In the last 10 years more than two-thirds of countries worldwide have adopted net zero carbon (NZC) commitments, with dozens implementing new regulation to reinforce these commitments, with at least a fifth of the world’s leading companies and a third of the UK’s biggest companies committed to net zero carbon targets. And this is just the beginning.
In this new series we will unpack the need for a carbon strategy, dig into the regulation and market expectations, consider how companies can achieve net zero and what the net zero agenda will mean for new developments, we’ll also look at how existing legacy buildings can hope to achieve similar carbon reduction targets.
With the rise of ESG as a driving force, companies everywhere are being increasingly required and/or expected to disclose their carbon impacts. While it is important for all kinds of reasons to reduce carbon, the business imperative is becoming far more evident. For instance, it is now commonly believed that carbon performance will impact both the reputation and finances of companies, as stakeholders everywhere (investors, tenants, employees, etc) look to reward low carbon companies, services and products. Not knowing your carbon emissions and how to reduce them is no longer an option in today’s business environment.
In terms of the property and construction industry, in most instances this is at the company level. But going forward there is every expectation that buildings themselves will need to report on the carbon emissions they produce. A consultation currently before Government is promising to do just that.
The simple answer is that while there has been a lot of action to date, much more is still to come. The UK already has regulation that requires large companies to report carbon emissions, but that net is getting wider. Soon more companies will be required to measure and report officially.
But the unit of analysis is changing and getting smaller. It is expected that in the short term there will be regulation that requires carbon disclosure at the building level, effectively providing information about which buildings are low energy/carbon. Already, the Greater London Authority (GLA) requires all new major developments in the city to be zero carbon. Any offsets needed to meet the GLA NZC objectives are charged at a rate of £95/tonne CO2e/year for 30 years and must be paid upfront.
But it’s not just regulation that’s important. It is expectation. The Task Force on Climate-Related Financial Disclosures (TCFD) is the fastest-growing sustainability organisation in the world, and its voluntary principles are the framework for regulation in many countries, including the UK, US and Japan. Given that many companies have carbon reporting requirements themselves, they are becoming more attuned to which buildings can help them with these goals. There is an emerging market for low carbon buildings being driven by information and disclosure.
We know that carbon is a big topic that needs some careful unpacking into major components. To support our understanding of these components the upcoming series will be broken down into five key topics:
There has been a global convergence of two themes – net zero carbon and ESG disclosure. While the goalposts are continually moving, the direction is clear – more companies will be required to measure carbon and report more often. What needs measuring (either from regulation or market expectation) will increase (think embodied carbon) and the unit of analysis will get smaller (from company level to asset level, as evidenced by sustainability tools such as GRESB and CRREM). In this initial release we will look at how regulation is changing the reporting landscape and consider the direction of travel, outlining what needs measuring and why.
Companies will need to identify boundaries, measure emissions, develop a set of reduction targets and consider how to deal with “unavoidable” or “irreducible” carbon through offsets. In this piece, we will consider the learnings from our own journey towards net zero (alongside industry frameworks) and examine how corporations can develop and embed company-wide net zero carbon policies.
New buildings and net zero carbon
The UK is one of the most sophisticated carbon markets, and a leader in developing net zero carbon frameworks and principles (RIBA, LETI, UKGBC, etc). In the third article in our series, we will look at how we think about embodied carbon, whether a developer, service provider or even occupant. Although carbon strategies currently focus on operational emissions, companies must also think about what embodied carbon means to their business, as this is set to be the next battleground over carbon mitigation, especially as the UK grid decarbonises.
Existing buildings and carbon performance
For many companies, buildings are a primary source – maybe THE primary source – for their carbon profile. Occupiers will want to know what can be done to reduce emissions (management, procurement of renewable energy, etc). Owners and landlords face more risks, as potential tenants have higher expectations and more information at hand. In this report we will look at strategies for reducing carbon emissions from existing buildings and what owners and occupiers can do to improve their carbon profile.
Next steps and thinking ahead
Blue sky thinking and planning for the unknown has become a part of many organisations' outlook for the future and possibilities such as embodied carbon regulation at the national level, a public database of energy performance at asset level, whole building energy reporting, financial penalties for not reaching emission thresholds and premiums for low carbon buildings (or brown discounting) are currently under discussion - making a carbon strategy now more important than ever.
In this final piece, we will look at where we have been (and are) and consider where this debate is heading. At the current rate of change, we will all need to be thinking ahead.
Want to find out more about how you can develop a carbon strategy? Get in touch with our experts today.
Read our next report in our carbon strategy series to discover how net zero carbon is transforming regulations and markets.