After COP21: What next for business and the buildings sector?

On 12 December governments from nearly 200 countries agreed to limit global warming to ‘well below 2C and to pursue temperature increase to 1.5C above pre-industrial levels’. Now that the dust has settled on this historic deal, we look at what the implications and opportunities are for our sector.

Intended nationally defined contributions (INDCs) from governments (pledges to curb or cut emissions) are a significant aspect recognised by the agreement, but are not legally binding in themselves and would still result in between 2.7 and 3C rise in temp. That said, the INDCs helped create a transparent framework for action and policy certainty which has the potential to give further confidence in the shift towards a low carbon economy.

2016 will be the time that UK government needs to put forward very clear policy commitments as to how it intends to meet future carbon budgets. The Confederation of British Industry, for example said that the deal heralded an exciting opportunity for business but that, “businesses will want to see domestic policies that demonstrate commitment to this goal and none more so than in the UK”.  The scaling back of many green policies in the last ten months has created a sense of nervousness in the business community. However, this is countered by an increased mobilisation of businesses who see the potential of the US$15.5tn cost by 2030 of meeting the key components of the Paris agreement. One of the recurring themes at Paris business events was the growing awareness of climate science and the impact of global warming. The resulting understanding is that $15.5tn looks like good value when compared against the long term cost of climate change on businesses’ viability, and investors are starting to follow this opportunity in favour of carbon intensive options like coal and oil.

Whilst the Paris Agreement won’t come into effect until 2020, the private sector has responded with clear intent to maintain momentum.  400 businesses have signed the Paris Pledge for Action, which pledges to ‘ensure the level of ambition set by the agreement is met or exceeded’ through taking concrete steps now to reduce greenhouse gas emissions.

So what does it mean for the buildings and construction sector?

The buildings and construction sector is responsible for about 30% of global greenhouse gas emissions which has the potential to proportionally rise given how the long lifespans of buildings locks in energy performance. Approximately half of the government signatories of the Paris Agreement included contributions directly relating to buildings in their INDCs. The industry itself showed intent to support the outcome of COP21, as an initiative set up by the UK Green Building Council saw more than 50 UK buildings and construction businesses put forward climate pledges in the run up. However, the same sector has been accused of supporting the controversial UK green policy changes we saw in 2015, therefore this may not represent universal support.

How does the sector contribute towards the 2C limit? At an early stage in business planning, a materiality review of an organisation’s activities will help identify what the most carbon intensive aspects are. From this developers, designers and constructors are able to understand impacts and set about committing to ways to reduce them. Initially these may be broad objectives or directions of improvement, which ultimately should be backed up by firm targets. Historically, targets for improvement on sustainability issues have been set on the basis of ‘what can be achieved’ or what compliance will require. In order to meet the intent of COP21, target setting for businesses will need to ask ‘what needs to be achieved’?

Science Based Targets, a joint initiative by CDP (formerly Carbon Disclosure Project), the UN Global Compact (UNGC), the World Resources Institute (WRI) and WWF encourages companies to set targets consistent with the level of decarbonisation required by science to limit global warming to less than 2°C. At present there are only two organisations within the buildings and construction sector that have committed to this approach to target setting, so there is a much work to be done to turn the emerging climate science understanding into action. Following such an approach will identify activities, their intensity, what this means in terms of emissions and a defined period of commitment to reducing CO2.

Clearly there are many positive commitments and indications of action to come out of COP21, and it is encouraging to see the change occurring across many projects and at the broader corporate level. However, this is the beginning of a long period of change for governments, investors and built environment businesses. We consider this process to be a journey, which stakeholders in the sector are at various points on. Now is the time to seize the momentum of Paris and consider what it means for your business planning.