Today, many companies include carbon targets in their sustainability strategies, aiming for goals such as net zero, carbon neutrality, or even becoming carbon positive. With mandatory emissions reporting on the horizon, early adopters of these practices are gaining a competitive edge.
The GHG Protocol, widely regarded and used globally, provides a framework for measuring a company's emissions across different scopes. Scope 1 covers direct emissions from sources owned or controlled by the company, such as emissions from company facilities and vehicles. Scope 2 encompasses indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the company. Scope 3 includes all other indirect emissions occurring in the company’s value chain, which are not covered by Scope 1 or 2, and is notably more challenging to accurately measure.
Still trying to grasp the concepts of Scope 1, 2, and 3 emissions? And now hearing mentions of Scope 4? Don’t worry, here’s a brief explanation to help you understand its role in five simple questions.
1. What type of emissions is Scope 4 addressing?
Scope 4 is referred to as "avoided emissions". This concept applies, for example, when a product becomes more efficient compared to a standard product, representing the emissions that would have been produced if the product had not been improved to take on circular economy principles or better energy consumption patterns. These avoided emissions occur outside the product's or service’s lifecycle or value chain but arise from its use. Unlike Scope 1, 2, and 3 emissions, which focus on direct and indirect emissions, Scope 4 is about preventing emissions from ever being generated. This fundamental difference places Scope 4 in a distinct nature and category of emissions.
Real case study:
NetNada Carbon Neutral Certified customer, Zolo, offers IT recycling services for multiple organizations across Australia and the Philippines. Companies that dispose of their old equipment through Zolo could report the benefits of this initiative through scope 3. However, Zolo can showcase the environmental benefits of its services through their own scope 4.
2. What are the benefits?
Companies are already highlighting avoided emissions. Indeed, creating products or services that generate fewer carbon emissions than their predecessors or competitors is a positive development. Enhanced efficiency is beneficial and can attract investors interested in sustainable projects. However, the challenge lies in the fact that these are emissions that were never produced, raising important questions about their measurement and reporting, which leads us to our following question.
3. What are the challenges?
As we mentioned, the main challenge with Scope 4 lies in the fact that it represents emissions that have not actually been produced. Calculating these avoided emissions requires testing and predictions, such as how consumers will use and dispose of a product. Therefore, caution is necessary when making claims about Scope 4. Currently, accountability for avoided emissions is not universally standardized, and the methods for measuring these emissions are unclear. Most importantly, there is no established framework for Scope 4, and it is not an official term used by the GHG Protocol. This lack of standardization makes it difficult to know what to measure, how to report on it, and how to compare and verify results.
4. Does this open the door for carbon washing?
The difficulties in measuring these emissions can result in inaccurate data and erroneous estimations, potentially misleading stakeholders about a company’s actual environmental impact. This concern has led experts to discuss the issue of "carbon washing," where companies might divert attention from their genuine efforts to reduce or remove their carbon footprint by overstating or misrepresenting their actions. Carbon washing can involve overestimating the impact of carbon reduction initiatives due to unclear standards or a lack of proper verification.
5. Is there a future for “avoided emissions” in emissions reporting?
Having more efficient products or services is crucial but how we report and incorporate this information into our emissions reporting is still being developed. Switching from fossil fuel cars to EVs is a positive change that avoids the use of fossil fuels, yet methodological challenges regarding measurement and standardization must be addressed. Companies reports are not only taking into account reduction efforts but also summing the estimation of avoided emissions to their positive impact.
In this sense, avoided emissions, often referred to as Scope 4, are still a new and evolving concept. Their future remains uncertain and requires a standardized framework. Further research is needed to assess the feasibility of incorporating avoided emissions into an international protocol like the GHG Protocol.
Challenges include how to:
• Determine an appropriate baseline scenario (e.g., which technologies to compare)
• Determine the system boundaries (e.g., which emissions to include)
• Determine the time period (e.g., how many years to include)
• Accurately quantify avoided emissions
• Avoid “cherry picking” (e.g., account for both emissions increases and decreases across the company’s entire product portfolio)
• Allocate reductions among multiple entities in a value chain (e.g., avoid double counting of reductions between producers of intermediate goods, producers of final goods, retailers, etc.)
Reducing emissions is crucial for mitigating the impacts of the climate crisis. Emissions reports provide essential data on a company's greenhouse gas emissions throughout its supply chain. As the saying goes, "we cannot change what we cannot measure." Accurate measurement is the first step toward making informed decisions and developing effective sustainability strategies.
In this context, companies and organizations still find reporting their Scope 3 emissions daunting, even with existing guidance. Scope 4, although it could highlight an important aspect of a product or service, is neither standardized nor required. Its potential will become clearer in the coming years.