How do I set baselines and when do I need to change my baseline year?
A “baseline” is a starting point or benchmark that a facility can use to compare changes over time and quantify any reduction efforts.
Baselines can be absolute or normalized. For example:
Absolute: The total amount of energy consumption for a period of time. (e.g., 1,500,000 kWh per year or purchased electricity in the reporting year)
Normalized: The amount of energy used while making a unit of product (for example, 0.15 kWh per pair of shoes produced).
It is recommended to use the ‘Normalized’ method to account for operational fluctuations.
Normalized baselines provide more accurate and useful comparisons over time.
If your factory has undergone major structural or operational changes such as acquisition or changes in product type, in general, you should establish or reset a baseline after those changes have been completed.
What do I need to know about data normalization?
Why? Your use of energy, water, or other manufacturing inputs can fluctuate due to various factors such as an increase or decline in business. To account for fluctuations we recommend dividing consumption data by a common parameter, such as production units. This provides for better year-over-year comparison of data and therefore more useful, and actionable analytics.What? Normalization removes variation in the data set. Consumption of energy for example is typically tracked in the unit kWh (Kilowatt-hour). However, for data normalization, a standard parameter, such as square meters of material or unit of production, is used to divide the absolute value of energy kWh.
How? Calculate using data captured from an absolute scale (for example, kWh for electricity) and dividing it by a common and constant (standard) parameter such as units of production, number of employees, or revenue. Repeat for all data sets.
In the Higg Index: if you select a normalized baseline, target, or reduction in the Higg Index, it will be normalized against the production units entered into the Site Information section for annual production. For example, if you selected annual production in “meters”, your normalized baseline will be normalized against meters.
Example: The electricity meter on production line A reads: 1,000 kWh it produced 100 pairs in one hour. The normalized energy usage is 10 kWh/pair [1000kWh/100pairs= 10 kWh/pair]. The meter on production line B reads 1,225 kWh it produced 140 pairs in one hour. The normalized energy usage is 1225/140= 8.75kWh/pair. Therefore, when comparing production lines A and B, production line B used more energy in an hour, however, when looking at the normalized data you can conclude that production line B was 12.5% more energy efficient.
What is a baseline?
To demonstrate improvements or reductions in environmental impact, it’s important to know what your starting point is. A “baseline” is a starting point or benchmark that you can use to compare yourself against over time. For example, if your factory used 80 m3 of water per 10,000 fabric meters in 2016, you will be able to compare your performance against this amount in years to come. In this example, “80 m3 of water per 10,000 fabric meters in 2016” is an example of a normalized baseline.
Data validation is a critical first step. The data needs to be stable and reliable before setting the baseline.
What is required:
- Using stable data: if your factory has undergone major structural changes such as acquisition or changes in product type, you should select a baseline after those changes have been completed.
- Normalization: if you select a normalized baseline, it will be normalized against the production units entered into the Site Information section for annual production. For example, if you selected annual production in “meters”, your baseline will be normalized against meters.
Verified data: baseline data should be accurate and verifiable. Verified energy data from Higg FEM is an acceptable source of baseline data. Baseline data verified by the internal audit process is also acceptable. - The baseline year and the baseline performance level (e.g. annual energy use, emissions per unit, etc.), should remain unchanged if you plan to set targets for improving your performance.
Considering the new 5-year baseline requirement for the 2023 FEM, should we change/update the baseline every year?
It is recommended to reset your baseline every five years, so you can continue to monitor, and make improvements and new action plans that remain relevant to ongoing changes within your facility as well. It is not recommended to adjust your baseline as often as annually.
Can we use other units like "SMV" for target setting if we report our production volume in "pieces"?
Internal target setting can be done by the facility using SMV, but automated evaluation of the target improvement, and baseline and baseline improvement will be done against the mandatory unit of measure, which would be pcs or kg as per facility type, so facilities are encouraged to use the mandatory unit of measure in their target setting.
Why has the baseline now been limited to just five years?
Any performance based on a baseline of more than 5 years, does not contribute to the continuous improvement of the facility and in return the industry initiative to reduce environmental impact.
Would we have a problem if our SBTi targets are set as absolute while our Higg FEM targets are set as normalized?
No, this would not be a problem for FEM, but they should be re-aligned once back-calculated to either normalized or absolute.
Should the target year be more than 3 years forward from the reporting year?
The target year should be at least one year forward from the current reporting year.
Is normalization compulsory for establishing target baselines?
While it is recommended, facilities can choose to set baselines based on absolute or normalized values.
Can we use the evaluating year as the baseline?
It is not recommended to set your baseline year as the reporting year. We recommend selecting a baseline year 1 to 5 years prior.