Thinking about Scope 4 Emissions
13th July 2022
Reducing emissions to zero within 28 years should be the world`s most important objective. In the light of decarbonisation talk, the importance of Scope 3 i.e. emissions all along the supply chain, has grown as more businesses start to target net zero, even though it may be difficult to be purely scientific over the emissions that get the product to the customer.
We are also hearing more about Scope 4 emissions these days, when most companies are still trying to get to grips with Scope 3 and all the potential double counting issues.
One of the first Australian business leaders who publicly contemplated this concept was Amanda Lacaze, chief executive of Lynas. Ms. Lacaze said in a speech to the Melbourne Mining Club in May: “As an input to green technologies like hybrid and electric vehicles and emission reduction technologies like catalytic converters, we see the materials we produce having a role to play in scope 4 or avoided emissions, should that become part of carbon accounting in the future.”
According to Alvin Ee, a research associate at the Energy Studies at National University of Singapore, the concept of Scope 4 emissions provides a better understanding of potential savings in terms of emissions avoidance.
There is a touch of art in measuring emissions along with the science. So, what is Scope 4 reporting? How will it differ from value chain emissions? Is the concept helpful or will it end up posing more questions than answers?
A simple definition of Scope 4 is the emission reduction (or avoided emissions) that occur outside of a product`s life cycle or value chain, but as a result of the use of that product. To take an example, a tumble dryer manufacturer develops a more efficient eco-tumble dryer that reduces electricity consumption. These avoided emissions could potentially be tracked and reported as Scope 4 emissions. On the other side, the manufacturer`s Scope 3 emissions could increase as sales increase as a result of growing popularity or increasing sales, causing an increase in the company`s total Scope 3 category 11 emissions. Scope 4 therefore offsets Scope 3. As concerns with double counting arise, is it becoming too complicated?
Is Scope 4 helpful?
This is new territory for organisations as many inaccurately estimate the climate benefits of their products. According to a recent CDP survey on avoided emissions, 36% of the companies said they had made claims about avoided emissions of their products.
With the change of customer behaviour and demand for carbon-free goods and services, this should provide transparency in the product value chain. Knowing this information will be helpful for companies when developing new products and when switching to carbon-free or low-carbon product lines. Accurate reporting will enhance a company’s reputation with stakeholders and with green talent while simultaneously benefiting the environment.
If businesses want to remain competitive, go further than net zero and become carbon negative, they must accurately disclose as many emissions categories as possible. If you are already gathering high-quality data for Scopes 1, 2, and 3, embarking on Scope4 reporting might be the next solid step as part of your company’s carbon reporting in the near future.
Posted by Betul Baykal, Manager at Klere.
