In just a few short years, the term “net zero” has evolved from its birthplace in the halls of scientific academia to take its place in the spotlight of public discussions about mitigating the dangers of climate change.
Goals to reach net zero emissions are being developed in local government chambers and Fortune 500 boardrooms alike. Jurisdictions with net-zero targets represent 68%+ of the globe’s gross domestic product (GDP). This number continues to grow as investors continue to place importance on Environmental, Social, and Governance (ESG) reporting to manage business risk and gain a competitive advantage.
In response, more commercial real estate (CRE) developers are beginning to set their own sustainability and net zero targets. The current lack of consensus on exactly what “net zero” means, however, makes this type of planning a challenge. Because of this, businesses need to be thoughtful as they develop, budget, and execute net zero plans.
The Counselors of Real Estate recently released an article titled “The Coming U.S. Regulatory Oversight of, and Demand for, Climate Disclosure.” In April 2021, the U.S. Securities and Exchange Commission issued a risk alert, cautioning firms that their ESG reports, and data, will soon be more heavily scrutinized. The article also provides a strong indication that climate disclosure could soon be a requirement as well, similar to what is mandatory in the European Union.
Until the U.S. adopts a framework of sustainability requirements that all must follow, there are meaningful actions businesses should include as they create a net zero plans:
- Tackle energy reduction (i.e., operational carbon) first, before investing in offsets.
- Address embodied carbon when constructing new real estate.
- Review opportunities to electrify (i.e., decarbonize) equipment when performing end-of-life system replacements.
- Capitalize on existing local utility incentives and federal tax programs to help fund initiatives.
Before finalizing budgets and moving forward with net zero plans, organizations should review which strategies will also positively impact a company’s sustainability reporting framework(s). For example, projects that reduce energy consumption will provide more points under Carbon Disclosure Project (CDP) and Global Real Estate Sustainability Benchmark (GRESB) frameworks, while projects that improve data monitoring (i.e., MBCx –Monitoring-Based Commissioning) and/or achieve a sustainability certification (i.e. LEED) will grant more points under GRESB. Understanding this overlap may help fund capital improvement projects outside of annual operational budgets.
The planning does not stop in 2021. In 2022, the International Organization of Standardization (ISO) is expected to provide a clearer definition regarding a global net zero definition. Until then, SBTi has a “net-zero” standard that is aligned with the Paris Agreement’s 1.5C trajectory. As organizations move forward with net-zero plans, and adjust them as future regulation comes about, we recommend initially tying targets to the Paris Agreement as this will likely be the sticking point for all climate change initiates and directives to come.
Senior Envelope + Healthy Buildings Specialist Tim Zelazny brings a passion for energy and sustainability consulting for new and existing buildings. As operations director for the Energy+Eco team, Saagar Patel is an outspoken advocate for energy efficiency and sustainability and shares his expertise in those areas to design and construction. Tim and Saagar both share their expert knowledge to further ESD’s mission to improve society through the built environment.