In recent years, there has been increasing discussion around greenhouse gas emissions, particularly in the context of climate change and the need to decarbonize economies. The commonly known emission categories – Scope 1, Scope 2, and Scope 3 – are widely recognized and defined by international standards such as the GHG Protocol. However, a new category, referred to as Scope 4, is emerging and drawing more attention. Scope 4 pertains to emissions uniquely associated with the potential reduction of emissions through products, services, or technologies offered by companies.
Scope 1, 2, and 3 – A Brief Overview
To understand Scope 4, it’s helpful to briefly review the basic definitions of the previous emission categories:
• Scope 1: Direct emissions resulting from a company’s operational activities, such as emissions from boilers, company vehicles, or production processes.
• Scope 2: Scope 2: Indirect emissions associated with the consumption of electricity, heat, or steam generated by external suppliers.
• Scope 3: Indirect emissions encompassing the entire value chain – from raw materials to product disposal, transportation, business travel, and product use by consumers.
Scope 4 – Definition and Significance
Scope 4 differs from previous categories as it relates to avoided emissions – those that can be reduced or eliminated through innovative solutions, technologies, or services. Scope 4 focuses on the potential climate benefits arising from companies’ investments in green technologies, renewable energy, or reducing the carbon footprint of customers using their products.
In the context of Scope 4, companies can assess how their activities contribute to reducing emissions in other sectors or organizations. For example, a technology company offering software that optimizes industrial processes can ultimately reduce energy consumption and, thereby, greenhouse gas emissions.
Examples of Scope 4
1. Renewable Energy: A company producing wind turbines may claim that its product contributes to emission reductions, as turbines replace the need for coal or gas energy generation.
2. Energy Efficiency Technologies: An LED lighting manufacturer could argue that its products reduce customers’ energy consumption, translating into avoided emissions related to electricity production from fossil fuels.
3. Digital Solutions: A company offering supply chain management software can help companies optimize transportation routes, which reduces fuel consumption and CO2 emissions.
4. Sustainable Transportation: A car-sharing company with a fleet of electric vehicles could claim climate benefits related to reducing emissions from private combustion-engine cars.
Offset vs. Inset in the Context of Scope 4
By focusing on avoided emissions, Scope 4 raises discussions on two key concepts related to emissions management: offset and inset. Both strategies involve reducing emissions, but their application in the context of Scope 4 differs from traditional approaches used in Scope 1, 2, and 3 reporting.
Offset (emission compensation)
Offsetting involves compensating for emissions elsewhere, outside the company’s direct operations. When a company invests in external projects, such as afforestation, renewable energy development, or carbon sequestration, these actions are classified as offsets. In Scope 4, offsets may involve a company launching a product or service that reduces emissions in another sector, such as wind turbines installed by renewable energy providers to reduce emissions associated with traditional coal-fired power plants.
Example of Offset in Scope 4: A company producing batteries for electric vehicles could claim that its operations help avoid emissions from combustion-engine vehicles. This action is an offset, as the emissions are avoided due to activities outside the company’s direct operations.
Inset (internal emission compensation)
In contrast, insetting refers to emission reductions within the company’s direct value chain. In Scope 4, an inset occurs when a company implements solutions that reduce emissions within its operations or those of its suppliers and customers. Insets may include investments in technologies that optimize production processes, reduce energy consumption, or promote better resource management in a sustainable way.
Example of Inset in Scope 4: A company producing energy optimization software for the industry may claim that its solution reduces greenhouse gas emissions for customers who use it by reducing energy consumption in their production processes.
Challenges and Controversies
Scope 4 also brings numerous methodological challenges and controversies:
1. Measurement and Verification Difficulties – avoided emissions are challenging to measure and verify. Determining the actual avoided emissions can be complicated, especially when no alternative scenario is available for comparison.
2. Lack of Standards – Scope 1, 2, and 3 are widely recognized by international reporting standards, such as the Greenhouse Gas Protocol (GHG), but Scope 4 lacks unified norms. This can lead to differences in interpretation and a lack of comparability between companies.
3. Risk of Greenwashing – some organizations may try to use Scope 4 as a marketing tool, presenting avoided emissions in an overly favorable light. This poses the risk of “greenwashing,” or engaging in misleading marketing practices that suggest more environmental responsibility than the company’s actual operations reflect.
ISO support in measuring Scope 4
Although “scope 4” is not officially defined, ISO standards that may help measure avoided emissions (i.e., those that could be saved through the company’s products or services) primarily include standards focused on life cycle analysis, carbon footprint, and energy efficiency assessment. Key ISO standards that support the measurement and reporting of potential avoided emissions include:
1. ISO 14067 – Product Carbon Footprint
This standard outlines principles for calculating and reporting the carbon footprint of products, considering the entire life cycle. It helps assess potential emission savings compared to other products or technologies, which can be useful in evaluating whether a solution contributes to avoiding emissions.
2. ISO 14064-2 – Greenhouse Gases: Emission Reduction Projects
ISO 14064-2 focuses on greenhouse gas emission reduction projects, including initiatives that allow for emission avoidance. This standard provides guidelines for methodology and evaluating the effects of emission reductions or avoidance through projects.
3. ISO 14040 i ISO 14044 – Life Cycle Assessment (LCA)
These standards relate to life cycle assessment and help assess the environmental impact of products, processes, or services at different stages. LCA identifies potential emission savings and helps understand how a technology contributes to emissions reduction on a societal level.
4. ISO 50001 – Energy Management Systems
ISO 50001 provides guidelines for energy management that help identify ways to improve energy efficiency. This enables organizations to reduce energy consumption, which translates into indirect emission reductions and potentially allows other parties to reduce their emissions.
5. ISO 14063 – Environmental Communication
Although not directly related to calculations, this standard supports communication about company activities related to avoided emissions, including transparent reporting on the environmental impact of products or services.
6. ISO 14046 – Water Footprint
This standard addresses the measurement and reporting of the water footprint of products, which can complement information on avoided emissions if a company wishes to report not only greenhouse gas emissions but also overall environmental impact.
Each of these standards can help an organization measure the impact of its actions, products, and services in both a direct and indirect emissions context. Scope 4 is a concept that could become a valuable component of analyzing and reporting the climate impact of business activities, offering a new perspective on greenhouse gas emissions. It may serve as an important indicator in the context of scientific research focused on the ecological efficiency of innovations and the long-term impact of sustainable technologies on the environment. However, effective implementation of Scope 4 requires refining methodologies, developing appropriate standards, and ensuring transparency and data reliability.
Green Savings Scheme S.A. has developed its own methodology for calculating emission reductions or increased GHG absorption, referring to the principles set out in the ISO 14064-2 standard, the Clean Development Mechanism (CDM) principles, and the principles adopted by the Intergovernmental Panel on Climate Change (IPCC). In the case of GSS CERT BIOGAS, the methodology also takes into account the principles resulting from the provisions of Directive 2018/2001 (RED II). Each tonne of offset is verified by an independent international verifier.
All companies can use GSS CERT Units (offsets) – including those that undertake reduction activities in accordance with procedures adopted under voluntary programs or standards, e.g. such as the GHG Protocol. Compensating (offsetting) greenhouse gas emissions using reduction activities carried out by third parties – e.g. GSS CERT System Participants – supports the company in mitigating the negative impact of generated GHG emissions on the environment and climate.
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