Challenges and Successes in Reducing Scope 3 Emissions (BOMA 2024)

The commercial real estate industry is leading the way in addressing greenhouse gas emissions in the built environment. Operational greenhouse gas emissions have received a lot of attention in this effort, but often overlooked are the Scope 3 emissions—the ones generated by your supply chain, material choices and other things that aren’t in your direct control.

A panel at the 2024 BOMA International Conference & Expo moderated by Hannah Debelius, Better Buildings program manager for the Department of Energy, explored ways to reduce Scope 3 emissions in both new and existing buildings.

What Are the Three Scopes?

It’s important to first understand the difference between scopes 1, 2 and 3.

Scope 1 emissions are from the fuel sources you directly burn on-site, like natural gas or propane.

Scope 2 emissions come from energy you’re purchasing—i.e. your electric bill.

Scope 3 encompasses everything else, from embodied carbon in building materials to the greenhouse gases emitted by transport companies who deliver products to you. Depending on your agreements with your tenants, the tenants’ emissions may also count as Scope 3 for you.

Emissions reduction planning, including Scope 3, is a major topic for participants in the DOE’s Better Climate Challenge initiative, Debelius said. Many times, companies will put together high-level climate action plans with a series of milestones (for example, net zero for all new buildings by 2030) without also assembling a plan about how to achieve these things. In response, the DOE released a framework to help property professionals connect their portfolio targets with the actual steps they’re taking in their buildings.

How to Reduce Building GHG Emissions

Panelists Michelle German, vice president of ESG for LBA Realty, and Chun Yee Yip, vice president of social impact for Lendlease, explained their approaches to reducing emissions from all three scopes.

“Decarbonization takes time,” German said. “You’re not going to get to it overnight. The strategy for us is that as equipment reaches the end of its useful life, we’re looking at what we can do to reduce energy and carbon emissions as much as possible at that point.”

Take Park Place in Irvine, California, for example. Over the years, LBA Realty has upgraded HVAC and lighting, implemented central plant upgrades to reduce energy use, and installed battery storage at this 2.1-million-square-foot campus, one of the company’s key assets.

“These kinds of things don’t just happen,” German said. “We have set a good process in place. We benchmark and track our data. We also require that our property managers put together an ESG action plan. To have that plan be as thorough as possible, we require every three years an energy audit and a decarbonization study.” This approach ensures good opportunities for savings emerge and the company understands where the opportunities are, German said.

Strategies for Scope 3 Emissions

Yip described Lendlease’s four-year effort to achieve net zero emissions for scopes 1 and 2 by 2025 and hit absolute zero (including all three scopes) by 2040. Lendlease set five key steps to achieve this goal:

1. Create a decarbonization investment strategy.

2. Phase out diesel and gas in operations.

3. Use 100% renewable electricity before 2030.

4. Collaborate with supply chain partners to set pathways to achieve absolute zero carbon by 2040.

5. Collaborate with tenants and residents to transition to renewable electricity and achieve absolute zero carbon by 2040.

The last two items fall into Scope 3.

“We quickly learned while we were on this journey that every organization’s Scope 3 emissions is someone else’s Scope 1 and 2,” Yip said. “We’re so interconnected in this. The ecosystem requires collaboration.”

Lendlease broke down the sources of its Scope 3 emissions, which make up about 80% of its total emissions—only about 9% is from operations. Most of the Scope 3 emissions come from construction and upgrades to existing assets, while tenants contribute about 12% of the Scope 3 emissions. “Not only is Scope 3 the largest source of our emissions, but the boundaries, measurement and data are not consistent,” Yip said. “The definitions are very broad.”

Other companies run into the same problem when trying to report Scope 3 emissions. Lendlease ultimately launched its Scope 3 Emissions Protocol to contribute to broader efforts to define the boundaries of Scope 3.

“If we can get everyone in this challenge to pull together, we’re going to be able to do two huge things,” Yip said. “One, decarbonize the hard-to-abate sectors of concrete, steel, aluminum and glass. The second is to align everyone with how we measure the data and reporting [of Scope 3]. We need to share this information in order for this to work.”

Lendlease is currently targeting a 10% reduction in Scope 3 emissions. It’s on its way to achieving it with three strategies:

1. Getting tenants and residents on board. Some properties have retailers. For these tenants, Lendlease developed a retail and operational guide covering everything from efficient lighting to healthy interiors to get the tenants on the same page as Lendlease.

2. Community solar. Lendlease installs solar panels and passes energy savings on to tenants.

3. Green leases. As with community solar, Lendlease is able to obtain benefits for both itself and its tenants. “If we go out and source X energy, what are the savings we’re getting as a landlord?” Yip said. “We’re going to pass it on to you, our tenants.”

Since 2021, the company has achieved a 7% decrease in Scope 1 emissions, more than 60% in Scope 2 and 10.5% in Scope 3—past its original 10% Scope 3 target.

“We may not have all the answers,” Yip said. “But together, we can find them.”