New SBTi Building Sector Guidance: What You Need To Know

By Brandon Law, RWDI, Associate Principal & Director — Sustainability; and Taryn Green, RWDI, Technical Director — Sustainability

When it comes to reducing the effects of climate change, the built environment is of particular importance, as sources such as Architecture 2030 state it is responsible for around 40% of the world’s annual carbon emissions.

To that end, the Science Based Targets Initiative (SBTi) has turned its focus, and is releasing new guidance for setting science-based targets specifically for the building sector. This new guidance will be rolled out first in Pilot through most of 2024. The final version is targeted to be available by the end of 2024. Once finalized, it will become the gold standard outlining how to track, reduce, and report emissions for developers, REITs, building owners, property managers, and tenants.

This guidance is designed to help organizations do their part to limit global warming to 1.5°C, a target in line with the Paris Agreement. Here’s what you need to know to get started.

What is the Science Based Targets Initiative?

The SBTi, a leader in helping companies set greenhouse gas reduction targets in line with climate science, provides criteria and recommendations for organizations to set science-based targets that align with the Paris Agreement. The SBTi’s approaches are always aimed at target-setting at the corporate/portfolio level, not the asset-level. This is in contrast to certification programs like LEED, BREEAM, and PassiveHouse, which are building/asset-level programs.

Several key resources from the SBTi exist that companies should familiarize themselves with to set ambitious and impactful science-based targets. They include:  

• SBTi How-To Guide: High-level process overview on developing and submitting targets.
• SBTi Getting Started Guide: More thorough overview of procedures, including flow charts.
• SBTi Criteria and Recommendations for Near-Term Targets: Details on how to establish near-term targets, frequency of updating them, and when to communicate them.
• Net-Zero Standard Criteria: Includes all criteria that must be met for the SBTi to validate net zero target(s) and identifies best practices.
• Target Validation Protocol for Near-term Targets: Describes the steps and procedures followed during the target validation process of near-term targets.
• Building Guidance: Main website for the latest science-based target-setting methodologies, tools, and guidance for companies in the building sector.
• GHG Protocol: The SBTi's approach aims to adhere to, and build on, the foundation of the GHG Protocol. The SBTi’s sector-specific guidance documents aim to help interpret and deviate from it only when necessary.

For some industries, separate sector-specific methodologies, frameworks, and requirements have also been developed. The Building Sector Guidance, released for Pilot Testing on November 21, 2023, is the latest of these. 

What is the New SBTi Building Sector Guidance?

The SBTi’s new Building Sector Guidance establishes a standardized methodology for calculating and setting robust targets for Scope 1, 2, and 3 emissions across the building lifecycle. Notably, it provides a framework for including emissions sources – such as embodied carbon, fugitive emissions, and tenant energy use – that, for most, would not have applied to targets before this guidance.

Who Does the SBTi’s Building Sector Guidance Apply to?

The guidance acknowledges the broad array of actors that make up the building sector. It strives to define these roles and identify where we must all work together to achieve the sector’s decarbonization goals. The guidance currently addresses the following user categories:

Outside this, the SBTi has also established that any company that meets certain buildings-related emissions criteria shall also follow the sector guidance for their building-related emissions. These include:

• at least 20% of total scope 1, 2, and 3 emissions;
• at least 25,000 tCO2e across scope 1, 2, and 3 emissions; or
• a real estate portfolio that exceeds 100,000m2 in total floor area.

Importantly, the guidance also acknowledges this list is non-exhaustive, and organizations don’t always fall squarely into one category. Companies must therefore apply the guidance relevant to all user types applicable to their activities.

The Biggest Changes from the Building Sector Guidance

At minimum, everyone in the building sector should be aware of the four big changes introduced in the SBTi’s Building Sector Guidance:

Scope 3 Tenant Emissions Now in Target Boundaries

A building’s complete operational energy consumption, including both landlord and tenant-controlled spaces, is now to be included and combined within a user’s SBTi target boundary. The SBTi refers to this as the “whole building approach,” which will help ensure a building’s complete operational energy consumption is accounted for. It is also expected to force even more collaboration between building owners and their tenants to strategically decarbonize their spaces. 

In a similar vein, developers who build a building and then immediately sell it also need to account for, and include in their targets, 60 years of that building’s operational carbon.

Fugitive Emissions Can No Longer Be Ignored

Fugitive emissions refer to GHG leaks from the operation and maintenance of buildings that are often difficult to measure directly. These emissions include: 

• refrigerant leaks from cooling equipment;
• excess emissions from generators or boilers; and
• methane leaks. 

Historically, fugitive emissions haven’t been rigorously tracked or reported in the building sector because of a lack of data and accounting challenges. However, companies can no longer ignore fugitive emissions under the new guidance. Where data on fugitive emissions is unavailable, companies must provide estimates and disclose the methodology used to calculate them.

Embodied Carbon Must be Accounted For

To achieve meaningful decarbonization in line with the Paris Agreement, building sector organizations must also now consider the embodied carbon associated with the materials they use in constructing and maintaining buildings.

New Construction

Users who develop, are the first owner/purchaser, or who finance the construction or first purchase of a new building shall set a scope 3 target that covers the upfront embodied carbon emissions.  

Existing Buildings

When the first building owner sells the building, all future owners will have limited influence over the embodied emissions that have already been emitted. Therefore, they aren't required to account for its upfront embodied emissions in their emissions inventory. However, these users are still responsible for the embodied emissions of materials used in the maintenance, replacement, repair, and refurbishment of existing buildings, as they occurred in the reporting year.

Taking responsibility for the embodied carbon of existing buildings is recommended for all other users. For example, they “should be included in the target boundary, however they aren’t required,” unless this category or other Scope 3 emissions are deemed to be material, such as if Scope 3 emissions are greater than 40% of total emissions.

No New Fossil Fuel Equipment

Organizations must now commit to no new fossil fuel equipment in their building portfolio within 5 years from target submission, or by 2030, whichever is sooner. This applies to all space heating, cooking, power generation, and hot water equipment.

What Comes Next?

The SBTi is striving to build a clear roadmap for setting science-based emissions reduction targets. When finalized, the guidance will provide a methodology for calculating a building's total emissions footprint and setting an ambitious, yet achievable, 1.5°C-aligned target. While there will undoubtedly be challenges with these changes, these reductions are necessary to have a chance of avoiding the most significant effects of climate change. 

The time for incremental changes has passed. Bold climate leadership is now required, and this guidance provides the tools and pathway forward for the building sector to rise to the challenge.