We are all becoming increasingly aware of Scopes 1, 2 and 3 as reporting on these emissions categories are becoming integrated with mandated reporting. While we are familiar with Scope 1, 2, and 3 emissions, there is a lesser-known category gaining traction: Scope 4 emissions. Let us dive into what Scope 4 emissions are and why they matter.

Before we explore Scope 4, let us briefly recap the established emission categories:

• Scope 1: Direct emissions from owned or controlled sources. Think burning fuel in company vehicles or emissions from industrial processes.


• Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling. Think of onsite combustion such as a fleet vehicle or a gas or a gas stove in a burger joint.


• Scope 3: All other indirect emissions in the value chain, both upstream and downstream. This includes everything from purchased goods and services (downstream of the company’s manufacturing) to the use and disposal of solid products (after the product has ended its useful life).

Scope 4 emissions, also known as "avoided emissions," represent the emissions reductions related to Scope 1, 2, and 3. Essentially, Scope 4 quantifies the positive climate impact of a company's solutions and business practices.

How Does It Work?

Let us say a company takes its domestic hot water production from natural gas to solar thermal heating for its swimming pools. The Scope 1 emissions from this onsite combustion are eliminated; Scope 4 replaces Scope 1 thereby reducing the total carbon impact of the business.

Imagine a company that takes its existing building and converts all its lighting to energy efficient LED’s. This reduces the scope two emissions for the company. The emissions reductions achieved would be considered Scope 4 emissions.

Another example is a software company that provides video conferencing tools. By enabling remote meetings, their software reduces the need for business travel, leading to lower transportation emissions thereby reducing Scope 3 emissions. These avoided travel emissions fall under Scope 4.

Why Scope 4 Matters: Businesses can account, and report excellent work done.

• Highlighting Positive Impact: Scope 4 allows companies to demonstrate the positive climate impact of their innovative solutions by providing credit for steps made. It goes beyond simply reducing their own footprint, improving their financial position and derisking their business by demonstrating the result of the course of action taken.


• Driving Innovation: Recognizing Scope 4 encourages companies to develop and promote the company’s best practices, products and services that contribute to broader emissions reductions and future proofing their businesses.


• Comprehensive Climate Strategy: Integrating Scope 4 into a climate strategy provides a more holistic view of a company's environmental impact.


• Transparency and Communication: Reporting Scope 4 emissions can enhance transparency and communicate a company's commitment to climate action to stakeholders.

The challenge with Scope 4 emissions for reporting is that unlike Scope 1, 2, and 3, there is currently no universally accepted standard for calculating and reporting Scope 4 emissions. This can lead to inconsistencies and difficulties in comparing data across companies.

The Future of Scope 4:

As the focus on climate action intensifies, Scope 4 is likely to become an increasingly important metric. Efforts are underway to develop standardized methodologies and guidelines for calculating and reporting avoided emissions.