Laura Bowler

October 5, 2022

What are “scope 4” emissions and why should I care?

As if three scopes for greenhouse-gas emissions were not enough, conversations around scope 4 are beginning to pick up. In this article, our expert Laura Bowler gives you a crash course on these ‘newer’ emissions and helps you understand if they are right for your company.

people enjoying the summer at the lakes in Copenhagen

Scope 1, 2, and 3 emissions – these terms have caused countless hours of conversation, data collection and calculations, not to mention general stress for companies since they were first introduced by the GHG Protocol in 2001:

“What do these terms mean?”

“Which ones should I care about?”

“Should I report on them (and do I have to)?”

And just as companies are starting to get their scopes straight, there is a new conversation emerging about a class of emissions commonly referred to as “scope 4”.

Is it yet another term companies need to learn or is it a lot of fuss over nothing? Let’s first get the definition right.

Avoided emissions outside a company’s value chain

So, what do people mean when they say, “scope 4 emissions?” The most common use of this term is to describe avoided emissions outside the company’s value chain. Other terms sometimes used in conjunction with this “scope” include carbon handprint, climate positive emissions, low carbon products, and net positive accounting.

“Avoided emissions” is the term typically used in official emission standards and frameworks, so for clarity this is the term we will be using going forward.

Now, what are avoided emissions exactly? The term covers emission reductions that occur outside a product’s / service’s lifecycle or value chain but result from the use of the product / service. There are two main types of avoided emissions:

1. The product replaces a more emission-intensive product

a. For example, a company providing tele-conferencing services can replace traditional travel to in-person meetings, which leads to lower emissions

2. The product enables emissions reductions elsewhere

a. For example, a chemical manufacturer could create a new product that requires lower temperatures for a chemical reaction, allowing their customers to use less energy (and generate less emissions) in their own processes

Not captured in scopes 1,2 and 3

Up until now, most companies have focused on the emissions they generate within their value chain, which are more directly in their control:

  • Scope 1: Direct greenhouse gas (GHG) emissions that occur from sources that are controlled by an organization
  • Scope 2: Indirect GHG emissions associated with the organization’s energy use (the purchase of electricity, steam, heat, or cooling)
  • Scope 3: Indirect emissions resulting from activities from assets contained in an organization’s value chain (upstream or downstream activities)

Since avoided emissions are outside the value chain, they are completely separate from a company’s scope 1, 2 and 3 emissions and are not captured in those scopes.

Companies can use avoided emissions to reflect impacts that would not be picked up in a traditional greenhouse gas (GHG) inventory. However, because these emissions are separate, they cannot be used to offset or reduce scopes 1,2 and 3.

Companies can use avoided emissions to reflect impacts that would not be picked up in a traditional greenhouse gas inventory. However, because these emissions are separate, they cannot be used to offset or reduce scopes 1, 2 and 3.

LAURA BOWLER
STRATEGIC SUSTAINABILITY CONSULTANT, RAMBOLL MANAGEMENT CONSULTING.

A focus on positive impacts

Why are companies so excited to talk about avoided emissions? A few reasons:

  • They allow a company to tell a positive story about their environmental impact, which can help strengthen a company’s reputation (to consumers, suppliers, employees, etc.)
  • They can provide a competitive advantage in tough sustainability markets
  • They can guide companies in making decisions

So, what does this look like in practice? Consider a developer who is building a community from scratch. Traditional communities separate commercial and residential zones, meaning that residents typically travel between the zones when they need to go to work, shop, etc. This travel causes higher GHG emissions from residents (from driving cars, using buses or trains, etc.).

If a developer changes the layout to ensure residents have access to everything within a 15-minute walk of their home, residents would no longer need to travel to reach all the amenities in their community. The developer’s design decision would result in an emissions reduction for the community, but this would not be captured in the traditional scope 1,2 and 3 emissions of the developer.

Integrating avoided emissions into the community design process to determine the total emissions associated with each scenario could help the developer understand the complete environmental impacts of their decision. And if the developer chooses to prioritize emission reductions, they could share their avoided emissions publicly and get credit for their positive impact. The community and the developer benefits – it’s a win-win.

The risks associated with reporting avoided emissions

Reporting on avoided emissions is not all about positive, feel-good stories concerning companies doing the right thing. Although companies typically report out positive impacts, negative impacts are equally common.

A company that chooses to talk about avoided emissions may discover that their decision actually led to more overall emissions (either within their own supply chain, or elsewhere). While this is important knowledge for the company in understanding the impact of their products, this is not something companies typically want to highlight.

In addition, there is no generally accepted framework for estimating and reporting out on avoided emissions, and since the analysis includes a hypothetical scenario, there is a high degree of uncertainty in the calculation. This means there is considerable variation in how companies calculate and communicate on them.

Combine this with the fact that companies tend to focus on their positive impacts, and it’s not hard to see why accusations of “greenwashing” are common with avoided emission claims. (For those of you who want to report on avoided emissions, stay tuned for our future article on best practices for avoided emissions).

Finally, calculating avoided emissions can be a time-consuming, resource-intensive process. Companies who opt to report on them may shift focus or resources away from scope 1, 2, and 3 emissions. Before companies focus on their avoided emissions, they should ensure they understand and are reducing emissions inside their value chain.

Keep an eye on avoided emissions in future

To circle back to our initial question; should companies be paying attention to avoided emissions? The answer at this point in time is that companies should be aware of these emissions, but there is no need to drop everything and start reporting out on them tomorrow.

Companies should continue to focus on scopes 1,2 and 3 and work on their reduction goals inside their value chain first.

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