New SBTi building guidelines: What do they mean?

Panic creeps in …

The Science Based Targets Initiative (SBTi) has released the draft for net zero emissions target-setting guidelines for the building sector. The process for creating the guide began in October 2021, and in May 2023, the draft was released to the public.

The detailed document has been crafted with the help of multiple stakeholders in the building industry and PwC. The draft was open to feedback from the public till July 16, 2023, and the final draft will be published in October 2023.

SBTi creates science-based target-setting guidelines specific to industries and has previously published detailed drafts for important sectors such as apparel, aviation, Information and Communication Technology, and finance. This is the first time the initiative has devised a guide for the building industry, which is said to be responsible for 39% of global carbon emissions.

Notably, the new building sector-specific guidelines are increasingly robust and align with the Paris Agreement’s goal of a 1.5 °C temperature rise from pre-industrial levels.

If you’re worried about complying with the SBTi building guidelines, don’t stress, comundo has your back! In this article, we’ll explain who the SBTi guidance is aimed at, some noteworthy highlights, when it goes into effect, and the next steps.

Who is the SBTi building guidance for?

The new SBTi guidelines for the building sector target not just construction or real estate companies but stakeholders in the entire value chain of a building. These guidelines may apply to parties such as developers, owners, building managers, and tenants.

The guidelines also feature a separate section for financial institutes, as they play a pivotal role in the construction and management of buildings. Even though the SBTi has issued guidelines for financial institutions separately, this guide also addresses critical aspects of the building industry, such as financed emissions.

The tools provided for setting targets pertain to both embodied and operating emissions of a building.

Quick side note: Embodied emissions are the emissions emitted during the making of a building. Whereas operational emissions refer to the greenhouse gases (GHG) produced due to the building’s energy consumption. This particular draft does not address entities that produce manufacturing material. However, other sector-specific drafts exist for the cement, aluminium, and steel industries.

Highlights of the SBTi building guidelines draft

The new guidelines for science-based targets (SBTs) for building emissions focus on near- and long-term targets. However, this new draft makes the rules and conditions for near-term targeting more stringent. Moreover, there’s more clarity about embodied emissions for new buildings.

Let’s break down some noteworthy highlights of the draft:

Wider scope of targets with the ‘whole building approach’

With the new guidelines, the in-use operational emissions pathway will follow a ‘whole building approach.’ In other words, a building’s operational consumption must be targeted and reported regardless of the landlord (scopes 1 and 2, as per the GHG protocol) or tenant spaces (scope 3).

Companies must use sector-specific pathways for buildings. However, construction companies can use cross-sector pathways for scope 1 and 2 emissions.

The scope 3 targets are now aligned with the 1.5 °C goal, similar to scope 1 and 2 targets. The guidelines take a more ambitious approach to setting targets for reducing scope 3 emissions.

Targets based on building type and location

The sector-specific tools from SBTi for target setting will now have more flexibility regarding building types and locations. The draft acknowledges that the location and type of building can influence the pathway for reducing its carbon footprint.

The building typologies include office, retail, hotel, industrial distribution warehouse, healthcare, medical office, recreation, and residential.

This change may add some complexity, but it takes a more tailored approach to calculate operational emissions. Moreover, the guidelines permit aggregating targets if represented by the same units.

Upfront embodied emissions targets for new buildings

Entities that are the owner/purchaser of a new building or finance the construction or purchase shall set scope 3 targets for upfront embodied emissions. This is applicable whether or not their existing scope 3 emissions make up less than 40% of total emissions.

Also, companies that have already set embodied emissions targets based on previous guidelines should revise them according to the new guidelines and tools. The earlier guidance on scope 3 emissions was based on a 2 °C temperature rise.

Furthermore, different companies should include the scope 3 categories for the targets. For instance, developers must categorise these emissions by capital goods and use of sold products.

Financed emissions guidelines for financial institutions

The new building-specific guidelines for financial institutions build upon the existing detailed guidance.

The SBTi identifies and recommends the Global GHG Accounting and Reporting Standard to measure portfolio-wide financed emissions. They can prioritise certain parts of their portfolio for setting achievable financed emissions targets.

Financial institutions may use asset-class levels for portfolio target-setting. These include mortgage, real estate, and corporate instruments.

End of fossil fuel heating and cooking by 2025

This one is a biggie!

One of the near-term targets recommended in the new guidelines is ending the use of fossil fuels for heating and cooking before or by 2025. This includes avoiding new installations of heating and cooking systems that utilise fossil fuels from 2025. And companies must make this commitment public.

Companies owning or managing buildings with existing fossil fuel-based heating and cooking systems may gradually phase them out in favour of all-electric solutions.

Think of it like replacing your high-powered, gas-guzzling V8 Ferrari with a Tesla: you reduce your carbon footprint AND save on a ton of fuel costs.

When do the guidelines go into effect?

The building sector guidelines will be confirmed in October 2023. Although that is frighteningly near, once the final draft, after input from the public, is published, companies have a grace period of six months to align their targets to the new guidelines.

Therefore, companies in the building industry can expect to implement the new guidelines beginning in March 2024.

Taking the next steps

The inclusion of financial institutions in the new sector-specific guidance for SBTs indicates the importance banks and other financial companies play in the carbon footprint of buildings. To set ambitious yet achievable targets based on these guidelines, it’s important first to measure the current emissions of your portfolio.

comundo can help measure accurate emissions across the portfolio of properties, which can be categorised based on asset classes provided in the SBTi building guidelines draft. Empowered with the data, responsible companies can set both near- and long-term targets.

And panic subsides …