In today's rapidly evolving environmental reporting landscape, accurate data for tracking carbon emissions is more crucial than ever. For apparel and footwear brands aiming to track carbon emissions, set science-based targets (SBTi), and comply with regulatory standards like the CSRD, establishing a baseline year is necessary.
Many sustainability managers we work with are concerned that making changes in the way they measure emissions - such as implementing carbon management software, switching consultants, or employing improved methodologies such as switching from a spend-based to an activity-based calculation approach – might reveal a larger company footprint, requiring them to adjust their baseline. Brands often stress over the potential shift in emission factors and the impact this change might have on their previously communicated data. Even more often, the question arises: how will we explain this in our environmental report?
This article aims to guide apparel and footwear brands through the re-baselining process, essential for maintaining the relevance and accuracy of sustainability metrics as more accurate data becomes available. We will explore examples, including H&M’s approach, and provide insights on how to communicate uncertainties and changes in methodologies in environmental reports.
A baseline year is the starting point against which a company measures its greenhouse gas (GHG) reductions. It represents the company’s emissions in a chosen reference year. It could either be a fiscal or calendar year. By comparing future emissions to this baseline, companies can track whether they are reducing their footprint in line with SBTi requirements.
It is recommended to choose a baseline year as recent as possible (e.g., 2023 or 2024) to reflect accurate data and current operations. It is also recommended that the baseline year be no more than two years before the target submission date (cannot be earlier than 2015). Using older years (such as 2019) often relies on more generic emission factors, which can underestimate the footprint, weakening the credibility of your sustainabilty targets.
The Science-Based Targets initiative (SBTi) guides global efforts to combat climate change, aligning with the Paris Agreement’s goal of limiting global temperature rise to 1.5°C. In industries such as apparel and footwear – where greenhouse gas emissions are substantial – setting science-based targets (SBTs) enables companies to take proactive action. By aligning their operations with global climate goals, they not only reduce emissions but also contribute to a more sustainable future.
To begin this journey, companies must first understand where they stand. Carbon accounting – the process of tracking and measuring greenhouse gas (GHG) emissions – forms the basis for establishing an accurate baseline. This baseline represents a company’s starting point for emissions reduction and serves as the reference against which future progress is measured. Without reliable carbon accounting, it’s impossible to define meaningful reduction goals or implement effective mitigation strategies.
The SBTi recommends recalculating targets if there is a 5% or greater change in an organization's total base year emissions or in the emissions covered within a target boundary. This is a great example of how to ensure that the targets reflect the most accurate and current data, maintaining their scientific validity.
The idea of re-calculating your base year's carbon emissions introduces a set of uncertainties:
Discovery of Increased Emissions
Base year recalculation might expose previously underestimated emissions due to improved methodologies or more thorough data collection. Such findings can seem like a setback for brands that focus on reducing their environmental impact.
Adverse Impact on Targets
Updating the baseline can make it appear that a company is further away from its emission reduction targets. This can affect how stakeholders, including investors, perceive the brand's commitment and progress towards sustainability goals.
Reporting and Compliance Complications
Adjusting the baseline necessitates changes in emission reporting and can complicate compliance with environmental regulations. The process requires significant resources to manage additional documentation and explanations, which can be a burden.
Financial and Operational Implications
A new baseline might require more aggressive carbon reduction strategies, potentially leading to increased operational costs. These changes can impact a company’s financial strategy and its commitment to long-term sustainability initiatives.
Environmental metrics are inherently dynamic. As brands collect more primary data and their understanding of carbon footprints and environmental impacts deepens, the baseline should be adjusted to reflect the most current and accurate information. This ensures that targets remain scientifically valid and progress reports are transparent and reliable.
Failing to re-baseline carbon emissions when necessary can lead to significant consequences for brands, including regulatory non-compliance, which may result in legal penalties and fines. It can also jeopardize certifications with standards like the Science Based Targets initiative (SBTi), affecting credibility with investors, shareholders, and customers.
Therefore, each year, as new data and improved methods become available, brands should integrate these updates systematically. This approach, which we term "using the same lens to compare historical data," ensures that tracking and reporting are consistent and comparable over time. To provide a clear and accurate view of your environmental impact, brands maintain the integrity of historical data by applying updated methodologies retrospectively. This allows brands to present a true and fair view of progress and ensures that our targets remain aligned with the latest scientific insights.
The principle is straightforward: the most recent version is always the most accurate. Therefore, when communicating with investors and external stakeholders today, it's essential to relay the current version of data. While this may differ from the static nature of financial reports, it reflects the dynamic nature of environmental measurement.
Carbonfact's Changelog feature
Brands often worry about how to communicate changes in their carbon footprint within their environmental reports. Let’s take a look at a couple of sustainability report examples to see possible ways of communicating changing methodologies and footprints.
In its sustainability report, H&M details its calculation methods and data. It emphasizes maintaining historical integrity in its results, ensuring that changes in methodology do not compromise the accuracy and consistency of its data over time.
Each year, H&M updates its methodologies to incorporate the latest data and improved practices. These updates are reflected in its sustainability reports, allowing for accurate and reliable comparisons over time. By consistently applying the most current methodologies, H&M ensures that its environmental impact assessments are both precise and reflective of its ongoing efforts to reduce emissions.
Source: H&M Sustainability Disclosure 2023
Levi Strauss & Co.: Updating Scope 3 methodology
Levi’s revised its Scope 3 calculation methodology in 2024, transitioning from an IPCC AR5-based calculator to one aligned with the AR6 framework. This update incorporated the latest scientific data and climate models, offering a more representative view of emissions. The change was applied retrospectively to maintain comparability, and a formal re-baselining was not required.
Source: Levi Strauss & Co. Sustainability Update 2024
Together with Carbonfact, Everlane re-baselined its emissions inventory in 2024 to align with updated scientific standards and best practices. The company updated its emission factors, integrated more precise data inputs, and enhanced methodologies to better capture the full scope of its impact. This approach ensures consistent, transparent reporting and strengthens progress tracking toward its 2030 SBTs.
In its 2023 annual report, Zalando noted differences from its 2022 emissions data due to methodological changes in its GHG inventory accounting and improved data quality. The company regularly refines its emission factors and data collection processes to ensure its carbon reporting remains consistent and comparable year over year.
In a significant move towards more precise carbon management, Snickers Workwear, part of the Hultafors Group, began collaborating with Carbonfact at the end of 2023. Here is an example of how the brand communicates the upcoming changes in methodology and base year:
Source: Hultafors Group Sustainability Report 2023
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