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Introduction
Since the establishment of the Greenhouse Gas (GHG) Protocol in 2001, corporate carbon accounting has focused on Scope 1, Scope 2, and Scope 3 emissions, capturing direct and indirect emissions from a company's operations and value chain.
As the climate crisis intensifies, a new concept, "Scope 4 emissions," is emerging. Known as avoided emissions, Scope 4 offers a broader perspective on a company's environmental impact.
KEY ESG's software aids in tracking Scope 4 carbon emissions by reporting these emissions through seamless data integration, customised reporting, and simplified calculations. Learn more about what Scope 4 emissions entail, why they are important, and how we can support your Scope 4 emissions reporting at the end of this blog.
What are Scope 4 emissions?
Scope 4 emissions refer to avoided greenhouse gas emissions that result from the positive environmental impact of a company's products or services in the broader economy. Unlike direct emissions and indirect emissions categorised under Scopes 1, 2, and 3, the emissions created in Scope 4 focus on emissions generated by the benefits derived from sustainable practices.
- Scope 1: Direct emissions from owned or controlled sources, such as emissions from company vehicles.
- Scope 2: Indirect emissions from the generation of purchased electricity used by the company.
- Scope 3: Other indirect emissions, such as those resulting from a company’s supply chain and business travel.
- Scope 4: Emissions avoided due to the use of the company's products or initiatives, like energy-efficient appliances reducing energy demand.
Unlike Scopes 1, 2, and 3, which focus on emissions a company produces either directly or indirectly, Scope 4 considers the positive impacts of a company’s actions on the environment.
For example, a company that manufactures energy-efficient appliances contributes to reduced energy consumption, thereby avoiding emissions that would otherwise have occurred.
Another example is that cloud-based data storage companies may reduce fossil fuel use by switching users from inefficient and energy-sapping local server solutions to cloud storage services.
This approach allows companies to identify and report the emissions generated or avoided by using efficient products and services.
Recognising the importance of reporting and measuring emissions and calculating avoided emissions also underscores the tangible impacts of a company’s environmental strategies. The World Resources Institute developed this concept and provides a new way to measure the impact of companies' greenhouse gas (GHG) emissions reductions.
Why should we report avoided emissions?
Despite the ambitious net zero targets set globally, AI predictions indicate that global warming is likely to exceed 1.5 degrees Celsius as early as the 2030s, underscoring the urgent need for enhanced technological and economic strategies to combat climate change effectively.
This means that the need to improve technologically and economically is enormous and will require significant innovations to reach these goals. The current reporting approach concentrates on identifying organisational progress in reducing emissions. Reporting avoided emission reductions not only helps overall climate improvement but also offers several benefits to the company, including:
Enhances transparency
Reporting avoided emissions allows companies to demonstrate the broader impact of their operations beyond mere compliance. It gives stakeholders a clearer picture of how a company's product, products and services contribute to environmental sustainability. This level of transparency helps align public perception with the company's commitments to reducing carbon footprints and promoting green initiatives, establishing a clearer connection between daily operations and global environmental goals.
Boosts stakeholder confidence
As mentioned, when companies report on avoided emissions, they signal to investors and consumers their dedication to substantive emissions and sustainability goals. This transparency fosters trust and reassures stakeholders of the company's long-term viability and ethical standing. By openly using emission reductions and committing to measurable sustainability criteria, businesses can strengthen their credibility and attract environmentally conscious investors and customers looking for brands and transport companies that lead in climate action.
Drives innovation
Think about it: focusing on the positive impacts of products on the environment pushes companies to innovate continuously. By their carbon footprint and reporting avoided emissions data, businesses highlight how their new technologies or processes reduce environmental impacts. This not only sets a benchmark for industry standards but also motivates the entire sector to develop solutions that can lead to further reductions in carbon footprints, fostering a cycle of continuous improvement and innovation.
Improves brand reputation
Regular reporting on avoided carbon emissions plays a critical role in shaping a company’s brand as environmentally responsible. This proactive approach to environmental stewardship can significantly enhance a company's image, attract like-minded consumers, and differentiate the value of the supply chain and brand in competitive markets. Being seen as a leader in sustainability can lead to increased customer loyalty and potentially higher market share.
Facilitates access to green financing
Demonstrating a tangible reduction in emissions through innovative practices can significantly enhance a company's eligibility for green financing. Financial institutions and grant-making bodies are increasingly allocating resources to projects that substantively contribute to environmental sustainability. Effective reporting carbon accounting of avoided emissions can provide the necessary documentation to support claims of environmental impact, unlocking preferential lending rates and access to a broader pool of investment opportunities in renewable energy.
What are the main challenges of measuring Scope 4 emissions?
While Scope 4 offers a way to recognise and calculate avoided emissions and encourage efforts to reduce emissions that contribute to a larger climate solution, accurately measuring these emissions involves unique challenges. Here, we explore the main hurdles faced by organisations in quantifying absolute avoided emissions and validating such impacts. Measuring avoided emissions presents unique challenges like:
Quantification
Measuring avoided emissions accurately is complex because it involves predicting what would have occurred without a specific intervention. For instance, how much less CO2 is emitted due to the use of an energy-efficient appliance compared to a standard one?
This requires sophisticated models that can simulate alternative emissions scenarios, and incorporate various assumptions about behavior, technology usage, and market trends, making the quantification of Scope 4 emissions both intricate and model-dependent.
KEY ESG’s software uses sophisticated models to simulate alternative scenarios, helping companies accurately predict the emissions and avoid emissions made by their products or services. Our platform integrates various assumptions about consumer behaviour, technology usage, and market trends to provide reliable quantification.
Attribution
Attributing specific reductions in emissions directly to a company’s products or services can be problematic. This is especially true in complex markets where multiple variables affect consumption patterns.
For example, a decrease in emissions due to energy-efficient lighting must consider other energy conservation measures in place, such as climate or changes in utility and renewable energy prices. Establishing a clear link between a product's life cycle and its environmental impact requires detailed data and analytics, which can be challenging to obtain and interpret accurately.
Our platform offers detailed data analytics capabilities, allowing companies to establish clear links between their products and the resulting environmental impacts. By collecting comprehensive data and employing advanced analytics, KEY ESG helps ensure accurate attribution of emissions reductions.
Verification
Ensuring the accuracy and reliability of Scope 4 data is critical for maintaining credibility. Verification involves rigorous checks to confirm that the data reported are both accurate and consistent with real-world outcomes.
This can include third-party audits, consistent methodology application across reporting periods, and transparency in the data collection and calculation processes of sustainable projects. These steps are essential to uphold the integrity of sustainability reports and foster trust among stakeholders.
KEY ESG supports external audits and third-party assurance by providing automated audit trails of the data collection and calculation process. Our software ensures transparency in data collection and calculation, maintaining the integrity of sustainability reports and fostering stakeholder trust.
How can KEY ESG help you report your Scope 4 emissions?
Scope 4 emissions reporting is now simplified with KEY ESG. Our leading Carbon Accounting Platform makes quantification, attribution, and verification easier than ever. KEY ESG offers advanced tools to help companies accurately track and report Scope 4 emissions, such as:
Data management
KEY ESG's platform excels in consolidating diverse data streams, which is crucial for Scope 4 emissions, where data can be fragmented across various activities and sources. This integration allows for more accurate tracking and easier identification of trends in avoided emissions. By leveraging this comprehensive data analysis, companies can pinpoint which products or services are most effective in reducing emissions, helping prioritise future innovations and sustainability efforts.
Reporting tools
KEY ESG equips organisations with advanced reporting tools that simplify the complex process of documenting and communicating avoided emissions. These tools are designed to adhere to international reporting standards, ensuring that the reports generated are credible and can be used in sustainability disclosures, investor communications, and regulatory submissions. This capability is essential for companies aiming to showcase their environmental impact transparently and effectively.
Custom metrics and frameworks
Recognising the unique aspects of each business and industry, KEY ESG allows for customising metrics and reporting frameworks. This flexibility ensures that companies can accurately reflect the specific environmental benefits of their products or services. Custom metrics are particularly useful for companies operating in niche markets or with innovative products that traditional metrics may not fully capture, thus providing a more accurate and tailored view of their environmental impact.
In summary
While Scope 4 is not formally recognised by the GHG Protocol, its role in reducing global emissions is increasingly valued. Companies can significantly influence climate change mitigation through their sustainability efforts. KEY ESG provides essential tools to more companies track and report these impacts accurately, empowering businesses to contribute more effectively to a sustainable future.
By choosing the right partner for your ESG reporting, you hold the power to make a substantial positive impact on our company's emissions and environment. Accurate reporting is the first crucial step towards meaningful ESG improvement activities. With KEY ESG, not only can you enhance your company’s environmental reporting, but you also take a significant step towards sustainability.
Interested in making a difference? Request a demo with KEY ESG today and start on your journey towards a greener, more sustainable future. The future of our planet is in your hands—start with precise, reliable ESG reporting and lead the way in climate action.
Introduction
Since the establishment of the Greenhouse Gas (GHG) Protocol in 2001, corporate carbon accounting has focused on Scope 1, Scope 2, and Scope 3 emissions, capturing direct and indirect emissions from a company's operations and value chain.
As the climate crisis intensifies, a new concept, "Scope 4 emissions," is emerging. Known as avoided emissions, Scope 4 offers a broader perspective on a company's environmental impact.
KEY ESG's software aids in tracking Scope 4 carbon emissions by reporting these emissions through seamless data integration, customised reporting, and simplified calculations. Learn more about what Scope 4 emissions entail, why they are important, and how we can support your Scope 4 emissions reporting at the end of this blog.
What are Scope 4 emissions?
Scope 4 emissions refer to avoided greenhouse gas emissions that result from the positive environmental impact of a company's products or services in the broader economy. Unlike direct emissions and indirect emissions categorised under Scopes 1, 2, and 3, the emissions created in Scope 4 focus on emissions generated by the benefits derived from sustainable practices.
- Scope 1: Direct emissions from owned or controlled sources, such as emissions from company vehicles.
- Scope 2: Indirect emissions from the generation of purchased electricity used by the company.
- Scope 3: Other indirect emissions, such as those resulting from a company’s supply chain and business travel.
- Scope 4: Emissions avoided due to the use of the company's products or initiatives, like energy-efficient appliances reducing energy demand.
Unlike Scopes 1, 2, and 3, which focus on emissions a company produces either directly or indirectly, Scope 4 considers the positive impacts of a company’s actions on the environment.
For example, a company that manufactures energy-efficient appliances contributes to reduced energy consumption, thereby avoiding emissions that would otherwise have occurred.
Another example is that cloud-based data storage companies may reduce fossil fuel use by switching users from inefficient and energy-sapping local server solutions to cloud storage services.
This approach allows companies to identify and report the emissions generated or avoided by using efficient products and services.
Recognising the importance of reporting and measuring emissions and calculating avoided emissions also underscores the tangible impacts of a company’s environmental strategies. The World Resources Institute developed this concept and provides a new way to measure the impact of companies' greenhouse gas (GHG) emissions reductions.
Why should we report avoided emissions?
Despite the ambitious net zero targets set globally, AI predictions indicate that global warming is likely to exceed 1.5 degrees Celsius as early as the 2030s, underscoring the urgent need for enhanced technological and economic strategies to combat climate change effectively.
This means that the need to improve technologically and economically is enormous and will require significant innovations to reach these goals. The current reporting approach concentrates on identifying organisational progress in reducing emissions. Reporting avoided emission reductions not only helps overall climate improvement but also offers several benefits to the company, including:
Enhances transparency
Reporting avoided emissions allows companies to demonstrate the broader impact of their operations beyond mere compliance. It gives stakeholders a clearer picture of how a company's product, products and services contribute to environmental sustainability. This level of transparency helps align public perception with the company's commitments to reducing carbon footprints and promoting green initiatives, establishing a clearer connection between daily operations and global environmental goals.
Boosts stakeholder confidence
As mentioned, when companies report on avoided emissions, they signal to investors and consumers their dedication to substantive emissions and sustainability goals. This transparency fosters trust and reassures stakeholders of the company's long-term viability and ethical standing. By openly using emission reductions and committing to measurable sustainability criteria, businesses can strengthen their credibility and attract environmentally conscious investors and customers looking for brands and transport companies that lead in climate action.
Drives innovation
Think about it: focusing on the positive impacts of products on the environment pushes companies to innovate continuously. By their carbon footprint and reporting avoided emissions data, businesses highlight how their new technologies or processes reduce environmental impacts. This not only sets a benchmark for industry standards but also motivates the entire sector to develop solutions that can lead to further reductions in carbon footprints, fostering a cycle of continuous improvement and innovation.
Improves brand reputation
Regular reporting on avoided carbon emissions plays a critical role in shaping a company’s brand as environmentally responsible. This proactive approach to environmental stewardship can significantly enhance a company's image, attract like-minded consumers, and differentiate the value of the supply chain and brand in competitive markets. Being seen as a leader in sustainability can lead to increased customer loyalty and potentially higher market share.
Facilitates access to green financing
Demonstrating a tangible reduction in emissions through innovative practices can significantly enhance a company's eligibility for green financing. Financial institutions and grant-making bodies are increasingly allocating resources to projects that substantively contribute to environmental sustainability. Effective reporting carbon accounting of avoided emissions can provide the necessary documentation to support claims of environmental impact, unlocking preferential lending rates and access to a broader pool of investment opportunities in renewable energy.
What are the main challenges of measuring Scope 4 emissions?
While Scope 4 offers a way to recognise and calculate avoided emissions and encourage efforts to reduce emissions that contribute to a larger climate solution, accurately measuring these emissions involves unique challenges. Here, we explore the main hurdles faced by organisations in quantifying absolute avoided emissions and validating such impacts. Measuring avoided emissions presents unique challenges like:
Quantification
Measuring avoided emissions accurately is complex because it involves predicting what would have occurred without a specific intervention. For instance, how much less CO2 is emitted due to the use of an energy-efficient appliance compared to a standard one?
This requires sophisticated models that can simulate alternative emissions scenarios, and incorporate various assumptions about behavior, technology usage, and market trends, making the quantification of Scope 4 emissions both intricate and model-dependent.
KEY ESG’s software uses sophisticated models to simulate alternative scenarios, helping companies accurately predict the emissions and avoid emissions made by their products or services. Our platform integrates various assumptions about consumer behaviour, technology usage, and market trends to provide reliable quantification.
Attribution
Attributing specific reductions in emissions directly to a company’s products or services can be problematic. This is especially true in complex markets where multiple variables affect consumption patterns.
For example, a decrease in emissions due to energy-efficient lighting must consider other energy conservation measures in place, such as climate or changes in utility and renewable energy prices. Establishing a clear link between a product's life cycle and its environmental impact requires detailed data and analytics, which can be challenging to obtain and interpret accurately.
Our platform offers detailed data analytics capabilities, allowing companies to establish clear links between their products and the resulting environmental impacts. By collecting comprehensive data and employing advanced analytics, KEY ESG helps ensure accurate attribution of emissions reductions.
Verification
Ensuring the accuracy and reliability of Scope 4 data is critical for maintaining credibility. Verification involves rigorous checks to confirm that the data reported are both accurate and consistent with real-world outcomes.
This can include third-party audits, consistent methodology application across reporting periods, and transparency in the data collection and calculation processes of sustainable projects. These steps are essential to uphold the integrity of sustainability reports and foster trust among stakeholders.
KEY ESG supports external audits and third-party assurance by providing automated audit trails of the data collection and calculation process. Our software ensures transparency in data collection and calculation, maintaining the integrity of sustainability reports and fostering stakeholder trust.
How can KEY ESG help you report your Scope 4 emissions?
Scope 4 emissions reporting is now simplified with KEY ESG. Our leading Carbon Accounting Platform makes quantification, attribution, and verification easier than ever. KEY ESG offers advanced tools to help companies accurately track and report Scope 4 emissions, such as:
Data management
KEY ESG's platform excels in consolidating diverse data streams, which is crucial for Scope 4 emissions, where data can be fragmented across various activities and sources. This integration allows for more accurate tracking and easier identification of trends in avoided emissions. By leveraging this comprehensive data analysis, companies can pinpoint which products or services are most effective in reducing emissions, helping prioritise future innovations and sustainability efforts.
Reporting tools
KEY ESG equips organisations with advanced reporting tools that simplify the complex process of documenting and communicating avoided emissions. These tools are designed to adhere to international reporting standards, ensuring that the reports generated are credible and can be used in sustainability disclosures, investor communications, and regulatory submissions. This capability is essential for companies aiming to showcase their environmental impact transparently and effectively.
Custom metrics and frameworks
Recognising the unique aspects of each business and industry, KEY ESG allows for customising metrics and reporting frameworks. This flexibility ensures that companies can accurately reflect the specific environmental benefits of their products or services. Custom metrics are particularly useful for companies operating in niche markets or with innovative products that traditional metrics may not fully capture, thus providing a more accurate and tailored view of their environmental impact.
In summary
While Scope 4 is not formally recognised by the GHG Protocol, its role in reducing global emissions is increasingly valued. Companies can significantly influence climate change mitigation through their sustainability efforts. KEY ESG provides essential tools to more companies track and report these impacts accurately, empowering businesses to contribute more effectively to a sustainable future.
By choosing the right partner for your ESG reporting, you hold the power to make a substantial positive impact on our company's emissions and environment. Accurate reporting is the first crucial step towards meaningful ESG improvement activities. With KEY ESG, not only can you enhance your company’s environmental reporting, but you also take a significant step towards sustainability.
Interested in making a difference? Request a demo with KEY ESG today and start on your journey towards a greener, more sustainable future. The future of our planet is in your hands—start with precise, reliable ESG reporting and lead the way in climate action.
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