Scope 4: A Rising Metric in Global Sustainability Reporting

In the ever-evolving landscape of sustainability reporting, a novel metric known as Scope 4 is making waves, gaining traction among businesses aiming to measure "avoided carbon emissions.

If you find yourself pondering, "Just as I'm getting the hang of Scopes 1, 2, and 3, now there's Scope 4?!"—you're in good company. Although the carbon accounting scope categories were initially introduced in 2001 with the inception of the Greenhouse Gas (GHG) Protocol corporate accounting standard, numerous professionals are only now acquainting themselves with this evolving concept. In the pages that follow, we'll unravel the mysteries surrounding Scope 4 emissions—exploring their significance and delving into a fresh interpretation of this nuanced concept.

Conventional Scopes

Understanding Scope 1, 2, and 3 emissions is foundational for navigating the complexities of carbon accounting. These scopes delineate different emission sources.

Scope 1: Encompassing direct emissions from owned or controlled sources, this includes emissions from office buildings, factories, and company-owned vehicles. If your business has a physical presence, Scope 1 accounts for the emissions generated on-site.

Scope 2: This pertains to indirect emissions resulting from the generation of purchased electricity, steam, and heating consumed. Think of it as the emissions associated with the energy your organization buys and uses, contributing to the broader carbon footprint.

Scope 3: Widening the lens, Scope 3 includes all other indirect emissions within an organization's extended value chain. This category poses challenges for data accuracy as activities often occur further along the supply chain, where direct contact with suppliers might be limited. Examples range from emissions tied to business travel and commuting to those occurring during a product's usage phase.

The conventional Scopes 1, 2, and 3, dictated by the Greenhouse Gas Protocol, have long been the go-to accounting standards for many companies and government bodies. However, a paradigm shift is underway as Scope 4, a voluntary metric, emerges to encompass emission reductions occurring outside a product’s life cycle or value chain.

Scope 4 Emissions - A paradigm shift

The term Scope 4 emissions predominantly refers to avoided emissions, a concept identified by the GHG Protocol as reductions occurring external to a product's lifecycle or value chain, triggered by the product's utilization.

Noteworthy products with substantial avoided emissions include innovations like low-temperature detergents and the provision of teleconferencing services. Consider teleconferencing services as a pertinent illustration. When these services facilitate remote work, mitigating the need for employee commuting or client meetings, the CO2 emissions averted due to the employees staying home represent Scope 4 emissions for the teleconferencing provider.

Interestingly, while established reporting initiatives such as the Science-based Targets Initiative and CDP currently do not mandate organizations to report on avoided emissions, it remains a subject of ongoing speculation and discussion. The absence of such reporting is increasingly recognized as a crucial gap, and addressing it could potentially catalyze climate action within businesses, underscoring the evolving landscape of sustainable disclosure.

Forward-thinking companies are already incorporating Scope 4 in their reporting, signaling a broader trend. However, challenges abound, from the complexities of measuring avoided emissions to the perpetual introduction of new products in the market. The logistics sector is notably embracing Scope 4, particularly in monitoring lorries' fuel efficiency to reduce the carbon footprint of deliveries.

Why companies should report on Scope 4 emissions?

Current emissions reporting tends to focus on reductions, but new products or processes might temporarily increase emissions while decreasing long-term usage-related emissions. For instance, a company developing more efficient machines may see a short-term emission spike during R&D, yet yield larger reductions during product usage. Claims of emission reduction must be credible, following GHG Protocol suggestions to avoid greenwashing:

• Account for every product life cycle stage.

• Consider changes in consumer behavior.

• Differentiate market size from impact.

Penalizing temporary emission spikes during innovation can stifle long-term benefits. A solid understanding of Scope 4 allows organizations to transparently present emissions scenarios tied to sustainable product development. Alternatively, organizations can invest in R&D to innovate without increasing emissions.

Risk of greenwashing

While reporting on avoided emissions can confer a competitive advantage, skepticism exists, with some stakeholders viewing it as potential greenwashing. Experts caution against overshadowing Scopes 1, 2, and 3 emissions, emphasizing the need for a balanced approach. Avoided emissions, they argue, should inform product and policy design rather than be used to adjust existing emissions inventories.

To address concerns and uphold transparency, industry standards, including the Science-Based Targets Initiative, stress the importance of reporting Scopes 1, 2, and 3 emissions before delving into Scope 4. As organizations grapple with Scope 3 measurements, Scope 4 is poised to gain prominence, fueled by evolving reporting standards and increasing shareholder demands.

In this dynamic landscape, Scope 4 not only represents a shift in perspective but also an exploration of business opportunities tied to products and services that actively contribute to emission reduction—a vital step towards a sustainable future.