Using science based targets to help the Real Estate industry reach Net Zero

A third of today’s global CO2 emissions come from the building sector. The decarbonisation of such a broad sector - covering building designers, developers, owners and tenants - is one of the most complex challenges facing business and society. Furthermore, the rapid increase in green building standards and lack of alignment with a 1.5°C trajectory has made the building sector transformation fragmented and challenging.

PwC teamed up with leading global body the Science Based Targets Initiative (SBTi), to help businesses and financial institutions set ambitious emissions reduction targets and develop guidance that will shift the sector towards a net zero economy.

What does best practice look like in the buildings sector?

Working with the SBTi, our Sustainability team developed guidance on emissions accounting, target-setting and reporting to help companies in the sector, as well as investors, set ambitious near and long-term emissions reductions targets. The guidance is tailored for six different categories of users, from real estate developers and investors to landlords, property managers and tenants. The guidance was updated following the public consultation period in May and June 2023, and it is currently in the pilot testing phase.

Why set a science based target?

Strengthened brand reputation: As consumers become increasingly aware of the impact that their choices have on the environment, sustainability plays an increasingly important role in a brand’s reputation. Setting science-based targets inspires confidence and credibility in sustainability strategies.
Increased investor confidence: Investors are increasingly taking more interest in businesses’ environmental policies, to assess the resilience of their investments. Science-based target commitments demonstrate the robustness of such policies to investors and other stakeholders.
Enhanced resilience: As governments continue to work to implement the Paris agreement, ambitious science-based targets ensure that operations remain lean and efficient. This will ensure companies are more prepared for upcoming regulation and increase their resilience in a future where the cost and availability of resources is unpredictable.

What does setting a science based target involve?

To set targets using the SBTi Buildings Sector Guidance, companies will follow the same steps outlined in the general SBTi guidance. The Buildings Sector Guidance provides additional sector-specific details, such as buildings sector emissions pathways, Greenhouse Gases (GHG) accounting practice for buildings-related emissions and details on how to set more granular targets, which take into account the geography and building typologies included in a company’s buildings portfolio.

The general stages required in setting a science-based target are outlined below:

Determine target boundaries, scopes and target-setting methods

Key activities in this stage include:

Deciding whether to set a near-term target only, or a net-zero target as well.
Determining the base and year for each target
Identifying the required emissions categories to be included in the target boundary based on the intended user categorisation
Determining the target-setting method to be used for each emissions category.

Calculate a GHG emissions inventory

In this step, companies should collect data for emissions for their base year and most recent year. The SBTi relies on the GHG Protocol for GHG accounting guidelines. The guidance document provides an overview of GHG accounting principles for the buildings sector, as well as references to other relevant GHG accounting guides tailored to activities in the sector.

Construct targets

Companies will now use the Buildings Sector tools and pathways, as well as other SBTi tools and target-setting methods to calculate decarbonisation targets. For buildings-related emissions, this step addresses granularity in terms of building typologies and geographies.

Submit targets to the Science Based Targets initiative

Finally, companies will follow the general SBTi guidelines for submitting a target for validation. Additional guidance, criteria, and recommendations are provided to address Buildings Sector specifics and challenges, such as guidance on target recalculations, buildings changing typology, and acquisitions and divestments.