Connecting the dots

Tracking Scope 1 and 2 greenhouse gas (GHG) emissions is a legal requirement for some of the largest organisations in the UK, with a 2022 report revealing that 90 per cent of the top 500 S&P companies engage in at least some form of environmental, social and governance (ESG) reporting. Often, 70 per cent or more of an organisation’s emissions are a result of the value chain and therefore, over recent years, Scope 3 reporting has also entered the fore for many channel businesses.

Tracking activities across the entire business model, from suppliers to end users, can be quite complex and, therefore, Scope 3 emissions are often challenging for organisations to measure accurately. So, is the prospect of adding the additional Scope 4 emissions something channel businesses should be concerned with right now, and just what do they need to know?

Scope 4 emissions data, often dubbed as ‘avoided emissions’, includes any GHG emissions occurring outside of the product’s lifecycle, but as a result of the product existing. While Scope 4 emissions can be difficult to measure, it helps an organisation understand how much GHG emissions were avoided and provides a unique selling point for its products. 

Demonstrating impact

With more than 90 per cent of companies expected to miss their net-zero goals by 2030 if they do not double their efforts today, it feels on the surface that adding an additional scope before the majority of companies have established the basics, might be going a step too far.

However, those willing to collect Scope 4 data can use this as a key product or service differentiator. It can also be used to more accurately demonstrate an organisation’s true impact. For example, tech vendors that develop more energy-efficient products might experience higher sales and growth which could increase their total Scope 3 emissions.

By also tracking their Scope 4, they can demonstrate the impact they have made in reducing the CO2 emissions per product, even if they experience an overall increase due to increased sales and operational volumes.

Building trust

It’s no surprise that the companies most interested in Scope 4 emissions are those that have invested in research and development to create more sustainable products or services – logistics companies investing in fuel efficiency, renewable energy companies and electric vehicle manufacturers are all likely to have Scope 4 tracking high on their agendas.

While companies investing heavily to make their products and services more sustainable can use this as a USP in the marketplace, customers have become more aware of how accurate claims to be ‘greener’ are.

Greenwashing erodes consumer trust, with more than 50 per cent now saying they would actively boycott a brand doing so. Scope 4 gives companies the ability to validate their claims, providing greater transparency to their customers with a more complete picture of their environmental impact.

If a company claims that its product or service reduces the carbon footprint by 30 per cent, Scope 4 data would provide the background data behind the marketing statistics.

Collecting data

When looking into ways that organisations can identify avoided emissions in their products or services, they should consider comparing emissions of a product’s current and previous specifications. Additionally, companies could explore the benefits of their products compared to other products on the market, or compare emissions of numerous products to include in their reporting.  

Although the idea of tracking Scope 4 emissions is beneficial, it also has challenges around how to accurately measure the data and establish a set framework for businesses to follow.

In contrast to Scope 1, 2 and 3 emissions, Scope 4 does not have to be declared. It also does not fall into the GHG protocol guidance, so with little information out there to support organisations with their calculations, it is difficult to verify how accurate Scope 4 data is, especially if it hasn’t been independently audited.

To avoid accusations of greenwashing, claims of Scope 4 emissions data must prove that new products or services can successfully create fewer emissions. Doing so would require products or services to go through considerable testing and have set predictions in place to understand how end users would use and dispose of products. 

Finding focus

With the increased interest in GHG data, constantly changing reporting standards and growing expectations from boards such as the International Sustainability Standard, there is a perception that organisations will inevitably need to include Scope 4 emissions in future ESG reporting. Nonetheless, to effectively collect GHG data, channel organisations should first look at calculating and reporting on Scopes 1, 2 and 3 emissions before disclosing any avoided emissions figures.

Currently, the risk of tracking Scope 4 GHG emissions data can lead to businesses focusing too heavily on what they are avoiding rather than what they are reducing, leading consumers to believe that their efforts are nothing short of greenwashing. Therefore, businesses must approach tracking Scope 4 emissions with caution.

Scope 4 emissions can potentially create a more transparent approach to sustainability reporting, but to utilise this effectively, the right methodology is crucial. Avoided emissions data can help promote a positive outlook and will become a vital aspect of understanding a company’s carbon footprint in the future.

Moving forward, channel leaders need to grasp reporting on Scopes 1, 2 and 3 before reporting on avoided emissions to successfully build trust with the public and reflect on their practices for future development. Ultimately, Scope 4 must complement GHG reporting, rather than replace efforts to reduce Scope 1, 2 and 3 emissions.