There are enough acronyms in sustainability reporting land to make your head spin: SBTi, PRI, TCFD, TNFD…the list goes on.
But if you only master one thing this year, it is this: Get cracking on your Scope 3 emissions measurement.
Scope 3 can account for up to 80 per cent of a property company’s CO2 emissions, yet it has been neglected by the industry. This is due to a perception of lack of control. As a building owner, you have a lot of control over Scope 1 – the materials you directly consume, and Scope 2, your fuel source than you do over Scope 3, which is everything that occurs in your upstream supply chain and downstream ones associated with your customers.
Green Building Council chief impact officer Jorge Chapa says the two biggest challenges property companies face lie in obtaining quality accurate data, and deciding which parts are material and relevant to the business – that is, where to draw the boundary.
To a large extent, building owners are reliant on the ability of their suppliers to classify their material. For example, Chapa said that before 2015 there were no environmental declarations for steel. Fortunately, however, most materials used in the building envelope now have some sort of declarations on their embodied emissions.
Then there are the emissions associated with construction – for example petrol use of earthmoving equipment, and the electricity consumption of a buildings’ occupants once they move in (which is not known during the construction phase).
But Chapa said developers have more control than they think, because energy consumption will depend on what type of insulation or heating systems they install. If the building or heating system is inefficient, then the occupant will consume more energy, he reasoned.
Scope 3 emissions have the potential to become “an endless chain of things”, so putting the hard yards in to determine materiality is a must.
But at the same time, it’s essential to focus on what you can control. For example, you can control how much insulation you install or how many window glazings you use, but you can’t control whether your employees take the train or drive to work.
The lines can blur significantly if you’re a precinct developer, Chapa said. If this is the case, Scope 3 emissions can be those that occur in the space around your buildings, which is when stuff like street design to encourage active transport and placemaking really come into their own.
Other grey areas emerge for Real Estate Investment Trusts that purchase completed buildings – are they responsible for the embodied emissions in the building’s fabric?
Ultimately, getting your head around Scope 3 is important, but Chapa said it’s not the be all and end all and that it’s important that this analysis doesn’t detract from the more important exercise of measuring Scope 1 and 2 emissions.
“It’s a welcome move for the industry to be considering their emissions beyond their immediate control, but don’t forget there’s still a lot of work to be done over Scope 1 and 2 emissions where you have direct control. And don’t forget that your Scope 1 and 2 emissions because they are someone else’s Scope 3 Emissions.”
GPT Group has been reporting its Scope 3 emissions for the past two financial years, according to its sustainability report. Interestingly, they are around 24tCO2e annually, lower than their combined Scope 1 and 2 emissions of 45tCO2e, 35CO2e net of offsets.
Where to go for help
If you need guidance, check out the World Green Building Council’s Embodied Carbon Project, which focuses on lifecycle emissions.
The International Financial Reporting Standards Board have released guidance on Scope 3 emissions in this discussion paper released last October.
There are 15 categories of Greenhouse Gas Emissions in a corporate value chain Accounting and Reporting Standard – eight are downstream and seven are upstream.
IFRS wants all reporting entities to disclose both their Scope 3 emissions and the emissions intensity of their operations, represented by a factor of tonnes of CO2 equivalent per unit of physical or economic output.