Real Estate

In The Race To Meet Net-Zero Goals, Building Owners Struggle To Find The Right Starting Line

Most building owners and property managers recognize the need to develop and initiate a net-zero action plan, but a confusing array of regulations, pathways and metrics—constantly changing and different from state-to-state—are holding up progress.

A net-zero commitment is an aim to become carbon neutral (removing or offsetting the same amount of carbon that is emitted into the atmosphere) by a certain date. Once emissions are calculated for a baseline year, they need to be projected out to target year. Sounds simple, right?

In Europe, it is. The guidelines to net-zero are outlined in legislation. The European Union (EU) implemented the Sustainable Finance Disclosure Regulation (SFDR) in 2021, setting specific rules for how and what sustainability-related information financial advisors and financial market participants need to disclose. In the built space, the EU has proposed mandatory energy efficiency upgrades for all buildings and for all new construction to be net-zero by 2030. These draft laws are part of the EU’s Green Deal, which aims to transform its economy within three decades.

The U.S. currently lags behind many other nations, though we are gaining momentum. But the lack of a comprehensive federal strategy has caused many states and municipalities to take on carbon reduction in their own back yards. Therein lies the problem, particularly for building owners with large portfolios spanning multiple states.

What’s missing is a consistent approach and common understanding of how to successfully measure and reduce carbon emissions within the built environment. That’s the next critical step needed for building owners to truly reduce their carbon footprints and advance their overall sustainability efforts. Without this guidance, many owners don’t know where to begin. But there are basic steps that can be taken toward a net-zero goal, even without standardized legislation or guidelines across all states.

Understanding carbon emissions

Meeting net-zero carbon targets means quantifying building performance, as well as making clean energy infrastructure like renewables and transportation, and technologies such as thermal storage, batteries and fuel cells part of the overall building management strategy.

There are three categories of emissions for buildings, as defined by Greenhouse Gas (GHG) protocol:

Scope 1 – Direct, on-site emissions, usually due to burning fuels

Scope 2 – Emissions associated with energy / utility purchases to operate the building, including electricity and steam

Scope 3 – Emissions from value chain related to all activities (not directly controlled by the company itself or building owner)

It’s often unclear how tenants and landlords should categorize the carbon emissions of leased office space. Is the carbon that is generated the responsibility of the property owner or the occupier? Whether you categorize these emissions as Scope 1, 2 or 3 is dictated by the type of lease in place, as well as the organizational boundary.

Some building owners and developers have adopted progressive approaches toward solving this problem by asking tenants to participate alongside them in achieving net-zero goals. While not a requirement, a tenant that commits to the upgrade of individual space along with the building’s common areas, lobbies, riser closets and mechanical rooms could allow a tenant to claim its pro rata share of the building’s carbon reduction in its own overall Environmental, Social and Governance (ESG) score. This could be a significant win for many larger corporations with shareholders, customers and employees demanding action around ESG goals.

It’s all about that base

The critical first step to net zero is to baseline the emissions of a building or building portfolio. Key environmental metrics that make the most impact are energy reductions, energy use intensity, waste reduction and diversion and carbon emissions. However, the seemingly simple act of baselining these things is precisely what prevents a building owner from getting started.

Baselining Tips:

· Categorize your emissions as Scope I, II or III using the three scopes from the GHG protocol. Takeaways will include carbon hot spots and data gaps.

· Along with the three scopes, break down your portfolio by the age, condition of asset, and building type. Older buildings may need tweaks or refurbishment of operating systems, HVAC, lighting, or the exterior “building envelope”.

· Review the current state of equipment. Identifying today’s performance—while factoring in planned upgrades —allows for comparison against carbon reduction goals and ability to prioritize future improvements.

Once the baseline is established, it’s important to compare that information against an industry benchmark. There are resources available to do this, including the Environmental Protection Agency’s Benchmarking and Performance Standards Policy Toolkit and ENERGY STAR® Portfolio Manager.

Following baselining and benchmarking, a framework for success can be built, retrofitting and capital improvements can be identified, and the reduction of energy supply and renewables can begin.

PATHWAY TO CARBON REDUCTION FOR REAL ESTATE

AI brings sophistication and real results

Technology is a critical tool in any building owner’s net-zero mission. The rapid evolution of smart building technology in the last decade has been groundbreaking, connecting systems to enhance productivity, building efficiency, workplaces and people. But how is smart building technology facilitating a net-zero action plan?

There are incredibly sophisticated technology tools like Envio, which integrates with smart building technology. Envio utilizes artificial intelligence (AI) to adapt to real-time conditions and allow building management to track, learn, optimize and automate an entire portfolio’s equipment and systems from a central dashboard. A tool like Envio is making waves for its ability to not only collect data from all of a building’s various systems and chillers, but also feed occupancy data using cell phone metrics to represents people. With this data it can automatically optimize a building and its heating and cooling based on the net-zero goals.

CEO Lynn Martin of Red Bison, a building connectivity program providing integrations for all operation, property and tenant-based solutions, explained why his company recently entered into partnership with Envio.

“Envio is really the next step for us in being able to understand the human experience and translate it to actionable climate-related strategies for multifamily and office buildings. Our ultimate goal is to create the most intelligent, dynamic and environmentally sound spaces, and Envio allows us to do that.”

Building owners and property managers are feeling the pressure to meet net-zero goals, particularly because buildings (and the systems that power them) are the world’s single largest carbon emitter. But while the regulations surrounding net-zero may not be clear, the path forward will undoubtedly be paved with new technology, partnerships and approaches to support a greener, more energy efficient world.

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