Calculate the base year of the carbon footprint of the organisation (hereafter HCO) is a starting point for companies to develop a sound strategy to decarbonise their environmental footprint.
The term "base year" is defined as the reference year from which comparisons with subsequent years can be made. This year should be representative of the economic activities of the company. For example, the year 2020, due to the economic consequences of the Covid-19 pandemic, is not considered a representative "normal" year and, in most cases, cannot be selected as a base year.
When a company collects emissions data on an annual basis, it may decide to change the selected base year. Some of the reasons may be:
- Structural changes in the organisation (e.g. the incorporation of a new subsidiary into the group).
- Significant changes in inventory (such as the expansion of a factory together with the installation of new machinery including new consumption).
Another situation that may lead to a change in the base year is a recalculation of emissions due to a significant change in the calculation methodology.
For many companies, the base year calculation exercise is the first contact with the HCO calculation.
What is in it for companies to measure the base year of their emissions?
The main benefits are listed below:
- Emission DiagnosticsIt allows to obtain a detailed diagnosis of emissions and to identify the sources that contribute most to HCO.
- Objective setting: It facilitates the projection and creation of a concrete plan to reduce emissions by setting clear and achievable targets.
- Familiarisation with Environmental DataHelps the company to become familiar with the necessary environmental data and the procedures for its collection.
- Data Monitoring and EvaluationIt provides the possibility to assess the quality of available data and to address the collection of data that is not available.
- Regulatory PreparednessIt allows companies to anticipate and prepare for regulations, as many companies calculate their base year with a view to automating this process in the future.
- Corporate Responsibility and AwarenessPromotes corporate responsibility and awareness among employees, demonstrating management's commitment to sustainability.
What are the factors that put pressure on companies to measure their emissions?
- Sustainability disclosure standardsWith the new EU sustainability reporting directive (CSRD), reporting on climate change, including emissions, will be mandatory for companies. They will have to report their annual sustainability performance, complying with the standards. On the other hand, the amendment of Royal Decree 163/2014, will oblige large companies (+250 employees) to calculate their carbon footprint, establish a reduction plan and report this, in a standardised way.
- Risk managementClimate change: Rising temperatures and other extreme weather events pose increased risks to businesses (transitional and physical). For an organisation, the first step towards sustainability is to understand and mitigate its contribution to climate change as a climate risk management measure.
- Sustainability as a vector of business competitivenessThe ability to design, produce and market products and services with a reduced environmental footprint is becoming a competitive differentiating factor. Companies that have a better understanding and control of their environmental footprint are the best prepared to develop value propositions (products and services) based on sustainability.
How much effort does it take for companies to measure their Carbon Footprint?
- Scope 1 and 2: The effort to measure Scopes 1 and 2 is relatively low, as activity data are available in internal organisational records and emission factors are available in public databases.
- Scope 3 (value chain): Here the effort is considerably higher. Scope 3 involves collecting data from the entire value chain, which is a complex task. Many companies do not have this data because they rely on external actors or have never collected such information before.
Additional efforts
The base year HCO puts additional effort in terms of internal resources on companies. Companies need to assign additional tasks to employees, such as managing the inventory collection, maintaining communication with the external consultant, reporting data on inventory sheets and training in understanding the HCO study.
Tips to alleviate the efforts needed for the base year calculation
Here are some tips that can help companies reduce the workload arising from the base year HCO:
- Limit the scope of the study: Choosing to focus initially on the most relevant and measurable categories allows you to obtain useful initial results without overwhelming the organisation.
- Engage the support of an external consultant: Having the support of an external consultant can balance internal efforts.
- Previous training: Training employees in understanding and managing data can increase the efficiency and quality of inventory collection.
What are the steps to follow after calculating the base year?
Calculating a company's base year HCO is an important step, but only represents the initial phase. From here, companies must commit to monitoring their emissions and reducing them.
At Zirkel, we advise that, once the HCO of the base year has been calculated, companies take control and implement an environmental data management system in order to automate as much as possible the calculation of their annual emissions. This will allow companies to reach a level of independence and maturity in the management of their HCO.
At Zirkel, we also help to implement HCO management systems. We will talk about this in a new news item in the near future.
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