Scope 4 Emissions: can reporting avoided emissions help or hinder climate efforts ?
As companies increasingly strive to demonstrate their commitment to sustainability, a new concept is gaining traction in the realm of carbon accounting: Scope 4 emissions. Unlike the well-established Scopes 1, 2, and 3, which account for direct and indirect greenhouse gas emissions within a company’s operations and supply chains, Scope 4 refers to “avoided emissions”—greenhouse gases that are never emitted due to a product’s cleaner production or attributes. This new metric promises to highlight the positive environmental impact of products and services, but experts caution that it could also become a minefield for greenwashing if not carefully managed.
RELEVANT SUSTAINABLE GOALS
Defining Scope 4: A New Metric for Avoided Emissions
Scope 4 emissions focus on the greenhouse gases that are avoided when a cleaner product or service replaces a more polluting alternative. As defined by the World Resources Institute (WRI), Scope 4 measures “the difference in total lifecycle GHG emissions between a company’s product and some alternative product that provides an equivalent function.” Examples include electric vehicles replacing gasoline-powered cars, hydrogen-powered steel production, or virtual meetings replacing business travel.
While the idea of avoided emissions is not entirely new, the formalization of Scope 4 as a metric is gaining momentum. Some companies have already begun including avoided emissions in their sustainability reports. For instance, Aveva, a FTSE 100 technology firm, plans to establish a baseline and target for avoided emissions, which it refers to as Scope 4, by 2025. Similarly, Pacific Gas & Electric (PG&E) and companies like Telefonica and Renew Energy Global have started to report on avoided emissions, reflecting the growing interest in this voluntary metric.
Navigating the Complexities of Scope 4
Despite its appeal, Scope 4 emissions are not without challenges. Measuring something that never existed—emissions that were avoided—requires careful consideration and robust methodologies. Alan McGill, a partner for sustainability and climate change at PwC, notes the difficulty in comparing a product’s emissions reduction against the rest of the market. The frequent introduction of new products and the reliance on industry averages can complicate accurate assessments.
Additionally, the absence of a standardized framework for Scope 4 creates a risk of inconsistent and potentially misleading reporting. Companies must navigate issues such as boundaries (which parts of a product’s lifecycle are considered?), additionality (would the avoided emissions have occurred regardless?), and double counting (who claims the emissions reduction—manufacturer, installer, or utility provider?). Without clear rules, companies may inadvertently—or deliberately—overstate their environmental contributions.
The Greenwashing Risk
The lack of a formal standard for Scope 4 emissions poses a significant risk of greenwashing. Tiffany Kulasekare, a senior sustainability consultant at Rio ESG, warns that companies emphasizing avoided emissions over Scopes 1, 2, and 3 might present an incomplete picture of their environmental impact. Tatiana Boldyreva, associate director for climate change at CDP, argues that avoided emissions should be reported separately and not be used to adjust or reduce a company’s reported Scope 1, 2, or 3 emissions.
Experts agree that while Scope 4 can offer valuable insights into product and policy design, it should not count towards a company’s near-term or long-term emission reduction targets. The Science-Based Targets Initiative (SBTi) stipulates that avoided emissions do not equate to reductions in a company’s Scope 1, 2, or 3 inventories and should be excluded from net-zero reporting.
Corporate Adoption and the Path Forward
Despite the potential pitfalls, some companies are cautiously exploring Scope 4. PG&E, for instance, includes measures like customer energy-efficiency programs and electric vehicle adoption as part of its Scope 4 reporting, recognizing that these efforts, while impactful, are not yet part of an official category. Christopher Benjamin, PG&E’s director of corporate sustainability, emphasizes that Scope 4 helps quantify the utility’s ambition to aid customers in reducing emissions.
However, the question remains whether companies already grappling with the complexities of Scopes 1, 2, and 3 will see Scope 4 as a simpler means to claim climate leadership. There is a risk that avoided-emissions claims could be used to paint an overly optimistic picture of a company’s environmental performance, potentially misleading stakeholders.
Scope 4 has the potential to become a powerful tool in sustainability reporting, offering companies a way to highlight their contributions to reducing global emissions. Yet, its success hinges on the development of credible frameworks and guidelines to ensure that avoided emissions are accurately measured and reported. Without these safeguards, Scope 4 could become another ill-defined sustainability term, prone to misuse and overuse.
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