Measuring tenant energy data is critical for accurate Scope 3 reporting for commercial real estate companies. Now, you may be wondering whether your tenant’s energy consumption falls under Scope 3, and if it does, are you even required to report this data? 

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Lots of questions! So, let’s break it down in this article to help you understand the importance of measuring accurate energy consumption data from your tenants.

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The current state of Scope 3 reporting

The renewed focus on environmental, social, and governance (ESG) reporting brings even tougher requirements. This means that companies have to gather more data and ensure its accuracy. A lot of admin work, but well worth it. 

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More importantly, indirect emissions, aka Scope 3 emissions, were largely voluntary to report. That’s not the case anymore, with new regulations mandating the reporting of value chain emissions. For instance, the Corporate Sustainability Reporting Directive (CSRD) requires companies to report Scope 3 emissions data. More such legislations are being debated worldwide, mainly because without targeting Scope 3 emissions, efforts to curb emissions remain futile. 

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The data gap is another big issue when it comes to both upstream and downstream emissions of a company. The data is often obtained from external parties and lacks verifiability. Even worse is that many companies simply base data on industry averages, which can result in wild discrepancies – imagine having to waste time estimating emissions data for the sake of keeping up with legislation – not fun!   

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Which Scope does tenant energy consumption fall under?

If you’re unsure exactly how your tenants’ energy consumption comes under Scope 3 emissions, you must consider whether you have operational control over the properties you’ve leased. 

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Emissions from an asset a company wholly owns fall under Scope 2 and to some degree, Scope 1. So, if you directly control the properties leased or rented, the energy consumption from these properties constitutes direct emissions. Of course, you’ll be required to collect and report energy data as part of your direct emissions. 

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If you don’t wholly own or have no direct control over the property, the energy consumption would come under Scope 3 emissions. This is typically the case with investors or commercial real estate companies that have invested in properties but don’t directly oversee the management. 

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As per the GHG Protocol, this data comes under the ‘downstream leased assets’ reporting category (Scope 3). The energy data may also come under the category of financed emissions if you’re a financing company with real estate portfolios. 

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Either way, if you’re an entity in the EU with properties leased out, you’ll need to collect and report tenant energy data and be able to class it as Scope 1, 2 or 3 depending on the data itself and whether you have operational control or total ownership. 

How tenant energy data can help reduce Scope 3 emissions 

Collecting data on tenant energy consumption is important for real estate or finance companies investing in buildings that pay through rental income. It’s no longer optional, at least not in the EU. So, even if the energy consumption in an owned or controlled property is indirect, you must collect and report this data. 

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But collecting tenant energy use data isn’t merely an ESG reporting requirement – it has real benefits for all stakeholders, especially companies that profit from the properties. Here’s how:

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Increase energy efficiency

Data from tenant energy consumption can give insights into adopting solutions for greater energy efficiency. You can implement energy-saving technologies inside properties to reduce consumption. Similarly, you adopt renewable energy sources like solar panels to reduce and eliminate the impact. 

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Demonstrate climate action

Measures taken based on tenant energy data showcase a commitment to climate action. For real estate companies, it can help demonstrate commitment to existing and potential investors, increasing their confidence in the investments. 

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Accurate target setting

Accurate data can be empowering when setting goals for decarbonisation and ESG policy. The energy use data from leased buildings can help companies set realistic targets, especially in line with guidance from the Science-based Targets Initiative (SBTi) for finance and buildings sectors. 

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Engagement with tenants

Personal choices can influence energy consumption. Collecting and analysing tenant energy use can help building owners and managers engage with tenants and encourage efficient energy use. That, in turn, can help them reduce Scope 3 emissions while improving service to their tenants. Based on the data, you can create green reward systems for tenants that encourage efficient use of energy and heating. 

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Collecting tenant energy data

Depending on various factors, tenant energy data may or may not be so easily available. For instance, if you’re a company that invests in properties managed by another, getting data on energy consumption for every unit or tenant may be difficult. 

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Where actual data is unavailable, you’ll need to use estimates. But the thing about estimates is that there’s always a generous room for error. The data accuracy will be low if you use industry benchmarks based on floor area or number of occupancies. 

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Today, it’s easy to collect actual, reliable data on energy usage from properties with the right technology. comundo’s cutting-edge solution helps building owners and managers collect accurate tenant energy data and improve carbon accounting. 

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With comundo’s solution, you can get data going as far back as three years, which can help gauge your progress in making your property energy efficient. This data can help you report Scope 3 emissions more accurately and comply with ESG reporting regulations like the CSRD. 

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You can use this data to set targets and devise plans for further reducing your carbon footprint. Targeting tenant energy consumption can also decrease their carbon footprint, which is like targeting two birds with one stone. And with climate change knocking at our door, we need that!

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Finally, if you want to show the world that your buildings are high-performers within the sustainability world with a certification such as DGNB, you’ll need to collect the total consumption from your buildings – including tenant data. It’s a surefire way to set you apart from your competitors – and get you a higher score from DGNB!

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FAQs

How do real estate companies measure and verify the accuracy of the tenant energy data they collect?

Real estate companies can measure and verify the accuracy of tenant energy data using comundo's solution, which offers real-time emissions data based on actual consumption. This approach provides more reliable data than estimates based on industry averages or floor area.

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What are the specific legal consequences for companies in the EU if they fail to collect or inaccurately report tenant energy data under Scope 3 emissions?

While the exact legal consequences vary, in the EU, companies that fail to report tenant energy data under Scope 3 emissions could face legal actions, fines, and reputational damage. comundo's solution can help ensure compliance by providing accurate and verifiable data, reducing the risk of non-compliance.

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How do tenants typically react to collecting their energy data, and how does this impact their privacy or leasing agreements?

Tenants might initially have privacy concerns regarding the collection of their energy data. However, real estate companies can alleviate these concerns by using comundo's solution, which ensures data privacy and security. Transparent communication about how the data will be used to improve energy efficiency and reduce costs can also help gain tenant approval and cooperation.

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