Let’s talk about Scope 3 emissions: the next critical phase in decarbonising the real estate sector.

The theme for Climate Week NYC 2023 was We Can. We Will, a rallying cry for business leaders, political change makers and civil society representatives to speed up progress in decarbonisation.

  • 12 Oct 2023
  • by
  • Cate Harris, Group Head of Sustainability & Lendlease Foundation

Indeed, time is running out for the world to limit global warming to well below 2 degrees. According to the IPCC’s Sixth Assessment Report released in March this year, the pace and scale of climate action is insufficient to tackle climate change. Likewise, the 2022 Global Status Report for Buildings and Construction reported the buildings and construction sector is “not on track to achieve decarbonization by 2050”.

As a globally integrated real estate organisation, we want to play our part to accelerate the pace and scale of decarbonisation. And so, at Climate Week NYC we called on the real estate sector to expand its decarbonisation focus; to turn our combined attention to addressing our Scope 3 emissions.

We believe an industry-wide focus on targeting Scope 3 emissions could unlock industry collaboration up and down the value chain and kick-start the next critical phase in decarbonising the whole building system. To help spark the conversation about Scope 3 emissions, we officially launched the Lendlease Scope 3 Emissions Protocol v.1. The feedback we have received has been overwhelmingly positive. Read more about what people are saying about the Protocol here.

So, why do we think a focus on Scope 3 emissions could become a catalyst for decarbonisation?

The answer lies in the interconnectedness of Scope 1, 2 and 3 emissions.

Scope 3 emissions are the indirect emissions that occur upstream and downstream in an organisation’s value chain. For many organisations, these value chain emissions represent the majority of its carbon footprint. At Lendlease, approximately 90 per cent of total global carbon emissions are Scope 3 emissions – from upstream activities, such as the manufacturing of building materials and downstream activities, such as emissions from the use of electricity and natural gas by building tenants.

The important thing to recognise is that every organisation’s Scope 3 emissions are someone else’s Scope 1 or 2 emissions. This means when an organisation signals its intention to reduce its Scope 3 emissions, it creates a decarbonisation catalyst for businesses along the whole value chain. Imagine then, the effect of a whole industry signalling it wants to reduce Scope 3 emissions – this could become a catalyst for radical collaboration across the sector with increased investment and innovation driving both pace and scale of decarbonisation.

This is why we want to spark a conversation about our global peers getting to work on Scope 3 emissions. We recognise that one of the biggest barriers to setting Scope 3 reduction targets is the lack of clarity around our sector’s Scope 3 emission reporting boundaries.

Without consistency and clear guidance, it’s hard to make a start. As the saying goes, you can’t manage what you don’t measure. While there is consistency and clear guidance in how to account for Scope 1 and 2 emissions across our sector, the same clarity is not yet in place for Scope 3 emissions.

So, to that end, we have compiled our thoughts and research on a starting point for those boundaries that we hope will create debate and comparison and ultimately a consensus view.

The Lendlease Scope 3 Emissions Protocol v.1 is our current view on the GHG Scope 3 emission categories we have determined to be relevant to our value chain and which will form part of our Absolute Zero by 2040 target. It is designed to be a useful model for others in real estate investments, development and construction.

The Protocol is a seminal piece of work on our pathway towards our target of Absolute Zero by 2040. To know where to focus our decarbonisation, we need to first know how we are accounting for our Scope 3 emissions – what is material and therefore, what is in and out of scope.

We are sharing the Protocol to spark engagement across our sector, to help drive to a consensus on how to account for and report on Scope 3 emissions. If we can collectively achieve this, then we can collaborate as an industry to solve the two big systemic challenges we face: the decarbonisation of harder to abate materials, and the digitisation and sharing of Scope 3 emissions data. The Protocol is intended as an important first step towards that outcome.

While we are advocating for a consistent and comparable approach to Scope 3 boundaries and an industry-wide, data-sharing platform to enable the secure exchange of digitised, verified Scope 3 emissions data across our vast value chains, we are already taking action to reduce our Scope 3 emissions.

For Lendlease, the majority of our Scope 3 emissions are in the Purchased Goods and Services category, which includes carbon intensive materials such as steel, cement, aluminium and glass. We don’t underestimate the challenges of decarbonising these harder to abate materials but, building on our past success sourcing and procuring low embodied carbon materials, we are currently working on over 60 projects globally with embodied carbon requirements – a testament to our customers and capital partners appetite for lower embodied carbon buildings and our supply chain’s ability to deliver innovative lower embodied carbon alternatives. Read more about our project work here.

Our efforts to track, measure and report Scope 3 emissions are in-line with an increasing focus on Scope 3 disclosure by investors, regulators, reporting frameworks, and building rating tools. Investors are calling for disclosure of material scope 3 emissions so they can develop a full picture of climate related transition risk exposure. Disclosure of material Scope 3 emissions is being proposed by regulatory agencies such as the Securities and Exchange Commission (SEC) in the U.S. and by sustainability reporting standards such as the International Sustainability Standards Board (ISSB), making better Scope 3 measurement and reporting an imperative.

As we said when we set our industry-leading Mission Zero targets in 2020, no one organisation can tackle the climate crisis on its own. We are all reliant on industry collaboration and aligned aspirations to drive the necessary transformation at pace and so we look forward to working with others on Scope 3 emissions, the critical next stage in our shared decarbonisation journey.