The built environment contributes to around a third of global greenhouse gas emissions1. If we are going to keep the global temperature increase to below 2°C, the built environment sector will need to play a significant role in transitioning to a low-carbon economy.
Why is the Built Environment sector getting on board?
In the UK, the Green Construction Board’s Low Carbon Route map for the Built Environment sets out the policies, actions and key decision points required to achieve the UK Government target, in accordance with the Climate Change Act 2008, of an 80% reduction in greenhouse gas emissions vs 1990 levels by 2050. The consensus shows a tough path lies ahead to meet this target. This includes reductions across operational carbon in buildings, operational carbon in infrastructure, and capital carbon associated with construction and construction products.
Increasingly, there is recognition amongst the sector, stakeholders and investors that companies will have to move on from an ad hoc approach to carbon reduction; no longer setting arbitrary targets over equally arbitrary time periods. While this has made in-roads, it is no longer enough and this is where Science Based Targets come in.
In recent years organisations, including Landsec, Derwent, Segro, Crown Estates, Unite Students, Royal BAM Group, ISG Group and Keller Group, have committed to set Science Based targets.
What Are the Challenges for Built Environment Organisations?
There are seven approved methods that an organisation can use to define its SBT; however, each method can cause a large differentiation of the final numbers. As a new and developing scheme, the Science Based Targets initiative (SBTi) experts are adapting their methods from experience, and are working with applicants and their advisors to support the process.
Choosing the Right SBT Method
Choosing to use market or local based methods when calculating Scope 2 emissions can greatly impact the target. The market approach reflects the emissions from the electricity a company is purchasing, and a local method quantifies emissions based on the emission factors for locations at local to national boundaries3. In the built environment sector, it is likely the local based approach will present higher current emissions and therefore more of a challenge, however, this approach will result in a target more resilient to energy market fluctuations than the market based approach, whilst also showing willing to take responsibility for the organization’s impact on the planet.
Another choice that will impact the overall target is whether to use absolute or intensity based method. The intensity based method enables year-on-year comparison of emissions, accounting for the changing property portfolios. Measuring the intensity against floor space, rather than revenue, can provide for fixed portfolios where the given market value per m2 can vary.
What are Science Based Targets?
In the Built Environment sector, there is often an on-going tension between who invests in energy efficiency technologies, who pays back and who reaps the benefits. The division of responsibility and reward between the owner and occupier is a contentious area. Energy efficiency, for the next decade or so, will remain the key area for reducing GHG emissions before grid decarbonization takes over. Many owners feel the need to ensure they do not price out tenants when investing in upgrades and to look at cost-effective solutions with a fast pay-back. This requires greater attention to understanding the needs of the potential tenants and choosing the most impactful energy-efficient measures4.
Setting Scope 3 SBTs
Scope 3 targets do not need to be ‘Science Based’ but do require a full Scope 3 assessment, and for the targets to meet certain criteria. Scope 3 covers emissions resulting from the development and customer use of buildings, relying on the owner/occupier relationship again. Organizations in the sector who have set SBTs have found it challenging to meet the scope 3 requirements, and have created additional scope 3 targets outside of SBTi criteria to reduce these emissions in alternative ways – for example by addressing embodied carbon.
Find out more about SCOPE 3
What Are the Opportunities?
Science Based Targets realise the actual levels of ambition required by organisations in the built environment, leading to much higher carbon reduction targets than many have set previously. The process of developing and ultimately committing to these targets, although daunting, can demonstrate sustainability leadership, enhance reputation, ensure compliance with existing policy.
1. Strengthen investor confidence and credibility
Investors in the built environment are demanding the demonstration of sustainability commitments, recognising SBTs as a priority area. Improving the energy efficiency of a building and using renewable energy decreases their long-term investment risk. Many key investment groups have signaled they see SBTs as a priority within the ESG area.
2. Reduce regulatory uncertainty
Leading players in the sector recognize that signing up to the SBTs agenda will help them stay ahead of future policies and regulations to limit carbon emissions.
3. Gain Board-level buy-in
The high profile of SBTs amongst senior business leaders and the investor community can provide a platform for Sustainability managers to get their carbon reduction aims onto the Board room table.
4. Bridge the CapEx vs OpEx divide
Developing and achieving SBTs requires broad thinking that bridges the traditional divide between Capital Expenditure and Operational Expenditure, especially for those whose portfolio includes development and operation of built assets.
5. Re-set the horizon for investment decisions
The timescales for SBTs mean that the frame of reference for considering carbon impacts of projects is extended. This lends itself to considering the whole-life costs of buildings, but also incorporating carbon impacts earlier in the decision-making process for new projects.
6. Increase innovation
The transition to a low-carbon business will drive the development of new technologies and operational practices in the built environment.
In addition, some are seeking to go beyond the stretching SBTs, such as via the World Business Council’s Net Zero project – watch their informative video here. This campaign seeks to establish 100% net zero carbon buildings by 2050.
Whatever way your organization contributes to meeting global GHG reduction targets – by setting SBTs or going beyond – we can help you clarify your ambitions and make realistic projections
Find out more
If you would like to explore the implications of SBTs for your organisation, contact Richard Peagam or Susan Harris via the form below. Our team can help you model scenarios to see what reductions would be required and the costs of such interventions.