Scope 4 Emissions Explained

Persefoni Team
By Persefoni Team
October 4, 20229 min read
November 22, 2022, 11:21 AMUpdated
October 4, 2022Updated: November 22, 2022, 11:21 AM9 min read

“Scope 4” emissions, or “avoided emissions,” describe greenhouse gas (GHG) emissions avoided as a result of more efficient goods and services. The WRI defined this term in a 2013 article that explored the need for calculating a new avoided emissions category, however avoided emissions or “scope 4 emissions” are not an official scope, as are scopes 1, 2, and 3 emissions.

Scope 4 emissions aren’t a required scope to report and do not have a universally accepted standard for measurement. Scope 4 emissions should also not be used to offset or adjust scope 1, 2, and 3 emissions in an organization’s GHG Inventory since they’re calculated separately from those categories.

We’re all familiar with scopes 1, 2, and 3, but what is this so-called “scope 4” and what exactly are “avoided emissions?”

The GHG Protocol defined scopes 1, 2, and 3 to categorize the emissions generated by companies and other organizations. “Scope 4 emissions” is an unofficial term that companies and professionals use in an attempt to categorize and quantify the potential impact of their products on reducing emissions outside of their value chain.

However, many companies’ attempts to quantify scope 4 emissions result in vastly different calculations that are difficult to compare and verify. Unsubstantiated claims can also lead to greenwashing, whether intentional or not.

In this guide, we’ll go over what scope 4 emissions are, why some companies consider measuring them, and existing guidance about scope 4.

How Do Scope 4 Emissions Work?

In theory, scope 4 emissions offer professionals and reporting organizations a pathway to report on emissions avoided through more efficient products (goods and services) replacing less efficient alternatives.

For example, a cloud data storage provider can potentially reduce emissions by transitioning a customer from an on-premises data storage solution to cloud-based data storage. That company may claim it avoided emissions by replacing the use of inefficient on-premises data storage with efficient cloud-based data storage.

However, this requires assumptions, such as the purchasing company not upgrading its on-premises data storage to be more efficient or using renewable energy to lower its emissions. It also may not consider that a customer might store more data on the cloud due to decreased costs and increased processing speeds.

While there likely are emission reductions from transitioning to cloud-based data storage, especially when it is backed by renewable energy, the complexity of the product being replaced and changing consumer use patterns make it extremely difficult to accurately estimate avoided emissions.

Why Do Companies Want To Report on Scope 4 Emissions?

Many companies want to report on scope 4 emissions to quantify their efforts to reduce the impacts of their industry.

A commonly cited 2017 Carbon Disclosure Project (CDP) survey reports that 75% of companies offer products and services to help others reduce emissions. However, these claims are of limited value without substantiated data to support them.

On a very simple level, companies with claims like this need to prove that the new products and services create fewer emissions overall. That requires extensive testing and predictions, including predictions for how end users will use and dispose of products.

In theory, the extensive research needed to calculate avoided emissions could also help future product improvements and decision-making. However, the complexity of making calculations, substantiating real “avoidance,” and the risk of greenwashing make this a difficult and potentially risky claim for companies to make.

Why Remote Work Doesn’t Directly Lead to “Avoided Emissions”

The mass shift to remote work resulted in some lowered emissions in areas like employee commutes and electricity usage in the office. However, companies shouldn’t be quick to count these as avoided emissions unless they can accurately claim that remote work generates fewer emissions than in-person work.

For example, remote team members may not have energy-efficient appliances, lights, and other technology at home that might have been present in offices. This can potentially result in higher energy usage at home than they consumed while working on-site.

Working from home also creates new challenges for measuring emissions and impact. For example, reporting companies could measure their scope 1 and 2 emissions from offices by referring to utility bills. It requires much more effort to track down the same data for a fully remote company. Companies with remote workforces will need to find ways to report company-specific energy usage from their employees’ homes.

This is one example of how inaccurate or incomplete avoided emissions measurements may not tell the entire story of a company’s emissions.

What Is the Existing Guidance for Reporting on Scope 4 Emissions?

The WRI created Estimating and Reporting the Comparative Emissions Impacts of Products to provide a neutral framework for estimating and reporting the full impact of products.

It’s not meant to give detailed guidance, but it’s a starting point for organizations that want to learn how to collect more credible data. The paper is also intended to assist industry associations seeking to create sector-specific guidance.

In 2013, the WRI released a survey to determine the need to create a standard for avoided emissions. The WRI then published their Estimating and Reporting the Comparative Emissions Impacts of Products paper in 2019 to highlight the current challenges with reporting avoided emissions. It also includes guidance for reporting a product’s negative and positive GHG emissions impact.

The WRI identified three common avoided emissions claims in their 2019 article on how companies are inaccurately estimating their products’ climate benefits:

  • Claims comparing avoided emissions of one product to a previous version

  • Claims that apply the benefits of one product’s avoided emissions to the entire market to calculate emissions

  • Claims based on compiling and comparing emissions of multiple products

The WRI also gives the following broad recommendations for organizations that want to report on avoided emissions made through their products:

  • Compare new products with the product it’s expected to replace for an accurate representation of avoided emissions. For example, comparing a new product to a very outdated model isn’t an accurate comparison since it can inflate the actual emissions impact. For example, Apple shouldn’t compare the iPhone 14 to a competitor's first-generation product. Instead, it should compare it to the current offering from competitors that it is expected to replace.

  • Measure emissions from each stage of the product’s life cycle for an accurate representation of how the new product fully compares to the old product. The GHG Protocol Product Standard has further guidance.

  • Consider how product changes may influence consumer behavior since lowered emissions in one area can result in higher emissions in another area. This could potentially result in higher overall emissions compared to the previous model. The Policy and Action Standard also recommends that reporting organizations consider how products will change emissions.

  • Use real sales data for products replacing old products to calculate avoided emissions. This is more accurate than calculating based on units sold of the old product, according to the WRI. Emissions aren’t truly avoided if customers are still using the old version of the product rather than replacing it with the new version.

  • Assess all products when reviewing at the portfolio level, not just the products expected to reduce emissions.

Given the complexity of measuring scope 4 emissions and since it’s not currently required, it’s strongly recommended to focus on prioritizing measuring and managing scopes 1, 2, and 3 emissions.

What Are the Main Challenges of Measuring Scope 4 Emissions?

Measurement difficulties, high upfront costs, lack of required standardization, and greenwashing potential are the main challenges for measuring scope 4 emissions. There are many roadblocks that make avoided emissions measurements difficult to report on. We’ll go over some of these difficulties below.

Measurement Difficulties

Accurately measuring scope 4 emissions requires reporters to validate that their products are actually avoiding emissions. This can require resource-heavy measurement from beginning to end, including estimations on how end users use and dispose of the product.

Measuring avoided emissions requires many assumptions and complex calculations that may require additional market research. For example, companies will need to determine how many consumers were using the original product and if consumers are likely to replace it with a new product. Poor data can also lead to even bigger issues if it’s used for decision-making regarding products or other investments.

Uncertainty Around Attributing Avoidance

In addition to overall difficulties with measurement, it’s also complex to attribute avoidance. For example, secondhand clothing sellers may assume that selling these clothes avoids the purchase of a new garment.

However, consumers may still consume more secondhand clothes overall since they’re cheaper than buying new ones. Although secondhand clothes get more use in their overall life cycle, they may not last as long as new clothes. Companies that are attempting to quantify avoided emissions need to take into account all of these scenarios that impact a product’s total emissions.

High Upfront Costs

Creating and testing for more efficient products requires a lot of resources for research and development, testing, and other upfront costs. It can be tough to internally earn buy-in from key stakeholders if these efforts are projected to create higher emissions in the short term. Although this makes it difficult to measure emissions, it shouldn’t completely deter organizations from making their products more efficient or innovating in their market.

Lack of Standardization

There are many standards and guidelines that are applicable to avoided emissions. The WRI did a comparative assessment of avoided emissions guidance when compiling their own recommendations.

However, there is currently no universally accepted standard for calculating avoided emissions. They’re also not currently required to report. This lack of standardization makes it difficult to know what to measure and report on, create comparable results, and measure data quality.

Greenwashing Potential

All of the above difficulties can result in inaccurate data and overestimations of a company’s impact. Although many companies have positive intentions, it’s highly likely for companies to make false claims as a result of erroneous or incomplete data. This reflects poorly on the company and can damage trust with investors, customers, employees, and other stakeholders.


Getting Started With Measuring Emissions

Instead of putting effort into measuring avoided emissions, businesses should prioritize measuring their required scope 1 and 2 emissions along with their scope 3 emissions.

Measuring these emissions can be a daunting task despite existing guidance. Companies not only need to collect massive amounts of data, but they also need to maintain transparency with all stakeholders to substantiate any claims made.

Although carbon accounting isn’t easy, it’s necessary to have verifiable and decision-useful data to help companies and their stakeholders understand how they are trending towards their sustainability goals.

Finding and managing data shouldn’t be the task that holds up your company’s progress. Automating data collection and analysis can save time and resources that could be put to better use elsewhere.

Learn how Persefoni’s carbon accounting software can help your business measure and manage your scope 1, 2, and 3 emissions.

© 2022 Persefoni AI Inc. All rights reserved. This presentation is the exclusive property of Persefoni and may not be copied or distributed, in whole or in part, without the express permission of Persefoni.

Persefoni is a leading Climate Management & Accounting Platform (CMAP). The company’s Software-as-a-Service solutions enable enterprises and financial institutions to meet stakeholder and regulatory climate disclosure requirements with the highest degrees of trust, transparency, and ease. As the ERP of Carbon, the Persefoni platform provides users a single source of carbon truth across their organization, enabling them to manage their carbon transactions and inventory with the same rigor and confidence as their financial transactions.

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