In a buy-and-build, every add-on moves the baseline. Skip the recalculation and a group close to its trajectory shows a 15.8 per cent rise, or a disposal makes it look 20.0 per cent better.
When a portfolio company buys a business that already existed in its base year, add that business's base-year emissions to the base as if it had always been owned, then rescale the target with the same percentage cut. For an illustrative platform with 12,000 tCO2e in 2023, an add-on with 3,000 t of base-year emissions lifts the base to 15,000 t and the 2030 target from 8,472 to 10,590 t. Without the recalculation, a group within 160 t of its trajectory reports a 15.8 per cent increase.
Worked in full in The ESG Manager in Private Equity by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Buy-and-build is a common value creation plan in mid-market private equity, and every add-on breaks the comparison an emissions target depends on. The GHG Protocol's answer is base year recalculation: restate the past so that it covers the same perimeter as the present. The arithmetic is simple. The decisions around it, whether the change is significant and what to do when the target has no data for the base year, are where reports go wrong.
| Input | Value |
|---|---|
| Platform base year | 2023 |
| Platform base-year emissions | 12,000 |
| Target: linear cut per year, to 2030 | 4.2% |
| Platform emissions in 2025, organic | 11,000 |
| Add-on acquired on 1 January 2025: 2025 emissions | 2,900 |
| Add-on revenue, 2025 and 2023, millions | 58.0 / 60.0 |
| Significance threshold in the recalculation policy | 5% |
The original target is 4.2 per cent a year for 7 years, a 29.4 per cent cut to 8,472 t, built as in how to calculate an SBTi near-term target. The acquisition closes on the first day of the year to keep the timing simple. After a mid-year deal the base year is still restated for a full year of the acquired business, and if its data are not yet available the recalculation can be made the following year.
The add-on did not measure its 2023 emissions, which is normal for a business that size. Backcast them with an intensity: 2,900 t on 58.0 million of revenue is 50.0 t per million, and 2023 revenue of 60.0 million gives 3,000 t. Document the method; an auditor will ask.
Structural change = acquired base-year emissions ÷ base-year emissions = 3,000 ÷ 12,000 = 25.0%
Well above the 5 per cent threshold, so the base must be recalculated. The GHG Protocol leaves the threshold to the company's own recalculation policy; 5 per cent is a common choice, and the one used here. A new plant built after the base year would not count: it is growth, not a change of perimeter.
Recalculated base = 12,000 + 3,000 = 15,000
Recalculated 2030 target = 15,000 × (1 − 29.4%) = 10,590
The percentage ambition is unchanged; the tonnes move with the perimeter. In Excel, with the base in B2, the acquired base-year emissions in B3 and the cut in B4: =(B2+B3)*(1-B4).
| Comparison | Base | 2025 | Change | 2030 target |
|---|---|---|---|---|
| Not recalculated | 12,000 | 13,900 | +15.8% | 8,472 |
| Recalculated | 15,000 | 13,900 | -7.3% | 10,590 |
The platform on its own fell 8.3 per cent, against the 8.4 per cent its trajectory required after two years. The recalculated view tells the same story for the combined group: 13,900 t against a trajectory point of 13,740, 160 t behind, which is an honest picture. The unrecalculated view says emissions rose by 15.8 per cent, and it sets a 2030 target of 8,472 t that now requires a 39.1 per cent cut in five years, 1,086 t a year, instead of 23.8 per cent, 662 t a year. One of those plans is credible; the other gets abandoned.
| Change | Base-year emissions | Share of base | Recalculate? |
|---|---|---|---|
| One small add-on | 500 | 4.2% | No, alone |
| Three small add-ons: 500, 500, 200 | 1,200 | 10.0% | Yes, cumulatively |
| Divestment of a division | 1,500 | 12.5% | Yes, base falls to 10,500 |
The GHG Protocol asks companies to consider the cumulative effect of a series of minor changes, which is exactly how buy-and-build works: four or five small add-ons, none individually significant, together redefine the company. Keep a running total of structural changes since the last recalculation.
The disposal is the mirror image and the more tempting mistake. If the division emitted 1,400 t in 2025 and is sold, the remaining platform reports 9,600 t, an apparent 20.0 per cent fall against the 12,000 t base. Against the recalculated base of 10,500, with a target of 7,413, the real reduction is 8.6 per cent. Selling emissions is not reducing them, and buyers' diligence teams know how to redo this arithmetic.
At fund level the same logic applies to portfolio carbon metrics: an acquisition or exit changes the portfolio's perimeter. Reporting the like-for-like change alongside the headline figure avoids presenting a disposal as decarbonisation.
Recalculating the base but not the target, or the reverse. Both numbers must move together, or the percentage ambition silently changes. The second mistake is backcasting the add-on with its current emissions instead of its base-year activity: using 2,900 t rather than 3,000 t here understates the base, and every later year's reduction looks larger than it was. The scope 1 calculation behind each figure has to use the same emission factors in both years, or a methodology change is mixed into the structural one.
Add the acquired business's base-year emissions to the base, test the share against the threshold cumulatively, and rescale the target: here 15,000 and 10,590 t instead of 12,000 and 8,472. The ESG Manager in Private Equity covers the role, the craft and how to prove the value created across a holding period, and the free working documents and workbook for the book include a blank model for your own company.
For structural changes such as acquisitions, divestments and outsourcing, for changes in methodology and for significant errors, when their effect passes the significance threshold in the company's recalculation policy, commonly 5 per cent of the base. Organic growth and new sites that did not exist in the base year do not trigger it. In the illustrative case the add-on is 25.0 per cent of the base.
Estimate it and say so. A common method is to backcast with an intensity: current emissions per unit of revenue or output, times the base-year activity. The illustrative add-on emitted 2,900 t on 58.0 million of revenue in 2025, 50.0 t per million; at 60.0 million of 2023 revenue that gives 3,000 t for the base year.
Not individually if each is under the threshold, but the GHG Protocol asks companies to consider the cumulative effect of a series of small changes. Three illustrative add-ons of 500, 500 and 200 t are each under 5 per cent of a 12,000 t base, but together they are 1,200 t, 10.0 per cent, and should be recalculated.
This article is one calculation from The ESG Manager in Private Equity. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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