The carbon impact – five reasons why carbon reporting is key for property developers

In the past year or so, several local authorities introduced new planning guidance – such as The City of London Corporation’s London Plan Guidance – that requires developers to incorporate whole life carbon reporting into their planning applications.

Why do property developers need to start accounting for carbon now?

1. A greener building holds greater value in the market

A property’s energy-saving credentials will continue to hold value with consumers, who want to mitigate the ongoing operational energy cost burdens of the buildings they inhabit.

A report from the Home Builders Federation ‘Greener, Cheaper, Cleaner’, found that energy efficiency of homes is a top priority for almost two-thirds of homebuyers, not surprising given the continued cost-of-living strain on families.  But it’s also important to look beyond the renewable energy capabilities of the building and consider the levels of ongoing maintenance burdens that’s required for the components used.

The future maintenance burden of the building will have an environmental cost as well as a financial one – and this burden will quickly compound as we start to see additional financial penalties for environmental impacts. Therefore, the specification of the components used in the initial construction of the building will undoubtedly impact on its value. The most logical solution for demonstrating this to any future purchasers or tenants is to appraise design options through life cycle costing and whole life carbon assessments.

2. Save the developer and consumer money

Currently, council tax bands are based on several factors that include size, layout, location and character. But just as some local authorities have schemes in place to deter drivers from using the most polluting vehicles – such as the Ultra Low Emission Zone (ULEZ) in Greater London – councils could introduce a tax to encourage homeowners to make their homes more energy efficient.

In time, this could also include a levy for properties built using more carbon-intensive materials or processes. To mitigate the risk of this, developers could consider undertaking a whole life carbon assessment during the early stages of a construction project – ie, its design phase at the earliest stages of design. This means the overall cost of a building need not be more expensive. Indeed, low carbon alternatives to high energy intensive materials could actually reduce costs. Therefore, it makes sense to conduct whole life carbon assessments – not only to save on manufacturing costs but to reassure the consumer they won’t be saddled with more expenditure.

3. Fulfil funding criteria

Over the past few years, major investors have placed greater emphasis on investing in projects run by companies that set science-based targets (SBTs). Increasingly, they use frameworks created by the Institutional Investors Group for Climate Change (IIGCC) and The Carbon Trust – who work with corporates and governments, to help them align their strategies with climate science and meet the goals of the Paris Agreement – to guide these decisions.

They also use guidelines and frameworks set out by The Carbon Risk Real Estate Monitor (CRREM); a project developed by the Sustainability Consortium. This was designed to help investors assess and manage risk in the real estate sector related to climate change. With the onus on reducing embodied carbon, CRREM’s aim is to rank the performance of a building against science-based targets. If it exceeds its allocated carbon value, it could potentially become stranded and start to lose value.

These calculations could become increasingly important for property developers, who need to accurately predict the chances of their projects being financed or evaluate the risk of their existing portfolio.

4. Support businesses with their ESG commitments

Increasingly, a wide number of organisations want to demonstrate their commitment to Environmental, Social and Governance (ESG) through their business’s premises.  For over 30 years, Building Research Establishment Environmental Assessment Method (BREEAM) has been the main certification system in operation that’s evaluated and rated the sustainability performance of non-domestic buildings in the UK.

Typically, it assesses the procurement, design, construction and operation of a development against a range of targets based on performance benchmarks. There’s substantial evidence this can also give developers substantial return on their investments. Research undertaken by Property Week shows that ‘central London office buildings with a BREEAM ‘Outstanding’ rating have rents 23% higher than the average headline rent.  Similarly, buildings with an Energy Performance Certificate (EPC) ‘A’ rating have rents 17% above average headline figures.’

However, the onus on embodied carbon looks set to become equally as important. If you look at the total whole life carbon emissions breakdown for different building types, the figures can vary quite dramatically. For example, the whole life embodied carbon emissions for an office makes up 35% of its total whole life carbon emissions (to practical completion), while a warehouse makes up 47%. These figures will become increasingly important for property developers, as the green agenda continues to underpin many more company strategies.

5. Building regulations and planning requirements will continue to be updated

In addition to the changes set out under Building Regulation Approved Documents F, L, O and S (due to come into force by June 2025), the industry has proposed a new amendment, Part Z. This would ensure mandatory assessments and reporting of whole life carbon, with the aim of reducing the amount of embodied carbon across the construction industry.

Although this is unlikely to become enshrined in law over the next few years, more local authorities across the country could follow the example of London Plan Guidance and ask for whole life carbon reporting in their planning requirements. Property developers could be required to provide a carbon number that indicates all the energy used during the construction of a building – from the extraction of raw materials, their transportation, installation and maintenance, and their end-of-life process.

Operational energy reporting has been in place for some time for many businesses that are required, by law, to report Scope 1 and Scope 2 carbon emissions. Scope 1 covers direct emissions owned or controlled by the organisation – for example, emissions from fuel used in a furnace or boiler – while Scope 2 refers to indirect emissions physically occurring off-site – for example, emissions from a power plant to supply electricity to a building. It’s only a matter of time before Scope 3 emissions – which require cradle to grave emissions to be reported – will become mandatory.

Conclusion

The current raft of building regulations, due to become mandatory by June 2025, focus on increasing energy efficiency and reducing operational carbon. But it’s only a matter of time until measuring embodied carbon becomes mandatory too.

In the short-term, property developers need to look at regional variations to determine the impact of whole life carbon reporting on their potential return on investment. And as well as investing in technologies that improve energy efficiency and fulfil the requirements of the new building regulations, they also need to be thinking long-term. Primarily, this includes planning whole life cycle carbon assessments on components and materials, used for any new developments and choosing the right specifications to offset and minimize future risk – ideally in the design phase.

The industry has widely adopted the RICS (Royal Institution of Chartered Surveyors) Standard on whole life carbon assessments. The application of the standard varies in the tools and calculators seen in the further industry. But it currently provides the most accurate set of assumptions and guidelines.

Historically, there’s been a tendency for the industry to consider operational and embodied carbon separately. But they’re equally as important and, ideally, both need to be measured and reported at the design phase of each project, to reduce the carbon load of a building or project.  However, our industry has lacked a simple way to compare cost and carbon choices on one easy-to-use platform. This was our main motivation for designing the Cost and Carbon Materials Database, part of our Life Cycle Evaluator package. BCIS’ service streamlines the entire process, while supporting efforts to decarbonise, ensuring it’s far easier for property developers to make better-informed decisions, for both their budget and the environment.

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