Deloitte-uk-sustainibility

At the start of a new decade, climate change, sustainability and the environment are climbing higher and higher on the agenda of governments, corporates and households alike. The science is now showing with alarming clarity that decisive action needs to be taken soon to avoid catastrophic and irreversible changes to the world around us. From the Australian bushfires to Greta Thunberg becoming Time Magazine’s Person of the Year in 2019 and a household name, there has never been a bigger focus on these issues. In this first post in our Smart and Sustainable Future Series, we’ll look at emissions targets over the next 30 years, how real estate can step up to these challenges, how energy infrastructure will need to change and how modelling can help break down the change.

Since 1990 the UK has made good progress in reducing greenhouse gas emissions by over 40%, more than any other major advanced economy. But in June 2019 the UK Parliament took this one step further by making a historic commitment to achieve net zero greenhouse gas emissions by 2050.

Achieving this goal will require major step changes in investments into and adoption of new technologies, grid infrastructure, building materials and sustainable operations, data collection and analysis as well as consumer behaviour. Government frameworks and regulation will play a large role and will need to be adaptive to the changing landscape and technology.

Deloitte-uk-modelling-graph

* *Source: Charts and Data - Chapter 1

Buildings and the built environment are estimated to account for 40% of carbon emissions, so the property industry has a huge opportunity to drive change towards a sustainable future. In April 2019 the UK Green Building Council (‘UK GBC’) issued its framework definition for Net Zero Carbon Buildings to help define what net zero means for the property industry and deliver buildings that are in line with the 2016 Paris Climate Agreement. This is enabling the industry to sign up to the framework and commit to a single standard, namely being net zero carbon across the whole life of the building through a 5 step plan:

  1. Establish a Net Zero Carbon Scope, across Construction and Operations, End-of-life demolition waste and disposal, and carbon savings from material re-use beyond the life cycle;
  2. Reduce the Construction Impacts, through sustainable building materials and assessing embodied carbon impacts, which should be assessed and offset at practical completion;
  3. Reduce Operational Energy Use, through reduction and management of demand, efficient maintenance, repair, refurbishment and water use, and calculation and disclosure of consumption;
  4. Increase Renewable Energy Supply, prioritising on-site renewable energy or purchase agreements of off-site renewables; and
  5. Offset any Remaining Carbon, where a deficit still exists using recognised offsetting frameworks and disclosing where used.

However, with legislation in parliament focused on Brexit, fulfilling election pledges and the Covid-19 crisis, the driving force will need to come from industries themselves. In January 2020 the UK GBC joined forces with Property Week to launch the Climate Crisis Challenge calling on the property industry to take urgent action to reduce its carbon footprint, and almost every day new developers commit to becoming carbon-neutral. Many are already incorporating concepts through their developments, with Argent Related building a central energy centre for heating, cooling and electricity across their King’s Cross development, so no single building has its own boiler. The result helped them to achieve BREEAM ‘outstanding’ ratings for every office building across the development.

Last month, Ofgem published their decarbonisation programme action plan in line with the 2050 net zero targets covering the need for electrification to drive sustainability, the increased demand on the grid from electric vehicles, the peaks and troughs of renewable supply, and the need for a flexible grid to cover the growing network of devices.

Going forwards there are many challenges for the property industry to meet these targets, but also many opportunities. The need for flexible, transparent, robust financial and economic models to understand the impact of innovation can be hugely beneficial to governments, developers and construction firms alike across a wide number of areas from:

  • Understanding the impact of using sustainable building materials like mass timber;
  • Utilising new methods of construction such as offsite modular construction;
  • Installing renewable energy on-site and acquiring power purchase agreements for off-site renewables;
  • Long term operational benefits of energy efficient construction;
  • Offsetting the cost of retrofitting old building stock to new efficiency standards against ongoing operational cost savings and ‘green premium’ rental prices; to
  • The widespread adoption of electric and autonomous vehicles with layouts for smart charging, using electric car batteries for cheap energy storage at off-peak times and releasing to the grid during peak times for rebates.

While the climate crisis is the greatest challenge of our times, it’s also the greatest opportunity for those willing to grasp new opportunities to develop a sustainable future.

Deloitte-uk-stephen-gunnell

Stephen Gunnell – Assistant Director, Deloitte Business Modelling & Analytics

Stephen is an experienced member of Deloitte’s Business Modelling Centre of Excellence, joining the team in 2015, and undertaking a secondment to grow the Modelling team in the US firm between 2017 and 2019. He has provided a range of modelling, analytics and project management services across a number of industries, mainly developing, testing and documenting complex financial and operational Models. His focus is to develop smart cities, the Future of Mobility, renewable energy, and sustainable real estate and infrastructure to help society meet net zero carbon goals and the needs of the future.

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