Four key points to know about SBTI’s building guidance

In August 2024, the Science Based Targets initiative released the final version of its new guidance for the building sector, incorporating both feedback from the public and from a recent pilot study. Our experts break down the key requirements that made it into the final version and how it impacts real estate companies looking to set science-based targets.

On August 28, 2024, the Science Based Targets initiative (SBTi) released its final guidance around target setting for the buildings sector. The final version of this guidance represents a joint effort by many key players in the sector, including Ramboll. Delivering the global pathway for embodied carbon and advising the SBTi on these guidelines was our primary role in the process.

To recap the journey that brought us to this final guidance:

• An initial version of the guidance was released to the public for comment in May 2023
• A revised version of the guidance was issued in November 2023 after incorporating public comments
• Between January and March of 2024, SBTi conducted a pilot study with companies to identify potential challenges for implementing the guidance across regions and business types
• Since the pilot concluded, SBTi has been revising the guidance based on the feedback they received.

1. Companies must set targets on in-use operational emission and/or embodied carbon only if these emissions are significant (>20% of total emissions).

• Companies with in-use operational emissions exceeding 20% of their total emissions (scope 1,2 and 3, cat 1-14) in their base year need to set a target.
• In-use operational emissions needs to account for both landlord and tenant-controlled spaces (i.e. must use a “whole building approach”) and must also include fugitive emissions.
• Companies with upfront embodied carbon emissions exceeding 20% of their total emissions (scope 1,2 and 3, cat 1-14) in any of the last 3 years need to set a target.
• Upfront embodied carbon targets cover both emissions from new developments and from acquisitions where the company is the first owner and must have a base year within the last three years of submission.

2. Companies must include certain scope 3 categories in their target boundary based on their user type.

• Developers, owner-occupiers and owner-lessors have to include upfront embodied carbon in their targets (category 1 or 2).
• Both developers and property managers must include category 11 (use of sold products)
• Owner-lessors must include category 13 (downstream leased assets).
• Note: for the upfront embodied carbon and downstream leased asset emissions, if companies do not meet the 20% threshold outlined above requiring a building sector specific target, this category should still be included in a cross-sector target.

3. Companies must make a commitment not to install new fossil fuel equipment after 2030.

• In addition to setting decarbonisation targets, companies must commit to install no new fossil fuel equipment that is owned or financially controlled by 2030.
• This applies to any equipment used for space heating, power generation, cooking or hot water (but not to special equipment, like emergency backup power) in both new developments and in existing buildings (as equipment reaches end of life).

4. Location-based accounting is recommended, but not mandatory.

• After concerns raised around mandatory location-based accounting in both the public feedback period and the pilot study, SBTi has decided to allow either location-based or market-based accounting for scope 2 emissions in target setting.
• Location-based accounting is still recommended, and companies must report using both methods.
• In addition, companies are encouraged to make an energy efficiency commitment, further supporting SBTi’s goal to reduce emissions through reduced energy usage, not market-based instruments (such as renewable energy credits).

SBTi has also included clarification on the calculation of several key categories and recommendations around reporting. For example, companies are also encouraged to disclose absolute emissions for categories where they set intensity targets to show that targets are leading to absolute reductions. Companies are also asked to provide a breakdown of any emissions reductions to clearly indicate how much reduction is based on the sale of assets. Although some of these are not mandatory, these clarifications and recommendations will help ensure consistent reporting and increase transparency.

This final guidance from SBTi will take full effect six months from now, at the end of February 2025. Real estate companies can begin to adopt the guidance now, but starting in March 2025, any new submissions or re-submissions will need to align to this new building guidance.

For companies planning to adopt these guidelines in the future, we recommend reading through the full guidance to make sure all the rules for setting targets are clear. Companies can also use SBTi’s new tools to understand what setting targets under this new guidance might look like.

For any questions on how the guidance applies to your specific company, reach out to the Ramboll experts listed below. We supported the SBTi in developing these new guidelines for buildings and can help you get ready for their implementation.