Re-baselining: Understanding the Requirements for Recalculating the Base Year of Your Greenhouse Gas Inventory

A company’s carbon footprint is only as meaningful as the comparability of its data over time. But what happens when key assumptions, structures, or data quality change? That is when “re-baselining”—or the recalculation of greenhouse gas emissions—comes into play.

This blog post examines when and why a reassessment of baseline emissions is necessary, what requirements the GHG Protocol, the Science-Based Targets Initiative (SBTi), and ESRS E1 set forth, and how companies should systematically address these requirements. Particular attention is given to German small and medium-sized enterprises.

Re-Baselining: Purpose and Scope

Re-baselining refers to the recalculation of emissions in the base year to establish a valid basis for comparison of progress in emissions reductions. The goal is to enable "like-for-like" comparisons and ensure that progress is not distorted by methodological or structural changes. It is important to distinguish between re-baselining and a restatement:

• Re-baselining = Recalculation of emissions in the base year (e.g., due to acquisitions or methodological adjustments)

• Restatement = Correction of prior years (e.g., reporting errors), usually without affecting the base year

Requirements set by the GHG Protocol, SBTi, and ESRS E1

The GHG Protocol requires companies to adjust their base year in the event of significant structural or methodological changes. These include, among other things, changes in the organizational or operational consolidation approach, methodological corrections, or new findings that result in a shift in emissions. The recommendation: Define a clear re-baselining policy with thresholds and a process description.

The Science-Based Targets Initiative (SBTi) translates this requirement into two key criteria:

• C32 – Mandatory Target Review: All established climate targets must be reviewed at least every five years to ensure they remain current and align with the latest SBTi criteria.
• C33 – Triggered Target Recalculation: A recalculation is required if, among other things, the following changes occur:
  • The consolidation threshold (organizational or operational)
  • Scope 3 emissions account for more than 40% of total emissions
  • There are significant changes resulting from acquisitions, divestitures, outsourcing, or changes in methodology
  • The difference between the old and new baselines is ≥ 5%

The ESRS E1 (European Sustainability Reporting Standard, Set 1) includes a similar requirement: Companies must regularly review their emissions data set and explicitly document any changes in organizational structure or methodology. Here, too, relevant changes to the GHG inventory trigger an obligation to recalculate the data to ensure comparability.

Choosing the Right Method for Re-Baselining

A key component of any re-baselining policy is the selection of the appropriate methodology for recalculation. In this regard, companies face two fundamental decisions:

1. Should you use a fixed or rolling base year?
   
   With a fixed base year, the reference year remains the same over time—structural changes such as acquisitions or divestitures then result in a retroactive adjustment of the original base year. This method is particularly common in the context of SBTi target tracking, as it enables consistent measurement over extended periods. With a rolling base year, on the other hand, the reference year is updated annually (e.g., always the previous year)—ideal for companies with dynamic structures or for short-term management.‍
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2. How should structural changes within a year be accounted for?
   
   Under the all-year approach, the entire affected year is recalculated as if the structural change had been in effect from the beginning of the year. This method is simpler to apply, as it requires only a single round of re-baselining. The pro-rata approach, on the other hand, accounts only for the pro-rata effect of the change (e.g., inclusion of an acquired business unit starting in June). While the latter is mathematically precise, it often leads to a double adjustment—first in the year of the change, then again in the following year.
   

For most companies, the fixed base year combined with the all-year approach is recommended for reasons of practicality and data availability, as this combination facilitates comparability across time periods and avoids unnecessary complexity.

Common challenges and how to handle them

Small and medium-sized enterprises are facing increasing pressure to transparently disclose their emissions data—driven, among other things, by the CSRD, the Supply Chain Act, and ESG rating requirements. At the same time, they often lack the internal capacity, ESG expertise, or structured management systems needed to do so.

• Organizational changes resulting from generational transitions, company sales, or strategic realignments (e.g., the acquisition of new business areas)
• Changes in operational control, such as through outsourcing, new partnerships, or restructuring
• A shift in methodology from cost-based to activity-based costing, or new data availability
• The growing importance of Scope 3 emissions, particularly in complex supply chains
• Lack of internal re-baselining processes and uncertainty regarding trigger points

To avoid errors and meet the requirements for adjusting your carbon footprints, you need practical guidelines and proactive GHG data management. Accordingly, companies should view re-baselining not as a reactive compliance exercise, but as a strategic management tool. The recommended process consists of the following four steps:

1. Development of a re-baselining policy
   • Definition of triggers (e.g., structural change >5%)
   • Choice of methodology (fixed vs. rolling base year, full-year vs. pro-rata)
   • Define responsibilities, approval processes, and deadlines
2. Monitoring and regular review
   • Integration into the existing ESG framework or internal control system (ICS)
   • Regular review (every 2–5 years) through internal or external audits
3. Perform the re-baselining process
   • Analysis of the Change and Its Impact on the GHG Footprint
   • Recalculation of baseline emissions and, if necessary, adjustment of climate targets
   • Ensure documentation and, if necessary, external validation
4. Transparent communication
   • A clear statement in the sustainability report or the management report
   • Presentation of causes, effects, and comparability with the previous year’s results

Case Study: Linde: Linde applies a comprehensive re-baselining policy with a fixed threshold of 5%. Relevant structural or methodological changes—such as those resulting from acquisitions or improved emission factors—lead to a recalculation of the base year. The adjustment is made annually following an internal analysis and is disclosed in the sustainability report.

Conclusion: Re-baselining is a critical component of climate governance

Re-baselining is not an end in itself, but rather a fundamental component for validating climate progress and maintaining credibility with stakeholders and auditors. Mid-sized companies, in particular, should strategically incorporate re-baselining into their planning, adapt their internal processes, and take into account regulatory developments such as the requirements of the GHG Protocol, the SBTi, and ESRS E1.