What are Scope 4 Emissions – A New Category?
Scope 4 refers to and is categorized as “Avoided Emissions” – the emissions that are prevented through the use of a product or service, rather than those directly emitted. It is not part of the GHG Protocol’s Scope 1, 2, or 3 officially, but is progressively being used in sustainability narratives and voluntary disclosures. It measures the climate benefit of technologies, products, or practices that reduce emissions either in the value chain or for the end users. It is commonly observed in sectors like energy-efficient appliances, digitization, and circular economy models, etc.
Examples to Understand
- A manufacturing company adopting sustainable packaging that avoids plastic waste and the associated emissions.
- A service company calculating the avoided emissions enabling remote work, reducing the commuting-related emissions.
- A solar panel manufacturer calculating the emissions avoided by customers switching from coal-based power.
Why Scope 4 Matters
- Aligns with science-based targets and net-zero journey of organizations that consider value-chain impacts.
- Showcases innovation, highlighting how products or technologies contribute to a low-carbon economy.
- Shows climate-positive contributions in addition to the organization’s own carbon footprints.
- Supports policy engagement, strengthening the case for favorable green policies and incentives.
- Establishes stakeholder trust, communicating proactive leadership in sustainability beyond compliance.
Global Sustainability Frameworks and Guidance
1. GHG Protocol – Guidance on Avoided Emissions (Draft & Discussion Papers)
Although not a formal standard as yet, the GHG Protocol has published discussion papers acknowledging “avoided emissions”. It encourages voluntary, transparent disclosure, especially for innovative or green technologies.
2. Science Based Targets Initiative (SBTi)
SBTi recognizes avoided emissions but does not count them toward science-based targets. It encourages companies to focus on actual emission reductions within Scopes 1, 2, and 3, but recognizes Scope 4 for product innovation and climate solutions.
3. CDP (Carbon Disclosure Project)
CDP does not currently have a specific Scope 4 category but allows companies to disclose “emission reductions outside Scopes 1-3” in narrative or project-based disclosures. Innovative companies often use CDP’s open-text sections to communicate avoided emissions through case studies or product impact assessments.
4. EU Taxonomy and CSRD (Corporate Sustainability Reporting Directive)
While not explicitly calling it Scope 4, CSRD and EU Taxonomy encourage disclosure of the “environmental impact of products and services”, including how they enable decarbonization of other sectors. Product use-phase impacts and contributions to climate change mitigation can align with avoided emission disclosures.
5. IFRS S2 (Climate-related disclosures)
IFRS S2 (from ISSB) focuses on financially material climate risks and opportunities. Companies may disclose avoided emissions as part of their climate-related opportunities, especially if such reductions generate future economic benefits.
Impact on Indian Companies
Opportunities
- Scope 4 positioning enhances long-term enterprise value and brand equity.
- Helps in achieving extended producer responsibility (EPR) and Circular Economy goals under Indian Environmental Laws.
- Listed Indian companies preparing for BRSR Core, IFRS S2, and CSRD-style disclosures will find Scope 4 useful for showcasing product sustainability.
- For alignment with global supply chains, clients often seek suppliers who contribute to their net-zero goals.
- Demonstrating how your business enables decarbonization can attract ESG investors and global partners by this strategic differentiation.
Challenges
- No standard method for quantifying avoided emissions, which may set a risk of greenwashing if not credibly backed.
- Verification complexities and therefore need for credible data, assumptions, and third-party assurance.
- Need for investment in LCA (Life Cycle Assessment) tools and supply chain data transparency.
- Risk of double counting as emissions reductions may also be claimed by the end user or downstream partner.
Way Forward for Indian Industry
- Begin incorporating Scope 4 in ESG strategy documents as a voluntary but forward-looking metric.
- Work with consultants and assurance providers to develop robust methodologies.
- Integrate Scope 4 into product innovation and R&D processes.
- Align with global buyers and regulators increasingly valuing “climate-beneficial” products.
Conclusion
Scope 4 is not just about reducing emissions, it’s about enabling others to reduce theirs. For Indian companies, especially in technology, infrastructure, manufacturing, and renewable energy, Scope 4 offers an underexplored opportunity to amplify climate impact, unlock green revenue, and future-proof business models. As global standards evolve, early adoption of Scope 4 thinking can be a strategic advantage, positioning India as a proactive contributor to global decarbonization in the climate-conscious global economy.
