The buildings sector has long been a significant contributor to global carbon emissions, accounting for nearly 37% of energy and process-related CO₂ emissions worldwide. Buildings have become a focal point for organisations striving to set science-based targets and reduce their environmental impact. The Science Based Targets initiative (SBTi) has recently released updated guidance for the buildings sector. This framework sets clear, science-based criteria for companies in the buildings sector to reduce their greenhouse gas (GHG) emissions, helping to limit global warming to 1.5°C above pre-industrial levels, as outlined in the Paris Agreement. With buildings projected to nearly double in floor area by 2060, the framework's timely introduction offers a critical tool for mitigating their environmental impact.
Overview of the SBTi Buildings Sector Guidance
The Science Based Targets initiative (SBTi) has developed a new framework to guide the buildings sector towards a sustainable future, specifically 1.5°C-aligned emissions reduction targets. This guidance takes a 'whole building approach,' covering all energy consumption and fugitive emissions from buildings' operations. It provides a science-based decarbonisation roadmap for corporate and financial institutions involved in owning, developing and financing buildings.
The latest SBTi Buildings Sector Guidance outlines four key actions that companies should take:
End the Use of Fossil Fuels: Companies should make a public commitment to cease the installation of fossil fuel-based systems, including heating, cooking, power generation and hot water equipment, by 2030 at the latest.
Cut Operational Emissions: Focus on reducing emissions linked to a building’s energy use during operation. The SBTi, in partnership with the Carbon Risk Real Estate Monitor (CRREM), has developed region-specific pathways that account for local power grid variations and building usage patterns to ensure that emissions reduction targets are appropriately tailored.
Lower Embodied Carbon: With global floor area projected to expand by about 15% by 2030, largely in developing regions, it’s crucial to address the emissions from the materials and processes used in construction. Companies are required to set targets to decrease these upfront embodied emissions, which include emissions from raw materials, manufacturing, transportation and construction activities.
Upgrade Existing Buildings: Given that 80% of the buildings currently in existence will still be standing by 2050, it’s essential to significantly ramp up retrofitting efforts. To align with the IEA’s Net Zero by 2050 Scenario, retrofitting rates need to more than double by 2030. The SBTi advises companies to commit to energy efficiency upgrades to help decarbonise the operation of older buildings.
These criteria apply to companies meeting specific thresholds related to buildings-related emissions or real estate portfolio size. The guidance is designed to be applicable to various stakeholders in the building value chain, including developers, owner-occupiers, owner-lessors, tenants, property managers and financial institutions.
Setting Science-Based Targets for Buildings
The SBTi has collaborated with the Carbon Risk Real Estate Monitor initiative (CRREM) to develop regional pathways for in-use emissions, reflecting variations in local power grids and building usage. For upfront embodied emissions, companies are required to set targets to reduce emissions from raw materials, manufacturing, transportation of construction materials and construction activities.
The SBTi provides a target-setting tool that helps formulate intensity-based targets using the Sectoral Decarbonisation Approach (SDA), including 1.5°C-aligned global pathways for both in-use and embodied emissions. Additionally, the initiative offers an explanatory document with guidance on emissions accounting, reporting, target setting and validation.
Implementation Challenges and Recommendations
The building sector faces significant challenges in implementing science-based targets. One major hurdle is the performance gap, where a building's calculated energy use does not match its actual consumption. This discrepancy can be as high as a factor of four, with measured energy consumption sometimes quadrupling the modelled estimates. Even in stringent rating schemes like the German Passivhaus, this gap can reach 147%.
Another key challenge is the reduction of Scope 3 emissions. Companies often struggle with visibility and monitoring of suppliers' data, as well as engagement gaps between suppliers and procurement teams. The SBTi is addressing these issues by developing a Supplier Engagement Toolkit and reviewing Scope 3 target-setting methods.
While the SBTi framework provides a clear roadmap for emissions reduction, the buildings sector faces several challenges in its implementation. These include the need for substantial upfront investment, the complexity of retrofitting existing buildings and the requirement for widespread adoption of new technologies. However, these challenges also present opportunities for innovation and leadership. Companies that successfully navigate the transition to low-carbon operations can position themselves as leaders in the sustainable buildings sector, gaining a competitive edge in a market increasingly focused on environmental responsibility.
The Bottom Line
The SBTi Buildings Sector Guidance has a significant impact on the building industry's efforts to tackle climate change. Thanks to the guidance's whole building approach, covering both operational and embodied emissions, organisations can create a comprehensive strategy to reduce the sector's carbon footprint. While the implementation of these targets poses challenges, such as the performance gap and Scope 3 emissions reduction, the SBTi's recommendations offer a strong foundation to help overcome these hurdles. Focusing on halting fossil fuel installations, cutting operational and embodied emissions and retrofitting inefficient buildings can help the sector make substantial progress towards a sustainable future.