Swisscom has announced plans to be climate neutral and reduce carbon emissions by one million tons by 2025, using a new Scope 4 climate strategy developed with Accenture.
Swisscom has added Scope 4, or avoided emissions, to its sustainability reporting and set a 2030 target to be climate neutral.
The introduction of Scope 4 emissions, or emissions that might otherwise have arisen from product use, could complicate an already complex reporting landscape.
The addition of Scope 4 disclosures, a term for avoided emissions in the GHG Protocol, but which has been used in other ways, could open Swisscom to accusations of greenwash.
Swisscom (SIX:SCMN) has set new climate neutrality goals intended to help it reduce the carbon emissions of its customers by 1 million tons by 2025, equivalent to 2% of Switzerland’s total.
Accenture (NYSE: ACN) helped the company develop its new strategy. This involves the integration of an emissions type, known as Scope 4, into its strategy through enabling its customers to avoid or reduce emissions. This follows the decision by California utility Pacific Gas and Electric (NYSE:PCG) to include avoided emissions due to its operations in its June 2022 report.
The issue is not whether it’s a good idea to report on avoided emissions, as this could be an additional lens through which the market could build climate accountability. It could also be seen as sending stakeholders a message about the seriousness of the company’s engagement with climate change. The framing of such emissions as Scope 4 however, especially considering how fractured the current reporting landscape is today, could be problematic.
Greenwash by misdirection?
The concern is that by focusing on avoided emissions such an approach could take pressure of companies to act on Scope 1, 2 and 3 emissions, frameworks which have been in use since 2001. Given the importance of procurement and the supply chain in shifting market behaviour, and the challenges involved in measuring let alone managing Scope 3, shifting the focus away from this could open users of such an approach to accusations of greenwash through misdirection.
There are a number of other challenges around this new strategy, not least of which is the confusion around what climate neutral actually means in a world of net zero targets. But there is also confusion about the definition of Scope 4.
While the concept was developed in 2013 as part of the original GHG Protocol, it has since come to mean different things to different people. One example is in its use to refer to the scope of influence or impact through corporate lobbying.
It’s also important to note that under the EU Sustainability Reporting Standards (ESRS) guidelines, it is clearly stated that there is ‘no generally accepted framework for accounting and reporting on such avoided emissions’.
Within Europe then, avoided GHG emissions should not be used to adjust Scope 1, 2 and 3 emissions. It also says in AG 67 that such avoided emissions should not be used to claim GHG reduction targets. The use of such an approach to do so seems, at best, disingenuous of both Swisscom and Accenture.
What does Scope 4 emissions mean?
The most common meaning of Scope 4 emissions is avoided emissions, or those emissions that occur outside the life-cycle or value chain of a product, but still as a result of use of the product. An example of this would be a teleconferencing service that allows people to work from home, thereby saving emissions incurred via commuting.
The best use of Scope 4 is in the case companies developing new products, wherein they clarify the potential outcomes of their efforts via scenarios that create transparency for stakeholders. However given that Scope 4, or avoided emissions, does not reduce or offset the combined Scope 1, 2, and 3 emissions of a company or reporter and therefore opens the company to greenwashing scrutiny over its claims.
With Scope 3 emissions effectively covering the value chain, introducing a new end user category may be helpful for that end user, but not necessarily the overall understanding of emissions and importantly, where responsibility for emissions lies.
Data on how and how many companies are reporting Scope 4 data is limited, so the jury is still out on the prudence of incorporating it into sustainability strategies. Using the right comparisons and standards to assess avoided emissions is critical in accurately making Scope 4 disclosures. Further, with the boundaries to Scope 3 definitions still being debated, companies should be careful about incorporating Scope 4 into their sustainability accounting.
Inflated claims may be more expensive than the advice
Accenture views communications services providers like Swisscom as sustainability leaders, ecosystem enablers, and consumer champions. While these labels may seem appealing from a marketing viewpoint, using them to define a sustainability strategy may, at best, be viewed as an attempt at greenwashing by critics.
By incorporating the emissions reduction from the use of technologies such as AI-driven analytics, cloud computing, 5G and IoT to improve their services in the Scope 4 classification, as advised by Accenture, Swisscom risks overstating its positive environment impact on society.
Stephan Schneider, managing director, Accenture, said: “Swisscom is positively impacting the planet by combining technology solutions to enable a reduction across their emissions while also driving business value. The company can boost their business by offering customers a larger number of green products and services to choose from to reduce their emissions.”
Reporting initiatives such as the Science-based Targets Initiative (SBTi) and CDP don’t look for reporting on Scope 4. Despite that, a 2017 CDP survey said that over 35% of its respondents had reported on avoided emissions as part of their strategy. So it looks as if this confusion is an ongoing problem that needs to be addressed, especially if companies are going to count avoided emissions as part of their emissions reduction journey.
Such an approach could be beneficial as a tool for informing product and service design but as the means of achieving climate goals it is, at the least, problematic. The introduction of such unneeded complexity, especially in terms of a distraction from operational impact, introduces the question of what value Accenture is looking to add?