Buying or selling a company: How to integrate it into the Carbon Footprint?

Buying or selling a company: How to integrate it into the Carbon Footprint?

Buying or selling a company: How to implement it in your Carbon Footprint? We give you the answer here!

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The growth of a company, whatever its form, is a sign that it is doing well (economically anyway). A company with green KPIs can structure its development in different ways, one of them being the acquisition of other companies.

However, the acquisition of a company means that the scope of carbon-emitting activities expands. In this case, many questions arise: How to integrate it into the Carbon Footprint? How to communicate? What about the efforts already made and the actions implemented? We answer all your questions in this article!

Defining the scope of a company's activities: a strategic interest.

What is a company's scope of activity?

The scope of activity for a company represents all the different activities it carries out. This perimeter encompasses a variety of activities, which in turn encompass trades, in other words skills and know-how that enable the company to be competitive in the sectors in which it is present.

Depending on the evolution of the company's strategy and health, the company may be faced with two choices:

  • Refocusing: reducing its activities and refocusing them on the company's core business.
  • Diversification: extending the scope of activity, to consolidate its position in a sector, to face competition, to improve its control of the value chain, etc.
Evolution of the company's scope of activity - Source

Defining the scope of its activities is therefore of strategic importance for companies. It provides a precise overview of the company's presence in a market and enables it to make the right decisions on how to develop it.

The evolution of the company's scope therefore influences its activities, and consequently its carbon emissions. In the case of a refocusing, the manipulation is quite simple: the company reduces its scope of activity, and its emissions by extension. But in the case of a takeover, how can it extend its perimeter without erasing the efforts made, while keeping a rigorous and precise measurement? These are the questions we will try to answer here!

What is the impact of a buy-back on the Carbon Footprint?

First of all, it is important to give some background. The objective of this article is to discuss the integration of a company buy-out into the Carbon Footprint. This implies, first of all, that the purchasing company knows what a Carbon Footprint is (which we explain here!), but also that it has already carried out one. Indeed, the complexity of the approach lies in the integration of an existing assessment.

For companies wishing to calculate their Carbon Footprint after a takeover, in order to reduce the environmental footprint of their activities in a more global way, the subject is the same: it is necessary to be rigorous, pragmatic, and well equipped (with a SaaS like Traace, for example).

Let us return to the case in point. A company that has already carried out its Carbon Footprint has most probably also established a reduction trajectory, or at least has already defined the reduction actions to be implemented in order to play on the main action levers. If this company acquires another company during the course of the year, this means that its carbon emissions are increasing and that it must therefore address several points relating to the structure of its Carbon Footprint.

Expansion of its perimeter

Firstly, the main subject is obviously the evolution of the activities that must be taken into account in the Carbon Footprint. The acquisition of a company implies the acquisition of its economic activities (production, services), but also the integration of its fixed assets or its employees. It is therefore a set of elements, beyond the simple economic dimension, that will be added to the existing ones and will imply a review of the indicators taken into account for the Bilan Carbone and their importance.

Evolution of actions and reduction levers

As we mentioned earlier, a new perimeter means that the data to be taken into account in the Carbon Footprint will change. This also means that the levers of action, or the actions themselves, may change.

For example, a company with 100 employees that acquires a company with 200 employees will most likely see the subject of emissions linked to employee travel, and mobility in general, take on a more important role in discussions on the carbon footprint. In this case, a mobility plan, which may not have been a priority before the takeover, may become an important lever for action.

Beyond this example, we can also talk about the actions already implemented. Reduction actions defined for an initial perimeter will not necessarily have the same incidence and impact on the new perimeter. It is therefore important to decide, at the time of the takeover, on the durability and follow-up of the actions implemented, depending on their relevance.

Evolution of the trajectory

Finally, having discussed the two previous points, it is necessary to address the evolution of the company's overall carbon footprint reduction trajectory. The evolution of the scope, the data to be taken into account 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 the previously defined targets must be reviewed in order to maintain consistency despite the extension of the scope. In addition, the company's time horizon for achieving its targets may become unachievable.

For example, a company has to integrate the acquisition of another company that is not very mature in terms of carbon issues and that pollutes a lot. In this case, the entire environmental policy has to be built, from the trajectory to the reduction actions, including the provision of human, financial and material resources. The time spent building this policy affects the time the company originally set itself, and this implies changing the trajectory and the timeframe defined to achieve its objectives.

How to integrate a new scope into the Balance Sheet?

The decision has been taken to include this newly acquired company in the Carbon Footprint. There are therefore two situations, more or less restrictive.

Simple" case

The first situation that a company may face is when the acquired company already has carbon data, does its balance sheet regularly, etc. Once this company has a structured database, it is sufficient to integrate this information into the balance sheet already produced by the company, with the only constraint being to harmonise the methodology. As soon as this company has a structured database, it is sufficient to integrate this information into the balance sheet already produced by the company, with the only constraint being to harmonise the methodology. The "calculation" part is therefore relatively simple, and decision-makers can concentrate on the evolution of actions and the trajectory.

Complex" case

In this second situation, the acquired company does not have any structured carbon data, or at least one that does not allow the carbon footprint of all its activities to be visualised. Unfortunately, there is no miracle solution.

It is necessary to recalculate the entire scope, given the impact of the buyout on the activities of the acquiring company, to define a new reference year. From a methodological point of view, this is the only option available to maintain rigorous measurement and limit errors. This is also the recommendation made for the calculation of 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 have seen, the integration of a new entity modifies the structure of the company and its carbon footprint. We have also discussed the impact of these changes on the trajectory and the measures implemented by the company. On this subject, many questions can be asked: what happens to the actions already in place? What if the sum of my new balance sheet totally erases the efforts of the year? In reality, as with the whole carbon footprint calculation process, there is one key word: pragmatism.

Indeed, it is clear that buying a company is a long process, and calculating the Carbon Footprint can also be long (even if much less so with a SaaS, as we recall here. So, if we combine the two, it is likely that a company will not have the time, for year N, to recalculate its reduction trajectory, and to rebuild a complete action plan adapted to the new objectives.

In this case, it can decorrelate its analyses. By keeping its original scope, this company can continue to benefit from the results of actions already implemented. It also saves time in deciding on the trajectory to adopt with this new scope.

On the other hand, it has the carbon footprint of the activities of the newly acquired entity (either because it is available historically, or by calculating it), and can also act on it. This way of dealing with the situation has several advantages:

  • It is better tocarry out a rigorous and accurate analysis on two perimeters, with a view to merging them in the next financial year, than an inaccurate, approximate analysis on year N.
  • Preserve actions already in place: Buying a company shows a strategic will, but this decision does not call into question the actions already in place, the results of which must be shared.
  • Save time: Postponing the merger of the boundaries allows decision-makers to make considered decisions about the future trajectory, rather than rushing to make decisions about calculations that may also be rushed.

Communicate on the carbon footprint of the operation

The other major dimension of the carbon footprint calculation is the possibility, for companies that make the effort, to promote their actions and their desire to reduce their impact on the environment. For this, communication (well done, not greenwashing) is a strong element in the environmental policy of most organisations.

Of course, this communication only makes sense if it is based on rigorously calculated figures and clear and achievable objectives. On this point, it is necessary for companies to adapt their discourse in the event of the acquisition of other entities and the evolution of the objectives given.

Depending on the stakeholder (financial stakeholder, business partner, customer, etc.), it is also possible to communicate on the actions underway and their results in different forms, as well as on the reduction of the carbon footprint of the "historical" perimeter. This allows the company to promote its efforts, in a context where the environmental dimension is becoming a strategic issue for companies. However, it is imperative to remain transparent about future developments. A company cannot hide its acquisition indefinitely, and its commitment to environmental performance also requires a rapid decision on how to develop its ambitions.

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