissions increasingly look at both figures. A company that reports zero market-based emissions while its location-based emissions barely move may face questions about whether its claim reflects real change. The retailer's customers, who see the headline on store signage, are unlikely to know the difference, which raises the question of whether the claim is fair to them.

A Better Indicator

The retailer could report three figures together: location-based emissions, the share of electricity from contracts that fund new renewable generation and the share covered by certificates from existing projects. That would let readers see which part of the claim reflects new renewable supply and which reflects a purchase of attributes from generation that already existed.

Limits

The critique does not assess the retailer's energy efficiency efforts, which reduced use modestly, or the regional sources of its certificates in detail.

References

Bansal, P., & DesJardine, M. R. (2014). Business sustainability: It is about time. Strategic Organization, 12(1), 70-78. https://doi.org/10.1177/1476127013520265

Brander, M., Gillenwater, M., & Ascui, F. (2018). Creative accounting: A critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions. Energy Policy, 112, 29-33. https://doi.org/10.1016/j.enpol.2017.09.051

World Resources Institute. (2015). GHG Protocol scope 2 guidance: An amendment to the GHG Protocol corporate standard. https://ghgprotocol.org/scope-2-guidance