What’s changed in the SBTi building guidance for real estate industry?

The Science Based Targets Initiative (SBTi) revised its guidance around target setting for the buildings sector on 21 November, 2023. The guidance represents a more ambitious plan to decarbonise the building sector. The guidance has been developed by many key players in the sector, including Ramboll (which delivered the global pathway for embodied carbon and advised the SBTi on the preparation of the initial and revised guidelines).

An initial version of the guidance had previously been released in May 2023 (see our previous piece on the draft guidance here). SBTi has spent the last few months reviewing a significant number of public comments and revising the guidance based on the feedback.

The SBTi has elected to run a pilot programme for using the revised guidance. The goal of the pilot is to:

• Ensure that the guidance, criteria and tools are robust, clear, and practical
• Identify potential challenges for implementing the SBTi Buildings Guidance across regions and business types

The pilot period is expected to kick off on 11 December, 2023 and run through 23 February, 2024. Companies who wish to participate in the pilot can submit an application here.

Because of this pilot period, guidance from SBTi will likely not finalise the guidance until the end of the first quarter or the beginning of the second quarter of 2024. The guidance will take effect 6 months after the final draft is published, so real estate companies will not need to align to the new building guidance until the second half of 2024.

The latest guidance (version 0.2) contains a few significant changes as compared with the original draft released:

1. Location-based accounting is no longer mandatory

• Original Draft Guidance: Companies were required to use location-based accounting for scope 2 emissions
• Public concerns: This prevents companies from relying on renewable energy credits (RECs), green tariffs, and other market-based instruments. In addition, the location-based only accounting approach doesn’t align with other SBTi guidance (which allows either) or the GHG protocol
• Updated “Pilot” Guidance: SBTi will allow either location-based or market-based accounting for scope 2 emissions in target setting. The location-based is still recommended and companies must report using both methods

2. Commitments to no fossil fuel heating and cooking were extended

• Original Draft Guidance: Companies were required to make a commitment not to install fossil-fuel based heating and cooking from 2025 onwards
• Public concerns: The timing of this requirement was too aggressive; 2025 was regarded as too short a deadline for global implementation of this commitment
• Updated “Pilot” Guidance: SBTi has updated the commitment to be “within five years of target submission” or by 2030, whichever is sooner

3. Embodied carbon targets are not necessarily mandatory and pathways are more flexible

• Original Draft Guidance: All real estate companies were required to set specific embodied carbon targets using new sector-specific absolute contraction pathways for embodied carbon
• Public concerns: Companies struggle to get good underlying data used for embodied carbon calculations, making it difficult to quantify emissions and track progress. In addition, the pathways had limited granularity and didn’t work for all situations
• Updated “Pilot” Guidance: SBTi has introduced new thresholds for setting embodied carbon targets. Only companies with embodied carbon emissions exceeding 20% of their total emissions (scope 1,2 and 3) need to set a target. In addition, companies can use either the sector-specific guidance or SBTi’s cross-sector methods with 1.5⁰C ambition

In addition to these changes, SBTi has revised the guidance to restructure and clarify several sections. For companies planning to participate in the pilot programme or adopt these guidelines in the future, we recommend reading through the full guidance to make sure all the rules for setting targets are clear.

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.