By Parina Parikh, Senior Sustainability Assessor, Supply Chain & Product Assurance, DNV
As businesses across Asia and Australia accelerate their decarbonisation efforts, the conversation is expanding beyond traditional carbon accounting frameworks. While Scope 1, 2, and 3 emissions are widely recognised, Scope 4 emissions—also known as avoided emissions—are emerging as a critical tool for measuring real climate impact. By focusing one missions that are reduced or avoided due to the use of a product or service, Scope 4 offers a forward-looking perspective on sustainability and plays a crucial role in shaping net-zero strategies.
Unlike Scope 1, which accounts for direct emissions from a company’s own operations, or Scope 2, which includes indirect emissions from purchased energy, Scope 4 captures the climate benefits of innovation. Renewable energy solutions, low-carbon materials, and energy-efficient technologies are all examples of how companies can contribute to avoided emissions. A manufacturer of solar panels or wind turbines, for instance, enables emissions reductions by replacing fossil fuel-based energy sources. Similarly, a producer of energy-efficient appliances or low-carbon construction materials contributes to emission reductions over the lifetime of the product by creating products that, when used, reduce emissions compared to conventional alternatives.
Scope 4 is particularly relevant for businesses in Asia and Australia, where regulations, investor expectations, and sustainability commitments are rapidly evolving. Governments across the region, including Australia, Japan, and Singapore, are introducing stricter climate disclosure mandates and incentives for low-carbon technologies. At the same time, investors are prioritising companies that can demonstrate tangible climate action. Businesses that track and report avoided emissions are better positioned to stand out in an increasingly sustainability-focused market, gaining a competitive edge while reinforcing their role in the transition to a low-carbon economy.
Despite the lack of a standardised framework, businesses have practical tools to assess avoided emissions. Comparative analysis quantifies emissions savings by comparing a product or service with conventional alternatives. Life Cycle Assessment (LCA) takes a more detailed approach, assessing environmental impact across an entire product lifespan—from raw material extraction to disposal. Market-based modelling provides broader insights by measuring shifts in emissions across industries due to the adoption of low-carbon solutions. By combining these methodologies, organisations can present a transparent, data-driven approach to Scope 4 reporting, even in the absence of global standards.
While traditional carbon reporting focuses on a company’s current emissions, Scope 4 provides a future-focused perspective. Many businesses across Asia-Pacific have set ambitious net-zero targets, but achieving them requires more than internal reductions—it demands a broader industry shift. Scope 4 allows companies to demonstrate how their innovations contribute to systemic decarbonisation, supporting the widespread adoption of low-carbon technologies and accelerating progress toward net zero.
This is especially important for hard-to-abate sectors such as energy, heavy industry, and construction. While these sectors may struggle to reduce their own direct emissions in the short term, they can still play a crucial role by developing products, technologies or solutions that help other sectors reliant on their products to reduce emissions. For instance, a steel manufacturer that invests in green hydrogen production may not yet be carbon-neutral, but if its technology enable slower-emission construction materials, it’s making a meaningful impact on global decarbonisation.
While Scope 4 reporting holds great potential, it also comes with challenges. One major concern is greenwashing—without clear guidelines, companies risk overestimating or misrepresenting their avoided emissions, leading to credibility issues. Regulatory uncertainty adds another layer of complexity, as governments are still debating how to incorporate Scope 4 into climate disclosure frameworks. Double counting is also a challenge, where multiple entities in a supply chain claim the same avoided emissions, making it harder to ensure accurate reporting.
To mitigate these risks, businesses must prioritise transparency and credibility by clearly defining baseline scenarios, using recognised methodologies, and openly disclosing assumptions. While the GHG Protocol does not formally recognise Scope 4, companies can report avoided emissions within Scope 3 disclosures to enhance transparency.
Aligning with the Science-Based Targets initiative (SBTi) further strengthens credibility, as SBTi supports reporting on how products and services contribute to emissions reductions across the value chain. Third-party validation can also enhance trust, ensuring avoided emissions claims are backed by verifiable data.
As Asia and Australia accelerate their transition to net zero, businesses that proactively measure and communicate their avoided emissions will be better positioned for long-term success. As regulatory frameworks mature and best practices develop, avoided emissions reporting will become a more integral part of corporate sustainability strategies.
At the end of the day, the question is no longer just "How much are we emitting?" but also "How much are we helping to reduce?" And just as importantly, "Are we being honest and transparent about it?"
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