A quick skim of the ESG plan of any of the top commercial property owners will reveal aggressive decarbonization targets for their portfolios. Numbers like: 20% reduction by 2025, 50% by 2030, 80% by 2040, 100% by 2050. These targets represent a significant step towards decarbonizing the built environment, but are they achievable? The track record to date of most organizations is not great when it comes to meeting carbon reduction goals. Why is this, and what can be done to change this story?
Barriers to Decarbonization
Even where organizations have made climate change a strategic priority, there are often signficant barriers to decarbonization. And no wonder, it represents a big departure from previous ways of doing business. My experience is that these barriers tend to stem from organizational and financial issues, rather than technical hurdles.
One of the biggest barriers is a tale as old as time, organizational silos. In this case, a disconnect between the sustainability departments, whoe are setting ESG targets, and the asset managers planning their annual budgets for new equipment.
Other barriers may be financial. For example, companies that only fund projects with a positive ROI based on traditional approaches to financial analysis. This is how energy efficiency projects have long been evaluated and the approach has been carried over to decarbonization projects. However, decarbonization is not the same as efficiency. There are certainly some cases where you can achieve a positive ROI and achieve deep reductions in GHGs, but this simply isn’t the case a lot of the time.
How to Be Successful
The organizations that are successfully tackling decarbonization are doing the hard work of changing how they make decisions as a business. First, you must bring together the sustainability folks, asset planners, and operations teams so that everyone is working from the same playbook. This ultimately means understanding where every investment into your buildings fits in terms of its impact on carbon emissions. Viewing projects through a sustainability lens, in addition to a financial one, is the first step to making change.
The financial viewpoint remains critical though, and organizations need to adapt how they look at things like ROI. Many organizations are modifying their financial analysis to take into account future carbon risk. Things like rising carbon taxes or other carbon pricing mechanisms, risk of fines from municipal carbon intensity by-laws, and so on.
Other organizations are simply accepting that, to hit aggressive ESG targets, you need to spend money on decarbonization projects. Viewing these projects more like necessary infrastructure upgrades, like a new roof, than as an investment that is expected to generate a financial return. When taking this approach, the goal is to seek out the most impactful, least cost, carbon reduction opportunities. Even if these have a higher lifecycle cost than the “business-as-usual” alternatives.
However you go about making the argument to fund decarbonization, you’ll next have to confront questions like: Which facilities should I prioritize? Where are the most cost effective decarbonization opportunities? How much money do I need to spend to hit these targets? When do I need to spend it? While answering these questions may seem daunting, bringing in additional data can offer clarity. Making smart use of additional data can enable you to make good decisions and prioritize your actions.
For example, let’s take 2 similar buildings with similarly sized gas boilers both coming up for replacement. On the surface, just looking at your asset list, these may appear to offer a similar opportunity for decarbonization. But a bit dig deeper and you may start to find many important differences. One of these buildings may be densely occupied and full of computer equipment. As a result, it has a small space heating load that generates just 50 tons a year of GHGs. The other building could be sparsely occupied and has very long run hours and generates 250 tons a year. Without considering this additional information, the planning for these projects could have been the same. But by bringing in just a small amount of additional data, you can start to better evaluate where to get the biggest bang for your decarbonization $.
Tools That Can Help
The traditional way that organizations figured out things like: when equipment needs replacing, how much energy it uses, costs for alternative lower carbon options, etc. was through engineering studies. Energy audits, condition assessments and the like. However, this approach has a scaling problem. These studies are expensive and tend to produce static reports that tend to sit on shelves. Most importantly, there is simply no way that the number of studies required could be performed quickly enough to meet the ESG goals being set.
Fortunately, there are SaaS products on the market that can help, platforms like Audette and Carbon Lighthouse. These tools let property managers start to quickly prioritize their best decarbonization opportunities and put together plans that will help them achieve their carbon reduction goals in the most cost-effective manner. These tools help you figure out when equipment is due to be replaced, how much carbon it generates, and what you replace it with at a portfolio level scale.
As potentially great as these new platforms are, we have all seen the graveyard of promising tools that never make the transition to being a tool people actually use. Successfully bridging the gap between sustainability and asset planning processes is key. But no matter how good the tool, success is still going to take adoption by organizations that are committed to putting carbon reduction planning at the heart of how they maintain and upgrade their buildings.
Finding a tool that works for your organnization and conducting a high level review of your carbon reduction opprotunities is just the first step. There is obviously a lot more work to do after this initial screening, but at least now you have an idea where to focus your efforts, a budget, and an overall plan that gives you shot at meeting your targets. Time and time again, as we do detailed studies and engineering work to implement big decarbonization projects I’m reminded that retrofits can be really hard and full of surprises. But it starts with a plan.
