Scope 4 emissions: Are they relevant to your business?


SUSTAINABILITY and emissions reporting has become an expected business practice.

The newly formed International Sustainability Standards Board (ISSB) recently published its first draft documents. But just as organisations are starting to understand Scopes 1,2 and 3 of their greenhouse gas (GHG) emissions, there is a new conversation emerging about Scope 4. What is it, and what do businesses need to know about it?

Scope 4 emissions are separate from scope 1, 2 and 3. The best (and most official) explanation is “avoided emissions” because of a business’ action — which drive the behavioural change needed to reach net zero by 2050, but don’t directly impact a business’ net zero targets.

Aerial view of people walking, reducing scope 4 emissions
If a developer changes the layout to ensure residents can access everything within a 15-minute walk, unnecessary travel is avoided

It typically means producing a product or service, but can include initiatives such as investment or new policies. Traditional communities separate commercial and residential zones. This causes higher emissions from commutes. If a developer changes the layout to ensure residents can access everything within a 15-minute walk, unnecessary travel is avoided.

Organisations must report avoided emissions separately to Scopes 1,2, and 3. One does not cancel the other. If a cement manufacturer emits a million tCO2e (scopes 1,2 and 3) by using waste-derived fuels, it avoids 100,000 tCO2e. But reporting total emissions as 900,000 tCO2e would be incorrect: the emissions are not comparable.

This is an opportunity to quantify the hard work that goes into avoiding emissions in the first place. Demonstrating commitment can help to strengthen brand reputation or secure investment capital.

For property developers, calculating avoided emissions can help internal stakeholders to understand the impact of design changes. Sharing the results publicly, and receiving credit for their positive impact, can be an attractive selling point to potential residents.

As with all emissions declarations and statements, consistency and transparency are vital. The credibility of the industry depends on it, and the risk of being called out for greenwashing is very real.

This is particularly a challenge for avoided emissions, since there is no generally accepted standard — yet. This can lead to uncertainty in the calculation — time-consuming and resource-intensive.

Before reporting on avoided emissions, organisations should first calculate, report on, and set targets around Scopes 1,2, and 3. Only then should they take the next step.

A number of questions can be useful. What is the business benefit in calculating avoided emissions, and how will the results be used? Are claims being made in your industry today and, if so, how are they perceived? Do you have the capability to measure and report out on avoided emissions?

Whether an assessment demonstrates there is value in declaring your avoided Scope 4 emissions now or later, understanding and preparing to engage with this new class will help set the course for your organisation’s future, and begin the vital behaviour change to reach net zero goals.

Don’t underestimate avoided emissions, or their value. The direction of travel is clear.

Laura Bowler is a senior consultant and Shane Hughes is director of corporate net zero services at Ramboll.