Scope 4 Emissions: A Critical Aspect of Carbon Accounting

If youre into carbon accounting, youve probably encountered Scope 1, Scope 2, and Scope 3 emissions used to determine a companys carbon footprint and guide reduction efforts... but have you heard of Scope 4 emissions?

Most likely, not yet. Thats because Scope 4 emissions are an addition to emissions that companies need to keep track of.

While the concept is quite new, understanding it and knowing how to account for it is useful for companies and organizations wanting to curb their emissions and meet their climate goals.

So, were going to explain what Scope 4 emissions are, how they differ from the other scopes, why theyre important and beneficial for companies to measure and report, alongside the major challenges in calculating them.

What Are Scope 4 Emissions? How Do They Differ From Other Scopes?

To understand Scope 4 (S4) emissions, we need to differentiate them from its peers. Scope 1, Scope 2, and Scope 3 emissions refer to direct, indirect, and other indirect emissions, respectively.

·        Scope 1 emissions are from direct sources such as fuels burned to heat products or run a machine.

·        Scope 2 emissions are indirect footprint resulting from purchased energy used by the company such as electricity.

·        Scope 3 emissions refer to all other indirect emissions, such as embodied carbon of building materials and supply chain.

In other words, theyre what a company emits through their operations and other business activities.

Companies have full control over their Scope 1 and 2 emissions whereas Scope 3 emissions are generated by activities that the company cant control.

Scope 4 emissions, on the other hand, refers to the AVOIDED emissions or carbon pollution that happen OUTSIDE of a products value chain. Theyre a result of using that product or the saved emissions due to its performance.

Theoretically, S4 emissions provide companies a way to report on the avoided emissions by opting for more efficient products, either a product or a service.

For instance, telecommuting or carpooling to work saves on the carbon footprint of working. Likewise, decreasing energy consumption by using energy efficient equipment or appliances also cuts down carbon emissions.

There are two main types of S4 emissions:

Product or service that replaces a more carbon-intensive product: e.g. tele-conferencing services that reduces the emissions of traveling to the office.

Product or service that reduces emissions elsewhere: e.g. a low-temperature detergent that uses less energy.

Scope 4 emissions also cover work-from-home scenarios as they avoided using transport fuel and energy use in office work.

S4 emissions can be quite challenging to measure and report, but its becoming increasingly important for companies to do so. By fully understanding their Scope 4 emissions, businesses can identify areas where they can reduce their planet-warming emissions and contribute positively to climate change.

Why Should Companies Report Scope 4?

Most companies would like to account and report on their S4 emissions to gauge their efforts in helping their respective industry slash emissions.

In fact, 75% of the surveyed companies by the Carbon Disclosure Project (CDP) are offering products and services that help others reduce emissions. The caveat, however, is that without enough data to back up their claims, they remain unsubstantiated.

In other words, to validate their claim on reductions of a product/service, rigorous testing, predictions, and reporting is key. It also calls for scientific estimations or calculations on how consumers use a companys product.

In principle, calculating avoided emissions needs extensive research and product development or improvement. In practice, though, its so much more difficult to make accurate calculations and substantiate claims.

Thats why accounting for S4 emissions right from the very beginning of making a product/service is crucial. It also sets a baseline from which to measure the avoided emissions.

On the contrary, failing to consider these emissions may result in serious consequences for a company. Apart from a potential fine if a certain regulation is not met, the business may report its total emissions incorrectly.

More remarkably, incorporating avoided emissions the soonest time possible puts a company at an advantage compared to its peers. Currently, its not mandated to report on these emissions, but as governments started to become more stringent in regulating climate disclosures, companies who have their feet on this front will find it easier later on.

Existing Guidance or Framework for Reporting S4

Tracking and disclosing emissions under S4 can be tricky and theres no standards available yet today. But if your company attempts to do it, there are some frameworks that can guide you.

A good starting point is the World Resources Institutes guideline entitled "Estimating and Reporting the Comparative Emissions Impacts of Products". It may not be the most comprehensive framework but it helps in learning how to collect credible data for S4. Its a sector-specific guidance for industry associations.