A Guide to Scope 4 Emission Frameworks

Climate-conscious organizations are familiar with tracking their carbon footprint through Scope 1, 2, and 3 emissions. These categories involve everything from on-site fuel use to purchased electricity and the indirect emissions throughout a company’s value chain. But an emerging concept goes beyond measuring one’s own footprint to account for the climate benefits a company enables externally. Often referred to as scope 4 emissions, this concept includes greenhouse gases that are not released into the atmosphere due to a company’s product or service. If your offering helps others avoid emissions, the tons of CO₂ avoided can be tallied as “Scope 4.” This framework is gaining attention as businesses strive to demonstrate a positive climate impact, not just reduce their own emissions.

Understanding Emission Scopes 1, 2, 3, and 4

Greenhouse gas accounting divides emissions into Scope 1, Scope 2, and Scope 3 for organizations. One must understand the distinctions and relationships between Scope 4 emissions and other emission categories, particularly Scope 3, to clarify their respective roles and complexities. Scope 1 covers direct emissions from sources a company owns or controls. Scope 2 involves indirect emissions from purchased energy, such as the CO₂ emitted by power plants to generate the electricity a company uses. Scope 3 includes all other significant indirect emissions reporting outside the organization’s own operations. Notably, both upstream supply chain emissions and downstream emissions are considered. For most businesses, Scope 3 constitutes the largest share of their carbon footprint. Companies often find that 70% or more of their emissions fall under Scope 3, which is why addressing it is both challenging and crucial.

Enter Scope 4. Unlike the first three, Scope 4 is not an official requirement but rather a voluntary carbon emissions category proposed to capture “avoided emissions.” In other words, Scope 4 represents emissions not emitted into the atmosphere due to a company’s actions. Organizations have begun using “Scope 4” as an informal label for these avoided emissions, for example, the emissions are prevented by selling more efficient or environmentally friendly products. It’s essentially a way to quantify the climate benefit of innovations: if your product replaces a more polluting alternative, the pollution reduction can be counted and communicated.

What Are Scope 4 Emissions (Avoided Emissions)?

So, what exactly falls under this unofficial Scope 4? Avoided emissions scope 4 refers to greenhouse gases that would have been emitted if not for a company’s product or service. The concept was first introduced by the World Resources Institute (WRI) around 2013 as a way to encourage accounting for emissions reductions that a business enables externally. Unlike Scopes 1–3, these avoided emissions occur outside the company’s direct value chain. They are essentially the inverse of an emission: a climate credit for making something cleaner than it otherwise would be.

Imagine a company that manufactures ultra-efficient home insulation. Installing this insulation in buildings might reduce those buildings’ heating energy needs, preventing a certain amount of CO₂ from being emitted by power plants or furnaces. That “saved” CO₂ is attributed to the insulation company’s Scope 4. Scope 4 is about a company’s carbon impact tools and solutions that help others cut emissions. There are existing and emerging frameworks, methodologies, and guidance for measuring, assessing, and reporting Scope 4 emissions, including references to regulatory and voluntary standards.

Examples of Scope 4 Emissions in Action

It can be tricky to grasp avoided emissions without concrete examples. Many innovations and technologies can create Scope 4 benefits by displacing higher-carbon alternatives. Here are a few illustrative scenarios:

• Clean Technology Replacement: An energy-efficient appliance, like a high-efficiency washing machine or refrigerator, uses significantly less electricity than a traditional model. If a company manufactures these appliances, it can calculate how much CO₂ is avoided when customers use the efficient model instead of an older, power-hungry version. Those savings count as the manufacturer’s Scope 4 avoided emissions.
• Innovative Materials or Processes: Using recycled or low-carbon materials in products can avoid emissions that would occur with virgin materials. Producing steel in a factory powered by green hydrogen instead of coal-fired furnaces prevents a large amount of CO₂. This difference could be reported as Scope 4 by the steel producer. Likewise, sustainable aviation fuel blended into flights avoids emissions that pure jet fuel would have emitted, giving an airline a basis to claim avoided emissions.
• Digital Solutions and Services: Teleconferencing platforms that substitute for business travel are a classic example. A company providing a video meeting service can argue that each virtual meeting avoids the emissions of a car or plane trip. If a corporation holds a large conference online rather than flying attendees in, the emissions difference is enormous. Those avoided travel emissions can be tallied under
• Enabling Low-Carbon Behavior: Some products enable downstream users to cut emissions. For example, a cloud computing service might allow companies to avoid running their own energy-intensive data centers. By consolidating computing in an efficient, renewable-powered cloud, the cloud provider helps customers avoid emissions they’d otherwise produce on-premises. Those avoided emissions can be counted by the cloud provider in Scope 4. Another example is a manufacturer of high-efficiency LED lighting. When consumers use the LEDs, they consume less power than incandescent bulbs, avoiding power plant emissions, which the LED maker can claim as an avoided emission impact.

It’s essential to present these examples accurately. Avoided emissions are always calculated relative to a baseline scenario: what would have happened otherwise? The EV’s benefit is measured against a comparable gasoline car’s emissions. The savings of an efficient washing machine are measured against those of a typical older model in terms of energy use.

Why Include Scope 4 in a Corporate GHG Strategy?

In a comprehensive GHG accounting scope 4 strategy, it’s valuable to show stakeholders how the business contributes to fighting climate change on a macro scale. Reducing your own footprint (Scopes 1–3) is critical, but if your products also help others reduce theirs, that amplifies your impact. By reporting these contributions, companies paint a fuller picture of their environmental value. A renewable energy company can highlight not just that it’s low-carbon itself, but that every solar farm it builds helps avoid tons of CO₂ from fossil fuel power generation. This can strengthen the company’s position as a climate leader.

Highlighting emission frameworks that include avoided emissions can spur innovation. Engineers and product designers may be motivated to create offerings that deliver quantifiable emissions savings for customers. In turn, those climate-friendly products can become a market differentiator. Companies can gain a competitive edge and open new business opportunities by positioning their products as part of the climate solution. Some forward-thinking investors and business analysts even see avoided emissions as an untapped value driver. In a world striving for net zero, the ability to remove emissions from someone else’s ledger could translate into new revenue streams and brand value.

Including avoided emissions in sustainability reports can enhance Environmental, Social, and Governance (ESG) narratives. While there’s no official ESG scope 4 metric, many firms voluntarily discuss how their products help customers or communities reduce emissions. This storytelling can resonate with environmentally conscious investors, customers, and partners. It shows the company is not only minimizing its own footprint but also actively helping others do the same, aligning with a broader climate action mission. However, transparency is key. Claims need to be backed by data to be credible. When done right, disclosing avoided emissions can underline and enhance a company’s commitment to climate action without coming off as boastful. Measuring Scope 4 internally can inform strategy and R&D. If a company knows which products yield the most avoided emissions for users, it might channel more effort into those solutions. Avoided emissions accounting essentially quantifies the value of sustainable product features. This can justify investments in certain projects or technologies. It can also be inspiring for employees to see that the company’s innovations directly translate to climate impact.

Current Frameworks and Methodologies for Scope 4

Given the challenges above, what guidance (if any) exists for companies that want to measure avoided emissions? At the moment, scope 4 reporting is largely a patchwork of different frameworks and emerging best practices.

Greenhouse Gas Protocol and WRI

The GHG Protocol (developed by WRI and WBCSD) is the foundation of Scopes 1–3 accounting. While it hasn’t officially added a Scope 4 standard, WRI has acknowledged the concept. Back in 2013, WRI explored the idea of an avoided emissions category and later published a paper in 2019 titled Estimating and Reporting the Comparative Emissions Impacts of Products. This document offers a neutral framework for evaluating product impact, recommending ways to compare a product’s emissions with those of its alternatives. It doesn’t provide a strict formula, but it encourages consistency in approach.

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ISO and National Standards

Some international standards touch on avoided emissions. For instance, the ISO 14067 (carbon footprint of products) and ISO 14069 provide principles that can be applied to compare product emissions. Certain countries’ frameworks, such as France’s ADEME, discuss avoided emissions (although they may not refer to it as “Scope 4”). These standards often focus on life-cycle assessment methodology. They advise calculating avoided emissions as the difference between emissions of a low-carbon solution and the baseline solution providing the same function. For example, the French method considers emissions avoided when a company’s product or service reduces emissions outside the company’s own scope by offering a lower-carbon alternative or by financing emission reduction projects. However, emission frameworks vary: one might include recycling impacts, while another might include financed projects, and so on. Despite these efforts, no single global standard has emerged. In fact, at present, there are no recognised guidelines or standards universally governing Scope 4 accounting, and it may be several years before WRI or another body publishes official guidance on it.

Life Cycle Assessments (LCA) and Handprint Concept

Companies that do measure avoided emissions typically rely on LCA tools. An LCA evaluates the environmental impact of a product from cradle to grave. By doing an LCA for both the new product and the conventional product, one can estimate the “avoided” portion. Many companies partner with consultants or use specialized carbon impact tools to run these analyses. These tools might simulate energy savings, model alternative scenarios, and systematically quantify emissions differences. Until more formal protocols are established, following established LCA methodologies is the best practice to lend credibility to Scope 4 calculations.

Corporate Examples and Emerging Practices

Several companies have begun to voluntarily include avoided emissions in their sustainability reports, typically explaining their methodology in footnotes. Sectors like technology, utilities, and manufacturing have some early movers:

• Tech companies (e.g., cloud service providers) have described how they calculate emissions customers avoided by using their services versus on-premises infrastructure.
• Utilities like PG&E have coined programs internally as “Scope 4” (in quotes) to aggregate the emissions their customers avoided due to utility-run energy efficiency and electric vehicle programs. They use regulatory-approved methods to calculate those savings. This shows an attempt to formalize it internally, even if it’s not an external standard.
• Industrial manufacturers sometimes report how much emissions their energy-efficient components have saved when embedded in downstream products.

The methodologies for Scope 4 are currently fragmented. Companies interested in this area must be diligent in choosing a credible approach and should stay tuned to developments. It’s a bit of a frontier in carbon accounting. One that is rapidly evolving as the demand for showcasing climate-positive contributions grows.

Integrating Scope 4 Into Climate Action Plans and Net Zero Strategies

How should businesses incorporate Scope 4 into their overall climate action plans? The key is to treat avoided emissions as a complement to, not a replacement for, core emissions reductions. Virtually all net-zero frameworks (such as the Science-Based Targets initiative and others) focus on eliminating or neutralizing Scopes 1, 2, and 3 emissions. These frameworks generally do not count avoided emissions from sold products as progress toward a company’s own net-zero target. Any organization aiming for carbon neutrality or net zero must first aggressively reduce its direct and value-chain emissions (Scopes 1–3) through efficiency, clean energy, and supplier engagement. This is the foundation of a credible climate strategy.

Addressing Third-Party and Supply Chain Emissions

No discussion of emissions frameworks is complete without emphasizing the role of the supply chain and partners. While Scope 4 looks beyond a company, most organizations still have plenty of work to do within Scope 3, i.e., the third-party emissions linked to their suppliers and product users. Tackling these indirect emissions requires collaboration and often forms the bulk of corporate climate efforts. For many firms, reducing supply chain emissions is both the biggest challenge and the biggest opportunity in their sustainability strategy. The main challenges associated with Scope 4 emissions are measurement difficulties, attribution uncertainties, high costs, lack of standardization, and risks of greenwashing. This is where concepts like sustainable procurement and vendor risk management come into play.

Another aspect is data management. To effectively reduce supply chain emissions, businesses often need better visibility into supplier data and performance. This is where modern solutions come in. For example, Certa’s platform can integrate ESG metrics into the supplier onboarding and monitoring process, giving companies a clearer view of vendor-related emissions. By using such tools to gather emissions data and enforce standards in contracts, companies ensure their suppliers are part of the climate solution. Over time, a greener supply chain not only reduces Scope 3 emissions but can open opportunities for new Scope 4 claims if those supply chain improvements enable downstream emission savings.

Future Trends and Developments

As global sustainability standards evolve, Scope 4 emissions frameworks are poised for significant innovation. Anticipated changes include the emergence of more robust and standardized methodologies for quantifying avoided emissions, driven by increasing regulatory and investor interest. Companies can expect advancements in digital tools and data analytics to enhance the accuracy and transparency of Scope 4 reporting. Collaboration across industries and supply chains will likely become a best practice, enabling more comprehensive measurement of positive climate impacts. As regulatory bodies and global initiatives increasingly emphasize holistic emissions management, proactive integration of Scope 4 will become a hallmark of leading climate strategies.

Embracing Scope 4 is about embracing a broader definition of corporate climate responsibility. It encourages innovation, designing the next generation of products and services that help society cut emissions. It also reinforces collaboration, since avoided emissions often involve working closely with customers and suppliers. By carefully integrating Scope 4 into their strategies, companies can accelerate climate progress beyond their immediate operations, helping drive the systemic changes needed to tackle climate change. That is a goal we all share, and Scope 4 offers one more tool in our collective toolbox to measure and motivate progress toward a sustainable, net-zero future.

Sources

• World Economic Forum – You've probably heard of Scope 1, 2 and 3 emissions, but what are Scope 4 emissions?weforum.org
• Janus Henderson Investors – Innovation opportunities: Avoided emissions (Scope 4)janushenderson.com
• ClimatePartner – Scope 4 emissions (Glossary)climatepartner.com