Rebaselining emissions is something all companies—and even countries—do to keep their GHG reporting accurate. Whether due to mergers, acquisitions, divestitures, or updates in data methods, rebaselining ensures you're always comparing apples to apples over time. Find out if you need to rebaseline by looking at the key triggers below and ensure your emissions data truly reflects your evolving operations.
A company needs to rebaseline its emissions in the following scenarios:
1. Structural Changes:
Mergers or Acquisitions: If a company acquires another entity, the acquired company’s emissions must be included in both the base year and the current year to ensure a valid comparison.
Example: Company A acquires Company B in year 2. Company A must recalculate its base year to include the emissions of Company B.
Divestitures: If a company divests a business unit or facility, those emissions must be excluded from both the base year and future reporting periods.
Example: Company A sells Facility X in year 2. Emissions from Facility X must be excluded from the base year onward.
Outsourcing or Insourcing: Changes in operational control, such as moving processes to or from third parties, can trigger rebaselining.
Example 1: If a company outsources manufacturing previously done in-house, the base year should exclude the emissions if they are no longer in Scope 1 or 2.
Example 2: If a company used third-party freight (Scope 3) in the base year but now operates its own fleet (Scope 1), rebaselining is needed to shift those emissions into Scope 1. Caveat: If the Scope 3 emissions from third-party freight were not previously reported, rebaselining would be necessary to ensure the inventory reflects the new operational boundary.
Changes in Equity Shares or Joint Ventures: When a company changes its stake in joint ventures or equity ownership, it must adjust the base year to reflect its new share of emissions.
Example: Company D increases its equity in a joint venture from 30% to 60%, requiring a recalculation of the base year to reflect the higher responsibility for emissions.
Organizational Boundary Adjustments: Adjustments in how a company consolidates its emissions (based on equity share or operational/financial control) necessitate recalculation of the base year.
Example: A company initially used the equity share approach but later switched to the operational control approach, requiring recalculation of its base year to reflect the new boundary.
2. Methodological Changes:
Changes in Emission Factors: When a company adopts updated or more accurate emission factors, it must recalculate the base year to maintain consistency.
Example: A company uses a new, more precise emission factor for purchased electricity, which requires recalculating the base year to ensure accurate comparisons.
Switching from Spend-Based to Activity-Based Data: If a company switches from estimating emissions based on expenditure data to using activity-based data (e.g., actual fuel consumption), it is best to recalculate the base year using the new methodology. Companies can recalculate the base year if historical activity data is available. If not, they can estimate past data (backcast) using proxies such as financial or operational metrics. If neither is possible, spend-based data can be retained for the base year, with activity-based data used going forward. Documenting the methodology change and any limitations is essential for accurate reporting.
Example: Company F switches from spend-based estimates of freight emissions to actual fuel use data for its fleet. The base year is recommended to be recalculated using the more accurate activity-based data.
Changes in Hypotheses or Assumptions: If the assumptions or hypotheses used to estimate emissions (e.g., energy use estimates) change, recalculations may be necessary.
Example 1: If a company originally estimated emissions based on a hypothetical energy usage pattern and later obtains accurate, measured data, it should recalculate the base year using the updated assumptions.
Example 2: If a company initially made assumptions about the materials used in its products, but has since updated those assumptions or hypotheses based on new information, it should apply the revised assumptions to the base year and recalculate emissions for consistency with the current year's more accurate data.
3. Data Corrections or Errors in the Base Year:
If errors or omissions are discovered in the base year data, the company must correct and recalculate the base year emissions.
Example 1: Company G discovers that a significant portion of emissions from its overseas operations was omitted from the base year due to a data entry error. The company must recalculate the base year to include the correct data.
Example 2: In the base year, Company H excluded Scope 3.7 emissions from employee commuting, but it now includes them in the current year’s report. To ensure comparability, the company should recalculate the base year to include employee commuting emissions.
Example 3: Company J initially excluded Scope 3.1 upstream manufacturing emissions related to product purchases and services in the base year but has included them in the current year's inventory. The company should revise and recalculate the base year to reflect these upstream emissions for consistency.
Conclusion:
Recalculation triggers such as mergers, acquisitions, divestitures, methodological updates, or data corrections are simply indicators that a company *may* need to revisit its base year emissions.
However, recalculations are only mandatory if they meet the criteria outlined in the company’s recalculation policy and pass the definition of a significant change, also referred to as the significance threshold. This threshold determines whether the identified change is substantial enough to materially affect emissions reporting and comparisons over time.
As outlined in the GHG Protocol and related guidelines, companies must transparently document their recalculation policy and apply it consistently, ensuring that only significant adjustments lead to recalculated emissions figures.