You've calculated your base-year emissions, but are they still relevant? If your accounting methodology, scope, or data has changed, it may be time to recalculate your base-year emissions to align with your current reporting year. We call this base year recalculation or rebaselining: a process that ensures you capture the most complete and accurate picture of your true progress.
In the realm of sustainable business practices, the recalculation of base year emissions, often termed 'rebaselining,' is a cornerstone for accurate and meaningful greenhouse gas (GHG) reporting.
Why Rebaseline?
Rebaselining is necessary when significant operational changes occur that fundamentally alter a company's emission profile. Additionally, updates in emission calculation methodologies or improvements in data quality can prompt a reassessment of past emissions to ensure comparability over time.
At Greenly, we define progress as the actual reduction of a company’s emissions, measured by comparing two footprints calculated using the same methodology, data granularity, and scope. This consistency is key for an accurate analysis of progress. Selling an entity or using more accurate emissions factors can decrease your carbon footprint compared to your base year, but these aren't real progress – they’re simply shifts in scope or data quality. Rebaselining ensures consistency, providing a true sense of your progress.
When to Rebaseline?
If you’ve determined a recalculation is needed, here’s how to confirm the necessity of re-baselining:
Plug base-year data into an updated model aligned with the current year. For example, in the graph below, changes were made to the hypotheses for refrigerant leaks and corrections to natural gas consumption. If these changes cause the base year emissions to exceed the significance threshold, update your base year emissions.
Measure true impact by comparing these two identical models to showcase progress towards overall goals.
A key concept in rebaselining is the 'significance threshold,' which companies set to determine when changes are substantial enough to warrant a recalculation of the base year. This threshold is often quantified as a specific percentage change in emissions compared to the original base year figures. For instance, a common benchmark established by the Science-Based Targets initiative (SBTi) is a 5% change in total emissions, which, if met or exceeded, triggers a recalculation.
Activities that could trigger rebaselining include:
Scope Updates: Mergers, acquisitions, divestments, outsourcing, changes in ownership/control, or including previously excluded emissions.
Activity Data Improvements: Access to better data or fixing data errors that significantly change emissions.
Changes to Accounting Methods: Adopting new standards or improved methodologies.
Changes in Emissions Factors: Using more scientifically robust or representative emissions factors.
Recommendations on how to implement Base Year Recalculations
1. Develop and Communicate a Clear Recalculation Policy: Address when, why, and how you will rebaseline. Compliance with the GHG Protocol requires a recalculation policy.
2. Rebaseline When Change is Significant: Follow the SBTi's 5% threshold for significant changes.
3. Consolidate Less Significant Changes: Group smaller changes into a single baseline update to avoid frequent recalculations.
4. Manage Expectations: Communicate transparently with stakeholders about potential baseline changes.
5. Use Accurate and Qualitative Communication: Clearly explain the reasons behind any fluctuations to promote trust.
6. Follow GHG Protocol Guidance: This provides a reliable framework for accounting decisions and precision.
Conclusion
As businesses strive to align their operations with global sustainability targets, the practice of rebaselining becomes increasingly important. By ensuring that GHG reporting reflects the most current and accurate data, companies can make more informed decisions about their environmental strategies and communicate their progress more transparently to stakeholders.
For businesses looking to establish or refine their approach to GHG recalculations, adhering to established guidelines such as the GHG Protocol will provide a structured and credible framework to navigate this complex but crucial aspect of corporate sustainability reporting.