4a. Base Year and Base Year Emissions
Recalculation
“A meaningful and consistent comparison of emissions over time requires that companies set a performance datum with which to compare current emissions. This performance datum is referred to as the base year emissions” (World Resources Institute, 2004).
A base period (year) is the first in a set of periods. This period is normally set to an arbitrary level of 0 or 100. Any period or year can be stated as an inventory base year, the only requirement is that this is reflective of business-as-usual. Operational boundaries identify and categorize direct and indirect emissions at each operational level for organizational entities included in the emissions inventory.
Comparative analysis of any dataset is effective when consistently evaluated against a standard, benchmark or a yardstick that doesn’t change frequently. Data, in this case GHG emissions, can display trends and performance, negative or positive, when compared against the above-mentioned standard. In GHG emissions management and reporting, this is referenced as base year GHG emissions. Once GHG emissions are stated for a base year, comparisons of future (or past) performance can be measured and reported against base year emissions.
Organizations evolve over time and undergo certain structural changes in the course of doing business. The selected base year may no longer reflect the organizations’ true emissions profile. These changes may require adjustments to be made to the base year emissions to reflect structural changes to the organization such as:
- mergers
- acquisitions or
- divestments
These changes are then reflected in any comparative analysis undertaken against the stated base year.
Why do organizations track GHG emissions over time? It is usually in response to identified organizational goals such as:
- regulatory or public reporting as part of a strategy for communicating corporate/organizational sustainability,
- better manage sustainability risks and opportunities,
- defining and measuring against GHG emissions performance targets and goals, or
- a straightforward goal such as being a good “Corporate Citizen” by addressing the needs of investors and stakeholders.
Choosing a Base Year
To be consistent with the Kyoto Protocol, some organizations have chosen 1990 as their base year. Most GHG emissions trading and registry programs use a fixed base year model. Companies may also use an average of annual GHG emissions over a period of consecutive years as a benchmark to compare future GHG emissions performance. This alternative is useful to get a best possible GHG emissions profile for an organization that has experienced unusual fluctuations in its GHG emissions. A rolling base year allows a company that undergoes frequent structural changes to move or roll its base year forward by a year or a number of years at regular intervals.
After a company sets a base year benchmark, they must specify reasons why they have chosen that year.
What Triggers a Recalculation of Base Year Emissions?
Recalculating/Adjusting Base Year Emissions
Every organization has a threshold defined for when specific actions are required to be undertaken. For example: In the corporate world, when the share price of a publicly traded company falls by 20% they may have to stop trading their shares. The threshold in this instance is a drop of 20% in the company’s share price.
Similarly, when considering GHG emissions inventories for organizations, if an organizational event has the potential to affect the emissions inventory by greater than a threshold percentage, then this would initiate an action such as a need to recalculate the base year in consideration of this event.
As part of an overall risk management strategy, organizations will develop a policy on when base year recalculation is required. This will reflect the “threshold value”, or event that will require GHG emissions inventory recalculation.
Identifying Triggers for Recalculation of Base Year Emissions
Recalculation of GHG emissions for a base year occurs when an organization acquires either a new entity or capability that changes the organizational boundaries.
When the methodology used to calculate GHG emissions is changed, for example when a change in GHG emissions factors has a collective change in the organization's base year GHG emissions, recalculation is required.
Other instances when a base year recalculation is required could be human error causing a number of calculation errors or using incorrect GHG emissions factors causing significant anomalies or errors in the base year GHG emissions inventory.
Key points to remember:
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When significant structural changes occur in the middle of the year, the entire year's base year emissions should be recalculated.
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Recalculations will also be necessary if there is a change in calculation methodology or if more accurate data becomes available and this change is significant.
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Base year emissions are not recalculated in the case of an acquisition or insourcing of operations that did not exist in the base year.
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Base year emissions are not recalculated in the case of divestment or outsourcing of operations that did not exist in the base year.
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Base year emissions are not recalculated for outsourcing or insourcing if it is reported under Scope 2 and/or Scope 3. However, when significant emissions shift between Scope 1 and 3 and Scope 3 is not reported, base year emissions will have to be recalculated. If a company tracks and reports Scope 2 and 3 and uses different base years for each scope, outsourcing and insourcing will trigger base year recalculation.
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Base year emissions are not recalculated for organic growth or decline.
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Significant errors or cumulative errors with significant impact will trigger base year emissions recalculation.
Outsourcing and Insourcing
The following image explains how outsourcing of activities impacts base year emissions:
© University of Waterloo
Image Description
The following image explains how insourcing of activities impacts base year emissions:
© University of Waterloo
Image Description
Ungraded Quiz
Company A owns a fleet of trucks it uses to transport its products to various retail distribution locations. The emissions associated with fuel consumed by these vehicles are reported under Scope 1 emissions. In year 4 of its reporting cycle, the company decides to outsource the transportation of products to another company. The emissions from this activity amount to a little over 10% of Company A’s total yearly GHG emissions.
Scenario 1
Scenario 2
Scenario 3
Please return to the
Module 4 page to complete the remainder of the content.
References
World Resources Institute. (2004). The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard. Geneva, Switzerland: World Business Council for Sustainable Development.