“Our company has reduced our emissions by 20%!” The frequency of carbon disclosure headlines such as this is only increasing as the real estate industry steps up its environmental initiatives. As more real estate portfolios adopt carbon footprint disclosure initiatives, it is critical that the industry maintains transparency in carbon footprint declarations. Providing the appropriate background information behind how reductions were calculated and achieved is what gives disclosure statements context and meaning.
Measuring emissions performance for a portfolio is an intricate and detailed process, and it is easy for nuances to be lost in translation. Without context, it is difficult to understand the underlying environmental performance of one portfolio’s assets from another. Organizations are also facing mounting pressure from stakeholders to refine their carbon disclosures as industry awareness of the nuances behind carbon grows.
Frameworks such as the World Resources Institute’s GHG Protocol and the Global Reporting Initiative’s Sustainability Reporting Guidelines provide excellent strategies, guidance, and tips for ensuring that performance statements are precise and contextual. Following such frameworks when reporting greenhouse gas (GHG) emissions can ensure that the necessary details for the disclosures to be actionable are present.
5 Best practices
Below are five best practices that organizations can follow to develop accurate, contextual, and meaningful statements about their carbon footprint reductions.
- Report all indirect GHG emissions (Scope 2) using both the location-based and the market-based
The location-based method uses an average emissions factor for the utility grid in a property’s area and does not consider the organization’s choice for where their power comes from. The market-based method, on the other hand, uses an electricity supplier-specific emissions factor that allows organizations to take GHG reduction credit for choosing ESCOs with cleaner electricity generation or purchasing off-site renewable power.
Much of the greenhouse gases emitted by the real estate sector stems from the emissions of the utility grids that are generating and delivering electrical power to buildings. In addition to reducing emissions at the asset level, organizations can also choose to purchase renewable energy credits (RECs) and carbon offsets to help balance out the emissions generated by their local electricity grid. By dual-reporting using both Scope 2 methodologies, stakeholders can understand the roles that RECs and regional power grids played in a company’s carbon reduction.
- Include like-for-like GHG emissions in addition to absolute GHG emission reductions.
Companies often set a static baseline for their GHG emission tracking to monitor long-term improvements and carbon reductions over multiple years. However, real estate portfolios are rarely as static; changing size through asset acquisitions and sales. To report like-for-like GHG emissions using a fixed baseline, a company should only include emissions from assets that were owned and/or operated in both the baseline year and in the current reporting year.
When annual emissions inventory is limited to just the buildings that were wholly owned and operational throughout the tracking period, it presents a more insightful “apples-to-apples” comparison of performance.
- Verify and validate the asset data used in carbon disclosure calculations.
Undergoing an internal or external validation process of the data ensures data quality and accuracy. Validation should be performed by an internal or external third-party that was not involved in the data collection and calculation process. Validators should evaluate methodologies of data collection, data completeness, anomalies or gaps in data and calculation methodologies.
- When gaps in data occur, note the estimation methodology
Gaps in building data inevitably pop up due to unavailable or unreliable building utility information. However, a missing month should not prevent the tracking and advancement of emission reductions. When estimations are used to close data gaps, it is important that the calculation methods are reasonable and made clear. Examples of accepted estimation methods include: taking an average of adjacent months, approximating usage with utility costs or utilizing the previous year’s usage from the same time period.
Data inconsistency is one of the major contributors to portfolios inadvertently over- or under- reporting performance. Proper data scrubbing and clarity around estimation methodologies for missing gaps in asset data are essential if stakeholders and investors are to have adequate insight and confidence in GHG claims.
- Where possible, reduce emissions steadily through implementing energy conservation measures at assets.
Significant environmental performance improvements and sustained long-term emission reductions cannot be achieved without directly reducing energy consumption of assets. Energy conservation measures can include both capital improvements measures and operational adjustments. Real estate organizations do not have direct control over the emissions attributed to regional utility grids, so it is essential that they move the needle lower on the demand-side by investing in the energy efficiency of their assets.
Measuring, tracking, and reducing the carbon emissions of real estate portfolios is critically important for the future of the planet, and is a task that requires great attention to detail. Investors and stakeholders are looking to hold organizations accountable and make financial decisions informed by emissions performance data from reporting frameworks such as GRESB or GRI sustainability reports. Clear and contextualized carbon footprint disclosures are key to making sustainable investments and achieving our climate change mitigation goals.