Choosing a Base Year and Knowing When to Recalculate It

A corporate carbon footprint is rarely read as a single number. Management, investors and the registration body want to know whether emissions are going up or down, and that question only has an answer if there is a fixed reference point. The TGO Requirements for Calculating and Reporting the Carbon Footprint of an Organization (2022) call that reference point the base year. This article collects the rules on it from sections 3, 6, 7 and 9 for an organization setting a base year for the first time, or wondering whether last year's figure still counts.

#What the base year is

The requirements define the base year as a period fixed for the purpose of comparing emissions and removals, which may be a single year or an average of several years of data (TGO CFO Requirements, 2022, p.12). The five calculation steps in section 6.1 end with establishing the base-year inventory, after the sources have been identified, the method chosen, the factors selected and the emissions calculated (TGO CFO Requirements, 2022, p.21).

#Why an organization must set one

Section 6.6.1 gives three reasons for a base year: to compare emissions and removals over time, to meet the rules of the registration and certification body, or to serve other purposes for which the inventory is used. The period can be defined specifically, for example one year or a part of a year for seasonal operations, or as an average of several periods such as several years. If there is not enough historical information, the first year in which emissions and removals are calculated may be used as the base year (TGO CFO Requirements, 2022, p.24). For an organization doing its first inventory, that last sentence is the practical answer: year one is the base year.

#Four conditions when setting it

When setting the base year the organization must do four things: quantify base-year emissions and removals with data representative of the current reporting boundary, normally a single year, a multi-year average or an average of recent years; choose a base year whose emission and removal data can be verified; explain the details of the selection; and develop the base-year inventory in line with the requirements of the document (TGO CFO Requirements, 2022, p.24). The second condition is the one that catches organizations out. A year for which invoices, meter readings or fuel records are missing cannot be the base year, because a verifier cannot check it.

The organization may change its base year, but it must explain the reason for any change that is made (TGO CFO Requirements, 2022, p.24).

#Agriculture: use a multi-year average

The agriculture and forestry guidance in Appendix 16 recommends setting the base year as an average of GHG fluxes over several years, at least three, because a single year represents farm emissions poorly. It also states that recalculation is required if base-year activity data change or if a development affects the base data, such as a change of land holder or a change of calculation method (TGO CFO Requirements, 2022, p.93).

#When the base year must be recalculated

Section 6.6.2 requires the organization to develop, document and apply a procedure for reviewing and recalculating the base-year inventory so that it remains a valid representation. Recalculation is triggered by three kinds of change: a change in reporting structure or organizational boundary, such as a merger, an acquisition or a divestment; a change in calculation method or emission factors; or the discovery of an error, or of cumulative errors, that together are significant (TGO CFO Requirements, 2022, p.24).

The factor rule is repeated in the section on selecting emission factors: if a factor is changed from the one previously used, the organization must explain the change and recalculate the base-year inventory (TGO CFO Requirements, 2022, p.23). A factor update published by TGO, or a switch from a default factor to a supplier-specific one, therefore reaches back to the base year; otherwise the two years are no longer comparable.

#When recalculation is not required

The organization does not need to recalculate the base year for changes in the production of its business units or for the opening or closing of facilities. It must, however, put any recalculated base-year inventory in writing (TGO CFO Requirements, 2022, p.24). Growth and new plants are exactly what the base year is meant to reveal; an acquisition or an error would distort the comparison if left uncorrected.

#The base year inside a reduction target

A base year also anchors targets. If the organization reports a reduction target, section 7.3 requires it to state the timeframe, meaning the target's reference year and the year in which the target is fully achieved; the type of target, intensity per unit or absolute; the emission categories covered by the target; and the quantity of reduction and the unit used to assess it (TGO CFO Requirements, 2022, p.26). A target expressed as a percentage below a base year that has since been recalculated needs to say which version of the base year it refers to.

#What the GHG report must say

The reporting rules make the base year visible to readers. The required content of a GHG report includes the selection of the base year and the base-year inventory, and an explanation of any change made to the base-year calculation or to historical GHG data, including any regrouping or recalculation and the documentation of limitations in comparing recalculated results. The report must also explain any change from the quantification approach used before (TGO CFO Requirements, 2022, p.31). The recommended content adds emissions and removals from previous reporting periods and an explanation of the differences between the current and the previous inventory (TGO CFO Requirements, 2022, p.32).

Appendix 15, the suggested report structure, gives the base year its own item 2.4: the data collection period, the details and explanation of how the base year for comparison was derived, and an explanation of any change to the data period or the base year that differs from the previous report (TGO CFO Requirements, 2022, p.87).

#A practical checklist

• The reason the base year was chosen, and the evidence that its data can be verified.
• The documented procedure for reviewing and recalculating the base year.
• A log of boundary changes, method and factor changes and errors found, each marked as triggering a recalculation or not, with the reason.
• Every version of the base-year inventory, dated, with the reason for each recalculation.
• The reference year and target year of each reduction target, and which version of the base year they point to.

None of this is extra work invented by the standard. It is the paper trail a verifier will ask for when the trend line on the first page of the report is questioned.

#How CarbonBiz supports this

In the App, a goal holds the baseline year and value and the target year and value, with server-side validation, and progress is calculated from recorded activities. Emission factors keep a version history with an effective date and a reason, and a recalculate action re-runs every activity that references an updated factor, which is the mechanism the recalculation rule needs. Edits and deletions to activities are written to the audit log with before and after values, so the trail of changes that the report has to explain is already recorded. The base-year account itself is produced in the Fr-04.2 form alongside the other TGO forms.