Decarbonization in the Built Environment: Unlocking enterprise value through targeted emissions reduction

Introduction: How decarbonization delivers sustainable business growth for the built environment

Decarbonization is taking on new importance among companies who must reduce emissions to meet investor & customer expectations, while also delivering enterprise value. It is not a coincidence that decarbonization, when done correctly, enables companies to fulfill both obligations, given how interwoven emissions are with commercial value.

This third and final blog in our three-part series on operational decarbonization explores how companies can use tailored building management to reduce their real estate-based emissions while also bolstering operational performance. As with our first two blogs on industrial heat and fleets, we highlight real-world case studies to bring building sector decarbonization to life and highlight the unique challenges and opportunities associated with emissions across the built environment.

Reducing building sector emissions is a win-win for companies

Globally, energy used directly within buildings and for generating electricity and heat for buildings accounts for 26 percent of all energy-related emissions.These emissions are largely driven by electricity imports and fossil fuels such as natural gas, used for building heating applications.

The significant energy consumption giving rise to these emissions is naturally a major cost for building owners and occupiers, making reductions attractive both from an economic and emissions perspective.

Given these factors, reducing building energy consumption is a growing focus for building owners and occupiers, as is reducing associated emissions by switching to cleaner energy sources. The technologies needed to accomplish both objectives are mature and proven. Heating needs, for example, can be addressed by adopting heat pumps or connecting to heat networks and improving the building fabric with more efficient insulation and glazing solutions, as well as lighting upgrades. Building owners and occupiers can leverage smart technologies linked to advanced building management systems to optimize energy use, while also benefiting from the rapid growth of on-site renewables to generate low-cost, zero-carbon electricity.

There are clear benefits to tackling building energy use and reducing emissions. For example, building owners are more likely to attract tenants seeking a space with lower operating costs and who increasingly have emissions targets to meet, sometimes commanding a rent premium. Mandatory energy efficiency standards are also increasingly common. Thus, improving building performance helps avoid stranded assets, while also potentially offering access to preferential lending terms and higher valuations from sustainability-focused investors. 

With real estate-based emissions being such a significant source of emissions for most companies, tackling them is a critical part of achieving any corporate-wide emissions reduction target. When paired with the cost savings from lower energy bills, building emissions reductions represent a major commercial opportunity.

Call to action

To get started on building decarbonization, consider the following practical steps and read on to see how real-world companies are putting them into action. 

• Unlock hidden savings: Conduct a building energy audit to identify cost savings and emissions reduction opportunities through building efficiency improvements. 
• Invest in future-proof technologies: Invest in proven technologies like heat pumps, smart building management systems, and on-site renewables to increase operational efficiencies and attract tenants.
• Move ahead of the curve: Avoid stranded assets, access preferential lending terms and higher valuations, and meet emerging energy efficiency standards by investing in building emissions reductions now.

Case study one 

The situation  

• A global leisure and entertainment company with a portfolio of more than 120 sites worldwide sought a costed emissions reduction roadmap for its buildings portfolio to support its company-wide net zero target, and deliver an increased enterprise value via lower opex and an enhanced customer proposition.pe

The solution 

• ERM identified several sites that were representative of the company’s full portfolio, including a theme park, aquarium, museum, and mixed leisure attraction, before conducting deep-dive energy and carbon assessments on each archetype to establish its energy use profile.
• For each archetype, ERM assessed a suite of carbon reduction measures, including energy efficiencies, on-site renewables, renewable energy procurement, and electrification of fossil fuel heating, cooling, and food preparation.
• ERM then calculated emission impacts, costs, and benefits for the company’s full portfolio, adjusting for local climate and energy mixes at all global sites.
• Lastly, ERM recommended measures to reduce the GHG emissions of the company’s building portfolio by over 90 percent. Key recommendations included: upgrades to heating, ventilation, cooling systems, lighting, motors, and pumps; installing rooftop and car-park solar photovoltaics; and procuring renewable electricity.

The impact 

• The site evaluation found that 73 percent of the building portfolio’s Scope 1 and Scope 2 emissions could be eliminated with a total investment of just under $50 million. Furthermore, these measures all had a positive net present value or had no net cost impact.
• ERM identified a further 20 percent of Scope 1 and 2 emissions that could be eliminated for an average cost of ~$100/tonne CO₂
• The assessment identified highly attractive energy efficiency measures, delivering GHG emissions savings of nearly 20 percent of base year emissions with payback periods of less than two years.

Lessons learned

• Rapid progress towards an actionable decarbonization plan for large portfolios can be achieved through an ‘archetype-driven’ analysis focused on a sample of representative sites.
• Companies can quickly evaluate and implement emissions reduction measures relevant to their global building portfolio, while accounting for regional climate and energy market contexts.
• Layered assessments of multiple building decarbonization options can identify significant concurrent benefits, including operational cost savings, access to more favorable financing, and enhanced revenue protection.

Case study two 

The situation 

• An automotive parts manufacturer with more than 60 manufacturing sites worldwide pursued energy consumption reductions across its site portfolio, using external capital funding through an Energy Saving as a Service (ESaaS) program. 

The solution 

ERM personnel applied a four-phase approach: 

• Identified Energy Conservation Measures (ECMs) based on data collected from each site, on-site and remote audits of the manufacturer’s portfolio, plus workshops with local site teams. ERM personnel held workshops with each site team to “fill the gaps”, jointly, where there was missing data.
• Secured funding for these ECMs, using a mix of energy supplier funding and performance guarantees.  
• Installed and commissioned the new
• Delivered maintenance services for the installed equipment and provided active energy performance management via a dedicated digital platform to generate additional energy savings and drive behavioral change among employees (e.g., using energy more efficiently). 

The impact 

• ERM personnel conducted audits on more than 60 sites across 10 countries and identified more than 250 ECMs and installed and commissioned the new equipment.
• Over 500 GWh of energy use is now monitored for the manufacturer through a dedicated energy monitoring platform.
• The above actions delivered an annual energy reduction of more than 10 percent across the site portfolio, representing annual CO₂ savings of 40,000 tonnes, with no upfront investment by the company. Furthermore, the manufacturer achieved annual estimated cost savings of €6.2 million.

Lessons learned

• Complex global companies can achieve significant energy and carbon reductions by implementing energy savings programs, with little or no capital investment, leveraging supplier funding and performance guarantees.
• Data gaps do not have to block Companies can fill gaps via collaborative workshops with local site teams who better understand the specifics of their own operations and buildings portfolio.
• Companies considering their own energy savings programs should ensure that their approaches are holistic (i.e., site- and company-wide, including process improvements) and verifiable through a comprehensive metering & monitoring campaign.

Conclusion

Our three-part blog series on operational decarbonization demonstrates how targeted emissions reduction initiatives can enhance corporate resiliency and performance amidst recent shifts in the business and geopolitical landscapes. These benefits are not exclusive to a select few companies. With the right actions, organizations operating across all sectors can access them regardless of their operational circumstances.

Taking lessons learned from the case studies covered above, companies with significant real-estate/built environment assets can translate decarbonization from ambition to actuality, reaping benefits along the way. Remember these key takeaways.

Key takeaways

• Representative ‘archetype’-driven approaches can help companies with large, diverse real estate portfolios create company-wide decarbonization plans that they can scale across their operations. 
• Building sector emissions reductions will likely pay for themselves or deliver positive financial returns within a few years of implementation.
• Tailoring building decarbonization plans to local and regional circumstances and collaborating with teams on the ground can accelerate implementation and unlock additional cost savings and performance improvements.