The dairy acquisition: restating a science-based target while a carbon-neutral claim waits to be issued

Test for significance first. A science-based target framework requires base-year emissions and targets to be recalculated after a significant structural change such as an acquisition, with significance commonly assessed against a 5% threshold on the relevant emissions. Here:

• Scope 3 addition: 195,000 ÷ 1,420,000 = 13.7% of the Scope 3 base year.
• Scope 1 and 2 addition: 210,000 − 195,000 = 15,000 ÷ 96,000 = 15.6% of the Scope 1 and 2 base year.

Both are well above 5%, so recalculation is required, not discretionary. The group must also confirm that the acquired entity's Scope 3 categories fall inside the target boundary, which must cover at least two-thirds of total Scope 3 emissions.

Mechanics. Add the acquired business's 2021 emissions to the base year (where 2021 data genuinely does not exist, use the first full year of ownership and disclose the approach and the limitation), then re-baseline the targets. The Scope 3 base year becomes approximately 1.615m tCO2e, so a 30% cut requires 484,500 tCO2e of reduction rather than 426,000 - about 58,500 tCO2e of additional abatement to find before 2030. The 46% Scope 1 and 2 target must also be recalculated against 111,000 tCO2e.

Why it matters. Without recalculation the group can appear to deliver its target through boundary change while absolute emissions rise by 210,000 tCO2e a year. The reported “30% reduction” would then not represent the absolute contraction the target exists to achieve. It misleads investors, any lender or bondholder using the target, and any remuneration committee with a target-linked bonus. It would also fail on revalidation, and would be a known error once identified.

On the CEO's timing argument. Delaying a required restatement to avoid a bad-news story converts a technical recalculation into a disclosure decision. The restatement should be made in the year of acquisition and presented alongside the growth story - the group is larger and its target has been reset to remain equally ambitious. Deferring it and issuing a marketing claim in the meantime is the greater reputational risk.

What spend-based means. Spend-based (economic input-output) estimation multiplies supplier spend by a sector-average emissions factor. It is permitted under the GHG Protocol Corporate Value Chain Standard but is the lowest-quality tier. Crucially, the output moves with price, supplier mix and currency - not only with physical efficiency. A 10% rise in milk prices inflates reported Scope 3 with no change in emissions, and switching to a cheaper supplier can appear to cut emissions. Year-on-year “progress” built on that basis is not reliable evidence of decarbonisation.

Disclosure. The report should state: the proportion of each Scope 3 category calculated by each method (62% spend-based, and which categories); the standards and factors used, with their vintage; an indicative uncertainty range rather than spurious precision (do not present a figure to three significant figures); and a dated data-quality improvement plan with named owners. Under IFRS S2 the measurement approach and key inputs must be disclosed; under the UK climate-related financial disclosure regime, the methodology and assumptions.

Practical action. Rank suppliers by spend and estimated emissions, then prioritise the handful that dominate - typically milk, packaging and logistics - and convert them to primary activity data over a two- to three-year programme. Use a hybrid method in the interim and disclose clearly which categories are supplier-specific and which are estimated. Build the methodology, source-data lineage and supplier evidence so the figures are assurable; a spend-based number with no documented factors will not survive limited assurance.

Target progress. Present progress with the caveat that 62% of the metric is estimated, and supplement the percentage with absolute figures and physical indicators (litres of milk per kg of product, kWh per tonne) that are not distorted by price. If a material share of the reduction claimed comes from methodology change rather than real abatement, restate and say so.

The claim fails on four grounds.

1. The footprint is not known. 62% of Scope 3 is spend-based, so “100% of its footprint” offsets a number the group cannot substantiate to the precision the claim implies. A claim must be as reliable as its weakest input.
2. No reduction before offsetting. The claim is built entirely on purchased credits, with no abatement attached to the product range. Offsetting in place of reduction is the pattern regulators treat as misleading.
3. Credit quality. A single reforestation project carries additionality risk (would the trees have been planted anyway?), permanence risk (fire, drought, disease, later clearance), leakage and double-counting risk. Verification by a recognised standard is a minimum, not a guarantee; the project's baseline may itself be overstated.
4. Legal exposure. The CMA's Green Claims Code requires claims to be truthful, clear, complete and substantiated. The Digital Markets, Competition and Consumers Act 2024 gives the CMA direct enforcement powers with civil penalties of up to 10% of global turnover for misleading commercial practices. Separately, Directive (EU) 2024/825, applying from 27 September 2026, prohibits claims that a product has a neutral or positive carbon impact where that is based on offsetting - directly relevant to any EU sales channel.

Recommendation. Do not issue the release. Replace it with a substantiated claim: the product's estimated footprint with a range and a stated boundary; the reductions already achieved and the specific further reductions planned with dates; and, if credits are retained, a separate transparent statement of volume, standard, project, vintage and verification, explicitly not used to describe the product as neutral. Require finance and sustainability sign-off on every environmental claim and retain the evidence file. If the CEO insists on proceeding, the matter should go to the board or audit committee in writing, with the advice recorded, because the exposure is corporate, not merely reputational.