Will the Proposed National Net-Zero Building Definition Go Far Enough?
Will the Proposed National Net-Zero Building Definition Go Far Enough?
“Net-zero.” That term has been thrown around in the property industry for a few years now, but if you were to ask someone using it for a definition, they likely wouldn’t be able to give you a clear answer. The lack of clarity on what net zero means has caused confusion in the real estate industry for years. Interchangeable terms like ‘net-zero energy’ and ‘net-zero carbon’ mean different things. The countless variations of green building certifications also have differing criteria. A newly proposed national net-zero definition will provide much-needed clarity.
The White House and Department of Energy decided to end the confusion when they recently released a draft definition for a zero-emissions building. The definition aims to create a common framework for better market alignment to move real estate toward zero emissions. The proposed definition focuses on three core principles: highly energy-efficient buildings free of onsite emissions from energy use and powered solely by renewable energy. It applies to existing buildings and new construction but not federally-owned properties. The new definition isn’t legally binding or intended to establish a regulatory requirement. However, the upcoming fifth version of the LEED building certification will align with the definition.
The most significant benefit of a national net-zero definition is the consistency it will provide across the real estate sector. Regulations, energy codes, and building performance standards across the U.S. vary significantly from jurisdiction to jurisdiction. A unified definition will give these standards a common target, moving the nation’s buildings in the same direction. The proposed definition will also reduce claims of greenwashing, giving building owners a verifiable set of metrics to prove their assets are net zero.
According to some in the building sector, the net-zero definition needs one critical element added. For the time being, the proposed definition only addresses operational carbon emissions and energy efficiency. The Department of Energy notes that embodied carbon, refrigerant impacts, and grid-interactive equipment may be addressed in subsequent updates. The definition doesn’t define carbon emissions in terms of Scopes 1, 2, and 3 categorizations. But as it currently stands, Scope 3 emissions are not covered. Scope 1 emissions come directly from a building, while Scope 2 are emitted from onsite electricity. Scope 3 emissions come from outside assets, such as embodied carbon released during construction and emissions from maintenance, renovation, and disposal.
Scope 3 emissions are typically the highest source for a building, spanning across the value chain. “To say forsaking Scope 3 is a missed opportunity is an understatement; it’s a catastrophe,” said Mahesh Ramanujam, President and CEO of Global Network for Zero, an international collective of business leaders implementing strategies for a zero emissions world.
Ramanujam says Scope 3, such as embodied carbon, is the Achilles’ heel of the real estate industry, and companies that ignore it are already falling behind. It’s why many companies are accused of greenwashing or exaggerating climate commitments. “While I applaud the mention of embodied carbon for future definition updates, I’d recommend greater urgency in including it,” Ramanujam said. Embodied carbon is becoming easier to measure and mitigate. More real estate firms are ‘upcycling’ new construction, using recycled materials in the building process. Scope 3 emissions are also no longer impossible to track or measure. ESG data platforms and certification bodies are available to help asset owners track emissions and identify strategies to reduce them. Strategies to eliminate these emissions include using Environmental Product Declarations or Life Cycle Assessments. The latter systematically evaluates all four stages of a building’s life, from how its raw materials are procured to eventual demolition.
Sustainable materials procurement is essential in Scope 3 emissions reduction. Purchasing materials that consider environmental impact significantly reduces a building’s carbon footprint. This requires environmental criteria for selecting suppliers, conducting audits on suppliers, and using products with environmental certifications. Circular economy principles in building design, construction, and maintenance also mitigate Scope 3 emissions. Building materials recovery systems rescue materials from waste streams and give them a second life.
These strategies are becoming more common, but Scope 3 emissions are still on the back burner for many real estate owners. The problem with not including Scope 3 in the net-zero definition is that the ultimate goal is zero emissions across the real estate value chain. Without that goal clearly defined now, building owners may fall further behind in tackling an area where there’s already a learning curve. Including Scope 3 emissions into the definition now would at least allow property owners to create long-term plans, even if they address Scope 3 further down the line and after operational carbon and energy efficiency.
As it stands, very few commercial buildings are categorized as net-zero. The World Green Building Council estimates that less than one percent of all global commercial buildings are verified as net zero, though progress is increasing. The number of net-zero properties is growing by as much as 50 percent annually. Counting the exact number of net-zero buildings is difficult because of varying definitions, which a national definition will help.
Commercial property owners already have their work cut out for them to increase energy efficiency and lower operational carbon. Tackling Scope 3 emissions is another massive task altogether. The White House’s proposed net-zero definition has not been finalized, so there’s a chance they could include Scope 3 considerations. Interestingly, the proposed SEC climate disclosure rule may also leave out Scope 3.
The reasons for leaving the factor out of the net-zero definition and the SEC rule are unclear. The SEC has faced heated opposition to its rule, causing it to delay its release date repeatedly. The net-zero building definition is not a regulatory standard, so it hasn’t faced the same scrutiny. The White House may simply feel addressing energy efficiency and operational carbon is more achievable, preferring to leave out some elements of a building’s impact that are somewhat inevitable.
A national net-zero carbon building definition will bring much-needed clarity as pressure mounts to decarbonize real estate. Leaving out Scope 3 emissions may be a mistake, but the industry is already behind on achieving net-zero energy and operational carbon. The danger of not including Scope 3 now is the real estate industry will further delay a pivotal factor of emissions reduction. It will be hard to claim a commercial building is genuinely net-zero if Scope 3 is not included. For now, the proposed national definition is a step in the right direction, but it still may not go far enough.