Challenges and Opportunities with Scope 3 in Commercial Real Estate

Sam Carson, Director of Sustainability Innovation at Carbon Credentials and co-author of UKGBC’s recent guide to scope 3 reporting in commercial real estate, discusses the challenges and opportunities of scope 3 within the sector.

Carbon Credentials have been working with UKGBC to develop industry-specific guidance on scope 3 in Commercial Real Estate (CRE). Our aim has been to work with industry partners to make clear how the Greenhouse Gas Protocol can be applied to CRE, to create more consistency and address some of the questions and challenges which underlie this part of our GHG accounting.

Through this work, we’ve engaged with landlords, consultants, and developers to better understand the challenges with scope 3 emissions in the value chain. It has become clear that consistency in the interpretation of the guidance is a big issue.

Challenges and inconsistencies in reporting

Scope 3 is considered an optional part of a greenhouse gas inventory, but the demand is rising for this information to be disclosed. One offshoot of the optional nature of scope 3 has been an element of cherry-picking, which means that assessments are not conducted within an appropriate interpretation of the guide.

This inconsistency in reporting is also an issue when other reporting frameworks which are aligned with the Greenhouse Gas Protocol, but not explicitly based on it, have conflicting requirements of scope 3 emissions. For example, GRESB reporting has tight definitions on what can be included in tenant emissions, and estimations are not allowed. The GHG Protocol, on the other hand, requires missing data to be estimated to achieve a complete picture. Each of these initiatives is aiming for different outcomes, and have a justifiable reason for this difference in rules, but that means that reporting to the GHG Protocol, the more loose of the frameworks, is inconsistent.

Embodied carbon is important, but not everything

Scope 3 includes embodied carbon, but that is not the only source of scope 3 emissions. There is a mystifying language around embodied carbon and life cycle emissions, and it is important that we make this important aspect of scope 3 accessible to reporting teams, and integrate embodied carbon into reporting and decision-making. Without a more integrated approach, this key area of climate risk will remain isolated from overall climate strategies.

Another major source of scope 3 emissions in CRE is tenant emissions. Like embodied carbon, this is a vital area of innovation as we learn ways of improving information exchange and collaboration to mitigate this area of climate risk in CRE portfolios.

The future of an aligned approach

Our work on science-based targets with six different CRE organisations, has taught us how scope 3 is treated within CRE, and how it can vary a great deal across organisations. This means engagement with the Science Based Targets initiative on CRE specific issues is hard because there isn’t a common approach.

How we innovate and collaborate across the industry will also require common approaches to scope 3 reporting. As we transition to a zero carbon economy, there will be challenging decisions to be made, and being aligned on how we account and report scope 3 will make those decision-making processes easier, and collaboration more straightforward.

It also means we can talk about how this should work. If the GHG Protocol needs to be refined to help CRE organisations to drive better action, we can have that discussion based on a common framework. We felt it was an important discussion, and the right time to have it.

What has become clear through this process is that scope 3 is where the real challenges will lie in as we become more serious about climate action. Scope 1 and 2 have challenges, but they are fairly well defined and simply need action. However, within scope 3 there are challenges where we will need to start thinking about radical solutions to issues such as the materials that go into buildings, or how we work alongside tenants to address climate issues.

It’s time to get our heads around this.

To download the guidance please click here. 

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