Setting meaningful sustainability goals starts with understanding your emissions. But before you can track progress through carbon accounting, you need a reference point, this is where a baseline year comes in. In this article, we’ll break down what a baseline year is, why it matters and how to choose the right one for your business.
What is a baseline year?
Why is a baseline year important?
Establishing a clear starting point
Without a baseline, tracking progress is nearly impossible. A well-chosen baseline year provides a consistent reference to evaluate how emissions evolve over time.
This helps businesses separate real progress from fluctuations caused by seasonal changes or external factors. Without a reference point, it’s difficult to determine whether emissions are actually decreasing due to sustainability efforts or simply varying year to year. You can think of it like setting a starting line in a race – you need that clear point to track how far you’ve come.
Setting realistic and measurable targets
Businesses usually set their emissions reduction goals as a percentage decrease from their baseline year. Whether it's working toward net zero or cutting emissions by 20% over five years, having a baseline gives you a clear starting point to measure progress and stay on track.
A well-defined baseline also helps businesses communicate their targets effectively. When stakeholders see clear percentage reductions based on a credible reference year, it builds trust and demonstrates a commitment to sustainability.
This transparent approach helps businesses stay accountable and also shows that their goals are not just aspirational but achievable. Moreover, setting a baseline gives your company clarity on how much you’ve already achieved and how much further you need to go. This is especially useful when negotiating with external stakeholders or coordinating efforts across teams.
Plan A helps businesses set science-based reduction targets by providing accurate emissions data, identifying hotspots, and modelling future scenarios. Companies can define SBTi-aligned goals, prioritise high-impact actions, and track progress through one central platform. This ensures targets are credible, achievable, and integrated into core strategy.
Ensuring transparency and accountability
Stakeholders, including investors, customers and regulators expect businesses to report their sustainability progress accurately. A clearly defined baseline year enhances credibility and allows for transparent communication about emissions reductions.
Companies that publicly report on their sustainability efforts, whether through annual reports, investor updates, or voluntary disclosures, depend on a well-defined baseline year to offer credible insights. This ensures that sustainability claims are backed by verifiable data, allowing for accurate tracking and meaningful comparisons over time. While it’s true that transparency is vital for maintaining trust, it also helps you to meet regulatory standards.
How to choose the right baseline year
Selecting the right baseline year is a strategic decision that depends on a multitude of factors. Keep each of the following in mind when trying to choose one for your business.
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Availability and accuracy of data
The chosen baseline year should be one that your business has reliable and comprehensive emissions data for. If the data you have is incomplete or inconsistent, it could lead to inaccurate comparisons in future reporting.
If past emissions data is missing, a different year with more complete records would be a better choice. In cases where an ideal year isn’t available, businesses can also use third-party datasets or industry benchmarks to estimate the missing emissions data.
However, since estimates can be a bit uncertain, it’s always best to go with a year that has the most reliable data. Having accurate data isn’t just important for internal tracking but also for external audits or regulatory checks.
Business and industry context
Think about both internal and external factors when picking a baseline year. If your industry went through major disruptions, like economic downturns, new regulations, or global events, the emissions from those years might not reflect how your business typically operates.
For example, if your business had to pause operations in 2020 due to the pandemic, using that year as a baseline might not be helpful because emissions were unusually low. Instead, picking a year before or after the disruption would better reflect how your business typically operates.
It’s also important to consider broader industry trends. If an industry-wide standard has changed or new government policies have been introduced, this might also impact the relevance of a given year.
The summary: Choosing a baseline year
When picking a baseline year, businesses should consider three things:
- Data availability – Do you have enough accurate records for that year?
- Consistency – Will this year provide a stable reference point for long-term tracking?
- Relevance – Does this year reflect your typical operations, or was it an outlier?
Companies that operate across multiple locations might need to ensure their baseline year accounts for all facilities and business units.
Adjusting a baseline year
In some cases, businesses may need to adjust their baseline year due to changes in operations, acquisitions, or changes in reporting requirements.
When should you adjust a baseline year?
Adjustments may be necessary if:
- Your company undergoes a significant structural change, like a merger or acquisition.
- There are substantial updates to the way you calculate your emissions.
- A previous year was selected without complete data and more accurate data is now available.
How do you adjust a baseline year?
If you find that you need to adjust your company’s baseline year, ensure that you:
- Clearly document the reason for the change for transparency.
- Recalculate past emissions using updated data to maintain consistency.
- Highlight these changes clearly in sustainability reports to maintain credibility.
It’s also important to communicate these adjustments to key stakeholders to avoid confusion and ensure alignment with reporting requirements.
Using a baseline year for carbon reduction goals
Once your business selects a baseline year, you can then use it as a foundation to drive long-term sustainability efforts. How does this work? Let’s break it down:
Tracking progress and identifying trends
Regularly comparing emissions data against the baseline year helps businesses spot trends, identify areas for improvement and adjust strategies accordingly.
Informing decision-making and sustainability strategies
A well-chosen baseline year allows businesses to make informed decisions on their carbon reduction initiatives. This can look like companies adopting more energy-efficient technology or switching to renewable energy sources.
Many businesses also use baseline year data to conduct scenario analysis, modelling different strategies to see how they will impact their emissions reductions over time.
Supporting regulatory compliance and reporting
Many regulatory frameworks require businesses to report their emissions reductions based on a baseline year. Choosing a suitable baseline ensures your business remains compliant with sustainability reporting requirements.
Tools and software to simplify baseline year calculations
Manually calculating emissions data can be time-consuming and complex, but the right tools can streamline the process.
Carbon accounting software
Carbon accounting platforms, like Plan A, take the hassle out of tracking emissions. They automatically gather data, highlight trends and compare your current numbers to your baseline year. They also provide real-time insights, allowing businesses to make adjustments before annual reporting deadlines. Such tools help businesses stay on top of their sustainability records in an easier, more accurate way.
Data collection and integration tools
Using automated data collection systems, such as smart meters or supplier reporting platforms, can improve the accuracy and reliability of emissions data, making baseline year comparisons more meaningful in the long run.
Common challenges when setting a baseline year
While establishing a baseline year is essential, businesses often face obstacles in the process.
Inconsistent or incomplete data
- Challenge: A common challenge is dealing with missing or inconsistent emissions data.
- Solution: Businesses can bridge this gap by using industry averages or estimates while working towards more precise data collection over time.
Changes in business operations
- Challenge: If your business significantly expands or pivots, the original baseline year may no longer reflect typical emissions.
- Solution: Keeping your baseline data up to date ensures it stays relevant as your business evolves.
Keeping up with evolving standards
- Challenge: Regulatory requirements and best practices in carbon accounting evolve over time.
- Solution: Staying informed about updates ensures that your baseline year and calculations remain aligned with the latest standards.
Choosing a baseline year is a key step in carbon accounting. It gives businesses a clear starting point for tracking emissions, setting reduction goals and measuring progress over time. By picking a reliable baseline year, using the right tools and staying flexible as things change, businesses can build an effective strategy to cut emissions. Not only does this help the environment, but it’s also a good business decision. Whether you're just starting out or fine-tuning your sustainability efforts, a well-chosen baseline year keeps you on the right track for long-term success.
Book a free call with Plan A’s experts to learn more about our best-in-class solutions and how they can help your business achieve its sustainability goals.
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