Scope 4 emissions are becoming increasingly popular as businesses seek to communicate their sustainability achievements. But what are they, are they useful, and how should they be used?
If you’re familiar with carbon accounting, you’ve probably heard of Scope 1, 2, and 3 emissions. These categories measure the direct and indirect emissions produced by a company, but there is a fourth category of emissions that is often overlooked: Scope 4.
This article explains what Scope 4 emissions are; how they are different from Scope 1, 2, and 3 emissions, and how they have the potential to help companies strengthen their efforts to become more sustainable and meet their climate targets.
What are Scope 4 Emissions?
Scope 4 emissions are also known as ‘avoided emissions’. This category covers emission reductions that “occur outside a product’s life cycle or value chain but as a result of the use of that product,” according to the World Resources Institute, which established the Greenhouse Gas (GHG) Protocol.
In other words, Scope 4 emissions are those which are not created through the use of a particular product by an end user, this excludes emissions saved during the production of a product.
What are examples of ‘avoided’ emissions?
Scope 4 covers any instances where a saving in emissions has occurred, for example; a company who sells energy-efficient appliances is helping to reduce its customers’ carbon footprint. Customers use less energy than they would if they had bought a less efficient model; therefore, this saves energy and reduces GHG emissions.
In this instance, the avoided emissions would be a percentage of the emissions saved (not produced) through the use of their product over another.
Here are some other examples of Scope 4 emissions:
- A company who provides teleconferencing services may have Scope 4 emissions associated with the commute emissions that it avoids for its customers.
- A renewable energy company may have avoided emissions associated with the fossil fuel emissions that it displaces by generating clean energy.
- A company who develops and sells plant-based meat alternatives may have avoided emissions associated with the methane emissions that it avoids by reducing meat consumption.
How do Scope 4 emissions differ from Scope 1, 2, and 3 emissions?
The main difference is that Scope 4 emissions are avoided emissions, while the other three Scopes are all produced emissions, albeit from different sources:
- Scope 1: Direct emissions from owned or controlled sources, such as burning fuel in company vehicles or at manufacturing facilities.
- Scope 2: Indirect emissions from purchased electricity, heat, or steam.
- Scope 3: All other indirect emissions that occur in a company’s value chain, such as emissions from the extraction and transportation of raw materials, the production of goods and services, and the disposal of products.
Scope 4 emissions are somewhat counter to Scope 3 emissions, where Scope 3 includes the emissions produced by use by the end user, Scope 4 emissions includes the emissions avoided during use by the end user.
Another contrasting factor which distinguishes Scope 1, 2 and 3 from Scope 4 is that avoided emissions are not currently required by any major reporting standards, such as the European Sustainability Reporting Standards (ESRS) which underpins the EU’s Corporate Sustainability Reporting Directive (CSRD).
Why should businesses consider their Scope 4 emissions?
Whilst Scope 1, 2, and 3 emissions demonstrate how a business is having a negative impact on the environment, Scope 4 emissions can act as an indicator for how a business is improving its sustainable credentials.
Reporting on the number of emissions a product avoids can be considered a great way of remaining competitive and bringing new eco-conscious customers to your business.
How do you calculate Scope 4 emissions?
In 2019, the WRI introduced a framework to cover the measurement and disclosure of GHG emissions that stem from a product or service, including avoided emissions.
Calculating Scope 4 emissions can be challenging, but there are a few different methods that can be used. One common method is to compare the life cycle emissions of a company’s product or service to the emissions of an alternative product or service that provides the same function.
For example, a company who sells electric vehicles could calculate its Scope 4 emissions by comparing the usage emissions of its electric vehicles with those of emissions from a competitor’s gasoline-powered vehicles.
Another method for calculating Scope 4 emissions is to use industry benchmarks or averages. This method can be less accurate than comparing with a specific alternative product or service, but it is often easier to implement.
The difficulty comes when considering the fast-paced world of product development, figures quickly become out of date as new products hit the market.
Reporting on Scope 4 emissions
Reporting on Scope 4 emissions is not currently required by any major GHG reporting standards. However, a growing number of companies are voluntarily reporting on their avoided emissions as a way to demonstrate their commitment to the climate and strengthen their sustainable credentials. In-turn, this can offer them a competitive advantage when it comes to attracting climate-conscious customers.
There are a few different ways that companies can report on their Scope 4 emissions, one common approach is to simply disclose the total amount of avoided emissions for your business. Another is to disclose the avoided emissions associated with specific products or services.
However, caution is warranted. Measuring avoided emissions can be challenging, and figures are likely to change regularly, it can open a business up to accusations of greenwashing, especially from sceptical stakeholders and wary consumers who are searching for any opportunity to criticise.
The future of Scope 4 emissions
Currently, governments and regulators have not announced plans which would require higher levels of disclosure of Scope 4 emissions. For now, companies should focus on reducing their Scope 1, 2, and 3 emissions, especially Scope 3 as it accounts for the majority of their carbon footprint.
Businesses should have time to start collecting, analysing, and reporting on data about avoided emissions when it becomes more important.
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