A common misconception is that Scope 4 reporting, which deals with avoided emissions, is not as crucial as traditional Scope 1, 2, and 3 reporting. This myth stems from a narrow focus on direct emissions and overlooks the broader role that businesses can play in reducing global carbon footprints. In reality, Scope 4 reporting is increasingly important for organizations committed to combating climate change and driving positive, systemic impact.
In this blog post we’re ready to bust the myth by summarizing the top 5 reasons why Scope 4 reporting should not be underestimated:
Reason #1: Scope 4 Reporting broadens the scope of climate action
Scope 1, 2, and 3 emissions focus on direct emissions from a company’s operations (Scope 1), purchased energy (Scope 2), and value chain activities (Scope 3). While essential, these scopes don’t account for the potential positive impact companies can have by reducing emissions elsewhere—this is where Scope 4 reporting comes in. Scope 4 measures avoided emissions, which are the reductions in GHG emissions that occur outside a company’s operations as a result of their products or services.
For instance, a company that manufactures energy-efficient appliances helps consumers lower their energy use and reduce their emissions. Reporting on these avoided emissions allows businesses to demonstrate their role in the broader fight against climate change. Scope 4 highlights how organizations can contribute to emissions reductions beyond their immediate operations, emphasizing a more comprehensive approach to sustainability.
Reason #2: Scope 4 Reporting encourages innovation
Companies that engage in Scope 4 reporting are incentivized to develop products and services that actively help reduce global emissions. For example, businesses in clean energy, electric vehicles, or energy-efficient technologies can use Scope 4 reporting to quantify the indirect environmental benefits of their innovations.
This pushes organizations to think beyond internal processes and invest in sustainable technologies that create positive ripple effects across industries and societies. Ignoring Scope 4 reporting would limit the recognition of these important innovations, reducing the incentive for companies to develop and promote solutions that contribute to global decarbonization.
Reason #3: Scope 4 Reporting aligns with stakeholder expectations
Today’s consumers, investors, and regulators increasingly demand transparency and action on sustainability. Scope 4 reporting helps organizations align with these stakeholder expectations by showing how their products or services contribute to broader environmental goals. For example, a company that produces solar panels or electric vehicles can report the avoided emissions from customers who switch to renewable energy or low-emission transportation.
This type of reporting can enhance a company’s reputation for environmental responsibility, making it more attractive to sustainability-focused investors and customers. It also helps organizations position themselves as leaders in the transition to a low-carbon economy.
Reason #4: Scope 4 Reporting supports global climate goals
Scope 4 reporting is aligned with global efforts to tackle climate change, such as the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement. Achieving these goals requires reductions in emissions at every level, including indirect contributions from companies that help others lower their carbon footprint.
By measuring and reporting avoided emissions, organizations can demonstrate their alignment with these global objectives. Without Scope 4 reporting, we risk overlooking the potential for products and services to accelerate progress toward international climate goals.
Reason #5: Scope 4 Reporting amplifies positive impact across value chains
Scope 4 reporting recognizes that companies have a role to play beyond their own emissions. Products and services that reduce energy use, promote renewable energy, or enable sustainable practices contribute to emissions reductions throughout the value chain and across sectors. For example, a software company that develops tools to optimize energy use in manufacturing plants can help those plants reduce their own emissions.
Without Scope 4 reporting, these indirect, yet significant contributions would go unnoticed. By reporting on avoided emissions, companies can showcase their role in fostering sustainability across industries, amplifying their overall impact.
The myth that Scope 4 reporting is not important overlooks the power of avoided emissions in driving global climate action. In reality, Scope 4 reporting broadens the scope of sustainability efforts, encourages innovation, aligns with stakeholder demands, and contributes to global climate goals. By recognizing and measuring their indirect contributions to emissions reductions, businesses can amplify their positive impact and play a vital role in building a sustainable future. Far from being insignificant, Scope 4 reporting is a crucial tool in the fight against climate change.
Not sure where or how to get started with Scope 4 reporting? At OXIA, we have made it our business to create the most trusted platform source for global ESG and impact data by designing methodologies and tools for measurement of GHG emissions, in synergy with investors, investees and governments.
Request a demo today and we’d be happy to assist you with your Scope 4 Reporting efforts.
