BLOG: Indirect emissions are the elephant in the room for commercial real estate

Companies are missing out on major carbon savings by ignoring supply chain emissions, warns UKGBC's Karl Desai

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October 1, 2019

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Too technical, uninteresting, difficult to communicate: the reserve of carbon accounting nerds.

This was the feedback from some when we set out to develop a guide to support commercial real estate companies with reporting on their indirect – ‘scope 3’ – emissions. At first it seemed they might have a point, but it quickly became apparent that these emissions are far too significant to put on the ‘too hard’ shelf.

Research from our friends over at Carbon Credentials revealed that scope 3 emissions typically account for 85 per cent of a commercial real estate company’s entire footprint. That’s a massive slice of the pie. And if they’re not taken seriously, represent an untapped opportunity for emissions reductions.

But it’s no secret that whichever sector you work in, scope 3 can be complicated. For the uninitiated, it refers to the emissions a company has influence over, but which do not fall within its direct control.

So, from a commercial real estate perspective, scope 3 emissions can include:

  • Emissions from construction materials used in a new building, reported by the building’s developer;
  • Emissions from the energy use of a tenant, reported by the building owner; and
  • Emissions from employees commuting to work, reported by an employer.

In all these examples, a company would not directly own or control these emissions sources but would have some level of influence over them.

Additionally, not all sources of emissions are created equal, and so it’s important for companies to understand where their most significant opportunities for emissions reductions are. For those in the know, the lingo for this is a ‘materiality assessment’.

You can’t manage what you can’t measure and this is especially true when coming to grips with scope 3 emissions. Companies leading the march against the climate crisis know that prioritising emissions reductions activities with the greatest level of return – in both economic and carbon terms – can only occur once a full and accurate picture of a company’s carbon footprint is understood.

Let’s take, for example, a property management company seeking to achieve emissions reductions:

A one per cent improvement on a relatively major portion of its total carbon footprint – let’s say emissions from its tenants, making up 70 per cent of its total – compared to one percent improvement on a relatively smaller portion – say employee business travel, making up two per cent – will have a greater positive return by a huge degree of magnitude, 350 per cent in this example.

In this way, strategically assessing and prioritising scope 3 emissions reductions has the potential to deliver carbon reductions many times greater compared to only looking at a limited scope of company activities. It goes without saying that these carbon reductions also lead to operational efficiencies and financial savings. Leading companies agree that carbon now represents a significant commercial risk and, paradoxically, opportunity, and that understanding a company’s total carbon footprint is the critical first step to informing any reduction strategy.

For too long, the commercial real estate sector has played in the safety of the scope 1 and 2 sandbox, addressing easier to abate direct emissions, whilst the scope 3 elephant loomed in the background. Now it’s time for companies to tackle the elephant in the room, by measuring, reporting, and reducing scope 3 emissions, to face up to their true impact.

So now we have you hooked, including with the UKGBC guide, what next? We’ve shone the light on this important topic and removed some of the main roadblocks with the guide, but how do we scale up our sector’s ambitions for tackling scope 3 emissions. It’s certainly not going to be something UKGBC can do on its own.

We’re going to need a wide range of CRE stakeholders to engage with this topic to unpick further blockages and, ultimately, drive emissions reductions. Some potential collaborations we’re looking into are: informing the WorldGBC’s Net Zero Carbon Buildings Commitment, dovetailing with the outputs of the Science-Based Targets for Buildings project, and gaining formal ‘Built On’ endorsement of the guide from the World Resources Institute.

I’ve mentioned ‘leaders’ a few times already in this blog, but that can be an ambiguous term in a fast-emerging space. How does the market discern what leadership looks like and what company commitments actually back this up? To address this UKGBC has recently launched the Climate Commitment Platform and Climate Leadership Model, to help ensure we’re all working to consistent outcomes in tackling the climate crisis.

UKGBC’s ‘Guide to Scope 3 Reporting for Commercial Real Estate’ is available for download here. Please get in touch with me at karl.desai@ukgbc.org if you’d like any further information on this project.