As companies refine their climate strategies and prepare for compliance with frameworks like the CSRD, a new concept is gaining traction in the ESG landscape, Scope 4 emissions. Unlike traditional […]

As companies refine their climate strategies and prepare for compliance with frameworks like the CSRD, a new concept is gaining traction in the ESG landscape, Scope 4 emissions. Unlike traditional emissions categories, Scope 4 focuses not on what a company emits, but on what it helps others avoid. This emerging metric is reshaping how organizations think about carbon reduction. While Scope 1 emissions refer to direct emissions from owned operations, and Scope 2 emissions capture emissions from purchased energy, and Scope 3 emissions encompass value chain impacts, Scope 4 introduces a critical, complementary perspective: avoided emissions.

This article explores the growing relevance of Scope 4 emissions, how they are measured, why they matter in 2025, and how they differ from traditional emissions metrics in your ESG reporting strategy.

What Are Scope 4 Emissions?

Scope 4 emissions are not officially recognized by the Greenhouse Gas (GHG) Protocol corporate standard, yet. But the term is increasingly used to describe the emissions avoided through the use of a company’s product or service when compared to a conventional alternative. In other words, they represent the positive climate impact a solution has in the hands of a customer or end user.

For instance, if a company sells energy-efficient appliances that reduce electricity use compared to standard models, the associated emissions savings would be considered Scope 4. Similarly, teleconferencing software that reduces the need for business travel or renewable electricity solutions that displace coal-based power generation also contribute to avoided emissions [1] [2].

These emissions are “comparative”, they only exist in relation to a baseline scenario where the low-carbon product or service does not exist or is not used [3].

Why Scope 4 Matters for ESG and CSRD in 2025

Scope 4 emissions are especially relevant in 2025, as regulations and stakeholders demand not just reductions, but credible impact. Under the CSRD, companies must assess double materiality, how sustainability issues affect them, and how they affect the world. Scope 4 emissions provide a powerful way to quantify the second part of that equation: how your product or service helps reduce societal emissions [4].

More and more companies are pursuing “net positive” or “carbon handprint” strategies, aiming not just to reduce their footprint, but to create products that actively reduce emissions elsewhere in the system. Including avoided emissions in your ESG goals narrative can:

• Support product differentiation and innovation [1]
• Enhance investor and customer perception of long-term climate value
• Demonstrate leadership in science-based climate action
• Help justify green revenue claims under emerging taxonomy frameworks [5]

However, Scope 4 claims are also subject to increasing scrutiny. Without clear standards or methods, they risk being perceived as greenwashing [3].

How Are Scope 4 Emissions Calculated?

Scope 4 emissions are estimated using either of two methodologies [3] [6]:

• Attributional approach: This uses product life-cycle assessments to compare the GHG emissions of a low-carbon product to a baseline alternative, assuming a one-to-one substitution.
  Example: Comparing emissions from an electric vehicle to a conventional gasoline vehicle over 200,000 km of use [6].
• Consequential approach (recommended): This measures the total system-wide changes in emissions that occur because a product enters the market. It considers market-mediated effects, like changes in demand, rebound effects, or grid carbon intensity [6].

The formula is generally:
Avoided Emissions = Emissions from baseline scenario − Emissions from product scenario

Where the baseline represents what would have occurred in the product’s absence.

For example, if a company sells solar panels, avoided emissions depend on the energy mix being displaced (e.g., coal vs. gas) and should ideally be measured using marginal grid emission factors rather than grid averages [6].

Key Differences Between Scope 4 and Scopes 1–3

Feature	Scope 1, 2, 3 (GHG Inventory)	Scope 4 (Comparative Assessment)
Measurement type	Historical and actual	Modeled and hypothetical
Boundary	Company operations + value chain	System-wide (customer usage or market substitution)
Methodology	Attributional	Attributional or consequential
Purpose	Accountability and compliance	Innovation, strategy, and product differentiation
Data source	Internal (operations, suppliers)	External (market, grid, use case assumptions)

Scope 4 assessments do not replace Scope 1, 2, or 3 reporting. They are meant to complement inventories with a broader systems lens [6].

Challenges and Limitations

Despite its promise, Scope 4 accounting comes with real caveats [1] [6]:

• Uncertainty: Emissions avoided depend on assumptions about baseline scenarios and product usage. For instance, will solar panels replace coal or just add capacity?
• Data complexity: Scope 4 assessments often require primary and secondary data from product users, policy forecasts, or market dynamics.
• Risk of cherry-picking: Companies may highlight only those products that show positive avoided emissions, ignoring those with neutral or negative impact.
• Lack of standards: There is currently no global standard or verification scheme for avoided emissions, although new frameworks are under development [5].

That’s why credible Scope 4 claims must be:

• Reported separately from your core inventory (Scope 1–3)
• Based on clearly documented assumptions and methodologies
• Transparent about trade-offs and uncertainties [6]

Examples and Emerging Standards

Several companies already use avoided emissions to demonstrate product value:

• 3M: Committed to helping customers avoid 250 million tons of CO₂e through product innovation [6].
• BT: Targeted customer reductions of three times the company’s own operational footprint [6].

Industry groups and accounting bodies are responding. The World Resources Institute (WRI) has released guidelines on estimating and reporting the comparative emissions impacts of products, recommending the consequential approach for decision-making [6]. Meanwhile, the GHG Protocol is evaluating how Scope 4 fits into its standards pipeline [5].

How to Integrate Scope 4 into Your ESG Goals

Scope 4 metrics can support a robust, forward-looking ESG goals disclosure, especially when preparing for frameworks like CSRD or TCFD. To use Scope 4 effectively:

1. Start with your GHG inventory: Ensure your Scope 1, 2, and 3 emissions are fully measured and reported first.
2. Identify low-carbon products: Prioritize those that likely replace more carbon-intensive alternatives.
3. Choose a baseline: Define the likely alternative scenario. Justify it transparently.
4. Select the right method: Use consequential approaches for strategic decisions, and attributional for product comparisons or customer messaging.
5. Disclose clearly: Keep Scope 4 separate from your official inventory and clarify assumptions, limitations, and market effects.
6. Avoid cherry-picking: Disclose whether the products analyzed represent your entire portfolio or just a subset.

Final Thoughts: A Tool, Not a Shortcut

Scope 4 emissions open up powerful new pathways to recognize and accelerate low-carbon innovation. They are not a shortcut to climate leadership, but they are a meaningful way to measure your company’s broader contributions in a decarbonizing economy. In a world where regulators and stakeholders are watching for greenwashing, robust and transparent Scope 4 disclosures can demonstrate real climate value and future-proof your ESG goals narrative.

References:

[1] Financial Times, “Measuring Scope 4 Emissions: What Boards Need to Know”
[2] Seneca ESG, “Scope 4 Emissions: The Next Frontier in Corporate Carbon Accounting”
[3] Thomson Reuters, “Scope 4 Emissions Reporting”
[4] Seneca ESG, “Scope 3 Emissions for CSRD: What You Need to Know”
[5] Eco-Business, “Climate Accounting Body Proposes Inaugural Standard for Scope 4 Emissions”
[6] World Resources Institute, “Estimating and Reporting the Comparative Emissions Impacts of Products”