Scaling the Summit: Reaching Net-Zero
More then 34% of the worlds largest companies have made commitments to Net-Zero, nearly all are on track to fail to meet that goal
In November, Accenture looked at companies making decarbonization goals and found what appeared to be a positive trend. Of the 2000 largest public and private companies in the world, nearly 84% planned to increase investments in their sustainability initiatives, and over 34% had made public commitments to reach net zero emissions. Upon closer look, however, only 7% of the companies that have made those commitments are on track to meet Scope 1 and 2 emission goals by 2030, and when expanded to 2050, only 8% are on track.
Why are we setting goals and not tracking to meet those goals?
In many cases, companies have made goals without understanding what their emissions actually are. It’s challenging to hit a target if you don’t know what you are aiming at. Unfortunately, getting that data is not as easy as it may seem, and without your current energy consumption data, you can’t set an accurate baseline.
This is where we generally start when it comes to decarbonization - where is your data, and what are your data coverage gaps? Those gaps are likely nuanced to your industry. In Commerical Real Estate, if your property is master metered, you likely have the basic consumption information. However, if you are in the area of Residential or Triple Net Commerical Real Estate, it might not be quite so easy. These verticals tend to have multiple meters, and the utility contracts are not always in the owner’s name, limiting the owner’s ability to obtain the data.
There are, of course, some avenues to obtain whole-building data, including working with utilities willing to provide aggregate data, often due to a utility benchmark reporting ordinance. Even that takes some patience and is better achieved working with a utility bill management company with the leverage to obtain the data. They know the nuances of each utility company and tend to have better results when navigating the attention of utility companies. There are also options that will try to go directly to the utility on your behalf, but you are often one double-factor authorization away, or a password reset from that data being “automatically” obtained for you. The issue here is utility companies are in the business of delivering energy and billing for that delivery. This is where their tech focuses and what they receive revenue for. Most do not prioritize providing additional reporting, and few have robust programs around aggregate whole-building data collection. There is a business case to be made for a utility company to monetize the delivery of this data, but with over 3,000 energy utility companies, it would take considerable time and investment, and just not an area the utility industry is focused on.
Another option may be Green Leasing. The Green Lease Leaders program provides resources to build model language into leases that may assist in both obtaining data and encouraging tenants to reduce their energy consumption. Scale can make this one challenging as well. It’s one thing if you have an office building with 20 tenants in it who have signed LOAs for their data to be released, and quite another if you have a multi-family building with 300 residents to keep track of.
Often overlooked is to engage your value chain to encourage them to provide you with Scope 3 emissions data. More on that in a minute, but suffice to say your supply chain is one of the biggest reasons you may never reach zero-carbon operations. These emissions tend to be significant, often far exceeding Scope 1 and 2 emissions.
Whatever your method, you need to get your data in hand. At this point, you need to lean into a framework to accurately classify and validate the methodology used in calculating your emissions. The global standard is the Greenhouse Gas Protocol, and it is this protocol that defines what Scope 1, 2, and 3 emissions are. Most of you are familiar with what these Scopes represent, but if you are not:
Scope 1 emissions are direct emissions from owned or controlled sources. These emissions come from burning fossil fuels on your premises - think natural gas utilities and gasoline engines. The flame is on your property.
Scope 2 emissions are indirect emissions but are emissions that directly result from your demand. Most often, this is electricity but could include purchased steam, heating, or cooling if purchased from a central district. The key here is that fossil fuels are being burnt elsewhere to satisfy your demand for the end product that results from burning those fossil fuels. The flame is on someone else’s property, but it’s only burning because you directly demand what is produced from that flame.
Scope 3 emissions are all other indirect emissions and tend to occur in your company’s value chain. This can be any material emission, from waste to employee commuting. The fossil fuel burning, in this case, isn’t directly because of your demand, but you are using the services of the organization that is providing those services, and any emissions they produce, are your Scope 3 emissions. The flame is in your neighbor’s yard, but they are using their flame to take care of something for you, perhaps grilling burgers that they then invite you over to share. You got the burger, and the emissions your neighbor used to cook it are indirectly your emissions as well - if you were eating, they wouldn’t have had to cook it, right?
You can see that energy is the common denominator here, which is why managing your energy supply is vital to achieving decarbonization. It is critical to identify where you are inefficient and reduce wasted energy consumption.
But how do you know if you are wasting energy?
Benchmarking is a tool used to compare our energy use to understand if it is efficient or inefficient. Whether we are comparing whole building energy use against a like building or comparing the output of an appliance against the energy input, we are comparing to determine which uses less energy to perform the task.
Just as important is understanding where you use energy - what is the carbon intensity of that energy? This is where we get into the energy supply. Of course, if you are burning fossil fuels on-site, like natural gas, this is pretty easy to figure out. As we move into Scope 2, however, there are more options for how that energy is generated. The more fossil fuels used to generate that electricity, the more the carbon intensity of the emissions. Where possible, switching to low-carbon energy sources is a critical step in decarbonization.
Addressing your Scope 3 emissions is the next step and one that will require more effort still. We first need to determine the materiality of our Scope 3 emissions. This will require quantifying the emissions contributed from each indirect source in the value chain and then determining if the impact of those emissions is material in the total impact of the organization. Nearly every product you use or discard has some level of emissions associated with it, both up and down the value chain. This is one of the biggest challenges of scope 3, as it really requires a forensic self-reflection around your indirect emissions. Have employees? Do they travel - Scope 3. Do they commute to work - Scope 3.
Chances are, your Scope 3 emissions will dwarf those of your Scope 1 and 2 emissions. Consider what I said earlier about the complications of control over the utility. 70% of the emissions of your average Multi-Family property are from the residents. This is the heating, cooling, lighting, and plug load that is typically by contract (lease) controlled by the resident. While the resident controls their use of those utilities, they remain indirect emissions for the landlord who owns the resident’s unit. To give you an idea of just how significant those emissions can be, the world’s largest retailer Wal-Mart states that 95% of the company’s emissions result from Scope 3 emissions.
I would argue that not only is engaging your supply chain important for understanding your Scope 3 emissions, but it is also critical as a means to hold others accountable to do their part in addressing their own emissions. Your Scope 3 emissions are someone else’s Scope 1 or 2 emissions. When we engage with our value change and challenge them to account for their own emissions, it also has a cascading effect on our own organizations.
For those emissions that cannot be mitigated, the organization must look to balance those emissions with corresponding offsets. Notice that this step comes after addressing efficiency and reducing the carbon intensity of the energy generated for the organization. The nature of those offsets will be company dependent and need to align with the expectations of the organization’s stakeholders. This area can pose some risk of being accused of greenwashing, making the type and quality of the offset essential to mitigate that risk.
Like so many other management approaches, the pathway to decarbonization is circular. Once the organization has defined success, set targets, and deployed strategies to meet those goals, the results must be sustained. This means following up action with measurement and verification, adjusting the strategy based on results, and optimizing and looking for opportunities to improve the process. Then we communicate those results transparently and then start again.
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the built environment’s impact. When not blogging, Chris is helping residents, clients, and investors reduce their energy, carbon, waste, and water impact as the Senior Director of Energy and Sustainability for Greystar. Our team’s insight into the utility consumption of our managed and owned portfolios provides insight into opportunities to identify and mitigate risk. We leverage innovation and experience to ignite solutions with real impacts while tracking performance, ensuring the trendline stays laser-focused on the goal. We in real estate have a tremendous opportunity to make a difference in the built environment. Standing shoulder to shoulder, we will get this done. I can be contacted at: chris.laughman@greystar.com for questions, concerns, or collaboration.
The opinions expressed in this blog are my own.
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