Increasing market share should increase our carbon budget, no?

As the race to net zero accelerates, businesses face a hard truth: their carbon emissions must fall, even as they seek to grow. The Science Based Targets initiative (SBTi) carbon budget allocation method attributes specific budgets to each company based on their economic size in the base year, downscaling from industry-wide targets. But what happens when a company gains market share? Should it inherit some of its competitor’s carbon budget, or must it shrink emissions regardless?

In theory, if a company absorbs a rival’s operations, it could argue for a larger share of the sector’s carbon budget. SBTi’s sectoral decarbonization approach (SDA) distributes emissions allowances based on an industry’s projected output. If a company expands within the same sector, it does not increase overall demand for goods or services; it simply takes over from a less successful peer. From this perspective, it might seem logical to allocate emissions accordingly.

Yet the fundamental principle of SBTi is absolute reduction—a sector’s carbon budget may be distributed, but it cannot expand. If every growing company were to claim additional allowances, the net-zero goal would be undermined.

A correcting mechanism for this challenge is the base-year recalculation. If you have a legitimate claim that your market share has increased significantly (often a 5% threshold is used), then the firm may recalculating their base year emissions, and thus their target emission reduction also changes. However according to GHG Protocol standards and SBTi guidance, base year recalculations are only warranted in the following situations:

• Mergers, Acquisitions, or Divestitures

• Significant Structural Changes in Operations

• Methodological or Data Improvements

Recalculation is specifically excluded for organic growth, and also competitor exits. Therefore if a company gains market share because a competitor shuts down, this does not inherently change its structure.

So to increase your carbon budget, you would need to trigger a recalculation, which may lead you to make the decision to acquire a struggling competitor, in order to take 'ownership' of their base year emissions, so that your expanded firm's reduction pathway reflects your larger market share.

Recalculating base year emissions is not about reflecting growth—it’s about ensuring consistency in tracking emissions reductions over time. If an increase in market share involves acquisitions, structural shifts, or data improvements, a recalculation is justified. But if a firm grows simply by outperforming competitors, the base year remains unchanged, and absolute emissions reductions must still be achieved.