What is flexible entity set-up for sustainability reporting?
KEY ESG is an AI-first ESG and sustainability data platform that helps private equity fund managers, their portfolio companies and corporate businesses collect, manage and report sustainability data, with carbon accounting built into the platform.
In sustainability reporting, an entity is any unit for which data is collected, such as a legal entity, subsidiary, business unit, site or portfolio company. In KEY ESG, setting up a new entity takes around a minute and requires no technical expertise. The sustainability team can create entities themselves, assign data owners and metrics to each one, and give each entity any tag, such as factory, warehouse, office, shop, country or business unit. Tags allow the same data to be aggregated and disaggregated at different levels, from group totals down to an individual site.
This flexibility allows the entity structure to reflect how the business operates and to change when the business changes. The three examples below show why this is valuable for sustainability managers.
Example 1: Turn group-level disclosures into operationally relevant data
Sustainability reporting requirements, including the Corporate Sustainability Reporting Directive (CSRD), generally call for disclosure at group level. A group-level Scope 1 figure summarises total direct emissions but does not show where they arise or who is responsible for reducing them. To reduce Scope 1 emissions, a company needs to know which plant or business unit produces most of them and assign ownership of the reduction at that level.
A manufacturing group with operations in the UK, the Netherlands and Poland sets up each factory, warehouse and office as an entity and tags it by site type, country and business unit. Each site manager submits fuel, gas and refrigerant data for their own entity. The group can then report Scope 1 emissions:
- at group level for CSRD and investor reporting;
- by country or business unit, to show where emissions are concentrated;
- by site type, to compare factories against warehouses and offices;
- by individual site, with reduction targets assigned to the responsible site managers.
The value: one dataset meets external disclosure requirements and supports internal decisions, and responsibility for reductions sits with the managers who control the emission sources.
To see how this would work for your organisation, book a demo.
Example 2: Add an acquisition and update the boundary and base year
The GHG Protocol Corporate Standard requires companies to recalculate base year emissions after significant structural changes such as acquisitions. Each company sets its own significance threshold, commonly 5% of base year emissions.
When a portfolio company acquires a competitor in June, the sustainability manager:
- adds the acquired company and its sites as new entities, which takes a few minutes, and tags them in the same way as existing entities;
- includes the acquired business in the reporting boundary from the completion date;
- assigns data owners within the acquired business;
- uploads its historical activity data so KEY ESG can calculate emissions using the same methodology as the rest of the group.
If the change exceeds the threshold, the base year and intervening years are restated on a consistent basis, with the original figures retained for audit purposes. If the acquired business did not exist in the base year, no recalculation is required.
The value: a documented base year recalculation that supports assurance and keeps reduction targets meaningful.
Example 3: Keep year-on-year comparisons consistent through M&A
The European Sustainability Reporting Standards (ESRS) require comparative information for the previous reporting period, and investors expect to see whether performance is improving. Acquisitions make this harder to show.
A group reports a 15% increase in total emissions after two bolt-on acquisitions. By tagging each entity with its acquisition year or divestment status, the sustainability manager produces two views from the same data:
- Reported total: all entities within the current boundary.
- Like-for-like: only entities that were part of the group in both periods.
In this illustrative case, the like-for-like view shows a 5% reduction, which demonstrates that the increase results from the acquisitions and that the existing business has reduced its emissions. Divested businesses are handled in the same way, with their historical data retained so prior periods can be restated.
The value: year-on-year reporting that separates the effect of acquisitions from changes in performance.
Frequently asked questions
Can sustainability data be reported at both group and site level?
Yes. In KEY ESG, entities can be tagged by attributes such as site type, country or business unit, so the same data can be reported at group level, at any intermediate level or for an individual site.
How long does it take to set up an entity in KEY ESG?
Setting up a new entity takes around a minute and requires no technical expertise.
Does every acquisition require a base year recalculation?
No. Under the GHG Protocol, recalculation is required when a structural change exceeds the company’s significance threshold. Acquisitions of operations that did not exist in the base year do not require one.
How do you compare emissions year on year after an acquisition?
Report both the total for the current boundary and a like-for-like figure covering only entities present in both periods.
What is flexible entity set-up for sustainability reporting?
KEY ESG is an AI-first ESG and sustainability data platform that helps private equity fund managers, their portfolio companies and corporate businesses collect, manage and report sustainability data, with carbon accounting built into the platform.
In sustainability reporting, an entity is any unit for which data is collected, such as a legal entity, subsidiary, business unit, site or portfolio company. In KEY ESG, setting up a new entity takes around a minute and requires no technical expertise. The sustainability team can create entities themselves, assign data owners and metrics to each one, and give each entity any tag, such as factory, warehouse, office, shop, country or business unit. Tags allow the same data to be aggregated and disaggregated at different levels, from group totals down to an individual site.
This flexibility allows the entity structure to reflect how the business operates and to change when the business changes. The three examples below show why this is valuable for sustainability managers.
Example 1: Turn group-level disclosures into operationally relevant data
Sustainability reporting requirements, including the Corporate Sustainability Reporting Directive (CSRD), generally call for disclosure at group level. A group-level Scope 1 figure summarises total direct emissions but does not show where they arise or who is responsible for reducing them. To reduce Scope 1 emissions, a company needs to know which plant or business unit produces most of them and assign ownership of the reduction at that level.
A manufacturing group with operations in the UK, the Netherlands and Poland sets up each factory, warehouse and office as an entity and tags it by site type, country and business unit. Each site manager submits fuel, gas and refrigerant data for their own entity. The group can then report Scope 1 emissions:
- at group level for CSRD and investor reporting;
- by country or business unit, to show where emissions are concentrated;
- by site type, to compare factories against warehouses and offices;
- by individual site, with reduction targets assigned to the responsible site managers.
The value: one dataset meets external disclosure requirements and supports internal decisions, and responsibility for reductions sits with the managers who control the emission sources.
To see how this would work for your organisation, book a demo.
Example 2: Add an acquisition and update the boundary and base year
The GHG Protocol Corporate Standard requires companies to recalculate base year emissions after significant structural changes such as acquisitions. Each company sets its own significance threshold, commonly 5% of base year emissions.
When a portfolio company acquires a competitor in June, the sustainability manager:
- adds the acquired company and its sites as new entities, which takes a few minutes, and tags them in the same way as existing entities;
- includes the acquired business in the reporting boundary from the completion date;
- assigns data owners within the acquired business;
- uploads its historical activity data so KEY ESG can calculate emissions using the same methodology as the rest of the group.
If the change exceeds the threshold, the base year and intervening years are restated on a consistent basis, with the original figures retained for audit purposes. If the acquired business did not exist in the base year, no recalculation is required.
The value: a documented base year recalculation that supports assurance and keeps reduction targets meaningful.
Example 3: Keep year-on-year comparisons consistent through M&A
The European Sustainability Reporting Standards (ESRS) require comparative information for the previous reporting period, and investors expect to see whether performance is improving. Acquisitions make this harder to show.
A group reports a 15% increase in total emissions after two bolt-on acquisitions. By tagging each entity with its acquisition year or divestment status, the sustainability manager produces two views from the same data:
- Reported total: all entities within the current boundary.
- Like-for-like: only entities that were part of the group in both periods.
In this illustrative case, the like-for-like view shows a 5% reduction, which demonstrates that the increase results from the acquisitions and that the existing business has reduced its emissions. Divested businesses are handled in the same way, with their historical data retained so prior periods can be restated.
The value: year-on-year reporting that separates the effect of acquisitions from changes in performance.
Frequently asked questions
Can sustainability data be reported at both group and site level?
Yes. In KEY ESG, entities can be tagged by attributes such as site type, country or business unit, so the same data can be reported at group level, at any intermediate level or for an individual site.
How long does it take to set up an entity in KEY ESG?
Setting up a new entity takes around a minute and requires no technical expertise.
Does every acquisition require a base year recalculation?
No. Under the GHG Protocol, recalculation is required when a structural change exceeds the company’s significance threshold. Acquisitions of operations that did not exist in the base year do not require one.
How do you compare emissions year on year after an acquisition?
Report both the total for the current boundary and a like-for-like figure covering only entities present in both periods.
