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Introduction
A company's growth, regardless of its form, is a sign that it is doing well (economically, at least). A company with green KPIs can structure its development in various ways, one of which is the acquisition of other companies.
However, acquiring a company means that the scope of carbon-emitting activities expands. In such a case, many questions arise: How to integrate it into the Carbon Footprint Assessment? How to communicate? What about efforts already made and actions implemented? We answer all your questions in this article!
Clearly defining a company's scope of activity: a strategic interest.
What is a company's scope of activity?
A company's scope of activity represents all the different activities it carries out. This scope encompasses a variety of activities, which themselves encompass skill sets, in other words, skills and know-how that enable the company to be competitive in the sectors where it operates.
Depending on the evolution of the company's strategy and health, it may face two choices:
- Refocusing: reducing its activities, and refocusing them around the company's core business.
- Diversification: expanding its scope of activity, to solidify its position in a sector, face competition, improve its mastery of the value chain…
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Clearly defining the scope of its activities is therefore of strategic importance for companies. This provides a precise overview of its market presence, and thus allows for making the right decisions on how to evolve it.
The evolution of a company's scope therefore impacts its activities, and consequently, its carbon emissions. In the context of refocusing, the process is quite simple: the company reduces its scope of activity, and its emissions by extension. But in the case of an acquisition, how can it expand its scope without erasing previous efforts, while maintaining rigorous and precise measurement? These are the questions we will try to answer here!
What is the impact of an acquisition on the carbon footprint assessment?
First, it's important to provide some context. The purpose of this article is to discuss the integration of a company acquisition into the carbon footprint assessment. This therefore implies, first, that the acquiring company knows what a carbon footprint assessment is (which we explain to you here !), but also that it already conducts one. Indeed, the complexity of the process lies in integrating it into an existing assessment.
For companies wishing to start calculating their carbon footprint after an acquisition, to more broadly reduce the environmental impact of their activities, the issue is the same: you need to be rigorous, pragmatic, and well-equipped (with a SaaS like Tennaxia ESG, for example).
Let's return to the scenario that interests us. A company that already conducts its carbon footprint assessment has very likely also established a reduction trajectory, or at least has already defined reduction actions to implement to leverage the main levers for action. If this company, during the current fiscal year, acquires another, it means its carbon emissions increase, and de facto that it must address several points related to the structure of its carbon footprint assessment.
Expansion of its scope
Initially, the main topic is obviously the evolution of activities that must be taken into account in the carbon footprint assessment. The acquisition of a company involves the acquisition of its economic activities (production, service), but also the integration of its assets or its employees. It is therefore a set of elements, beyond the simple economic dimension, that will be added to the existing framework and require a review of the indicators considered for the carbon footprint assessment and their importance.
Changes in reduction actions and levers
As we mentioned earlier, a new scope changes the data that will be taken into account in the carbon footprint assessment. This also means that the levers for action, or the actions themselves, may evolve.
For example, a company of 100 people that acquires one of 200 people will very likely see the issue of emissions related to employee travel, and mobility in general, take on greater importance in discussions about the carbon footprint. In this case, a mobility plan, which may not have been a priority before this acquisition, can become an important lever for action.
Beyond this example, we can also discuss actions already in place. Reduction actions defined within an initial scope will not necessarily have the same effect and impact on the new scope. It is therefore important to decide, at the time of acquisition, on the continuity and follow-up actions for those already implemented, based on their relevance.
Changes in the trajectory
Finally, after discussing the two previous points, it is necessary to address the evolution of the company's overall trajectory in terms of carbon footprint reduction. The evolution of the scope, the data to be considered, and the actions to be implemented necessarily imply redefining, or at least revising, the company's carbon trajectory.
On the one hand, the increase in total emissions means that the feasibility of previously defined objectives must be re-evaluated to maintain consistency despite the expanded scope. Furthermore, the timeframe the company has set to achieve its objectives may become unachievable.
For example, a company might need to integrate the acquisition of another company that is not very mature on carbon issues and is highly polluting. In such a case, the entire environmental policy needs to be built, from the trajectory and reduction actions to the provision of human, financial, and material resources. The time spent building this policy impacts the original timeframe the company had set, and this implies adjusting the trajectory and the defined timeframe to achieve its objectives.
How to integrate a new scope into the Carbon Assessment?
The decision has been made to integrate this newly acquired company into the Carbon Footprint. Therefore, two situations exist, which are more or less challenging.
"Simple" Scenario
The first situation a company might face is one where the acquired company already has carbon data, conducts its carbon assessment regularly, etc. As long as this company has a structured database, it is sufficient to integrate this information into the assessment already carried out by the acquiring company, with the only constraint being to harmonize the methodology. The "calculation" part is therefore relatively simple, and decision-makers can focus on the evolution of actions and the trajectory.
"Complex" Scenario
In this second situation, the acquired company does not have any structured carbon data, or at least none that allows for visualizing the carbon footprint of all its activities. Unfortunately, there's no magic solution.
It is necessary to recalculate the entire scope, given the impact of the acquisition on the acquiring company's activities, to define a new base year. Methodologically, this is the only viable option to maintain rigorous measurement and limit errors. This is also the recommendation for calculating Science Base Targets (SBT) : “Triggered target recalculation : Significant changes in company structure and activities, e.g. acquisitions, […]”.
Adapting Internally and Communicating with Stakeholders: How to Do It?
Adapting Your Strategy to the Context
As we've seen, integrating a new entity changes a company's structure and its Carbon Footprint. We also discussed the impact of these changes on the company's trajectory and the measures it has implemented. This raises many questions: what happens to actions already in place? What if the sum of my new assessment completely negates the year's efforts? In reality, and throughout the entire carbon footprint calculation process, there's one key principle: pragmatism.
Indeed, it's clear that acquiring a company is a long process, and calculating the Carbon Footprint can be too (though much less so with a SaaS, and we remind you here. So, if we combine the two, it's likely that a company won't have time, for fiscal year N, to recalculate its reduction trajectory and rebuild a complete action plan adapted to the new objectives.
In this case, it can separate its analyses. By maintaining its original scope, this company can continue to leverage the results of actions already implemented. This also allows it to save time in making decisions about the trajectory to adopt with this new scope.
On the other hand, it has the carbon footprint of the acquired entity's activities (either historically available or by calculating it), and can also act on it. This approach to the situation has several advantages:
- Avoid methodological shortcomings: it's better to have a rigorous and accurate analysis across two scopes, with a view to merging them in the next fiscal year, than an inaccurate, approximate analysis for fiscal year N.
- Preserve actions already in place: Acquiring a company demonstrates a strategic intent, but this decision does not invalidate actions already in place, whose results should be shareable.
- Save time: Postponing the merger of scopes allows decision-makers to make well-considered decisions about the future trajectory, rather than hasty decisions based on calculations that might also be hasty.
Communicate About the Operation's Carbon Footprint
The other major aspect of carbon footprint calculation is the opportunity, for companies that make the effort, to highlight their actions and their commitment to reducing their environmental impact. For this, communication (well-executed, not greenwashing), is a strong element in the environmental policy of most organizations.
Of course, this communication only makes sense if it is based on rigorously calculated figures and clear, achievable objectives. In this regard, companies must adapt their messaging if they acquire other entities or if their stated objectives evolve.
Depending on the audience (financial stakeholder, commercial partner, client, etc.), it is also entirely possible to communicate on ongoing actions and their results in various forms, as well as on the reduction of the carbon footprint within the "historical" scope. This allows the company to showcase its efforts, in a context where the environmental dimension is becoming a strategic issue for businesses. However, it is imperative to remain transparent about future developments. A company cannot indefinitely conceal the acquisition it has made, and its commitment to environmental performance also requires a rapid decision on how to evolve its ambitions.