The built environment industry needs to face up to climate risk

Accounting for around 40% of global carbon emissions, the built environment sector is a crucial part of the global effort to cut emissions to reach the goals of the Paris Agreement and limit global warming to no more than 1.5 degrees Celsius.

Around 85% of carbon emissions from the built environment are attributed to the materials that go into our buildings and the energy used by tenants and occupiers once they are built, so how we get everyone involved in playing their part is key to reducing emissions.

Over the past five years at Lendlease we have focused on targets for reducing energy, water, and waste by 20%. We have made good progress but are now striving to go much further.

We have set a target of Net Zero Carbon by 2025 for emissions associated with our use of fossil fuels – such as gas or diesel, and electricity. We have also committed to achieving Absolute Zero Carbon by 2040 – including all emissions from our supply chain and customers’ use of buildings, with no offsets. And that is no mean feat!

Why now?

It is clear to us that climate change is the biggest risk facing companies like ours working in the field of urban regeneration. We have portfolio of projects in Europe with an end value of over £25 billion and many will take 20-30 years to deliver. So we need to create places that are truly fit for the future.

Many of our customers are national or local governments and they want us to minimise the footprints of our projects and create zero carbon places.

We believe the sooner organisations take the time to understand the climate risks they face, the sooner they can take an informed seat at the table to shape the changes needed. By being an active participant in finding solutions, we can avoid unintended consequences for the industry.

What we’ve done

Lendlease has a long track record of leadership in sustainability. As early as 1973, our founder Dick Dusseldorp spoke of the importance of considering the environmental and social impacts of our work, as much as the economic.

The biggest game changer for us came in 2018 when our board signed up to the Task Force on Climate-related Financial Disclosure (TCFD). This required us to look at our long-term business and project plans through the lens of climate change. What we found was that unless we made significant changes and took action now, we were going to leave ourselves open to unacceptable levels of financial and non-financial risks.

TCFD required us to build different, science-based climate scenarios to assess the risk of different temperature rises for our business. We are currently the only company in our sector participating in the TCFD Scenarios Steering Group, and we’ve published our 4 scenarios on our website for anyone to reference. Better understanding the risks means that we have been able to begin putting together action plans to respond.

We found the biggest challenge is understanding and planning for business risks that are not within our control. One of these is the supply of the materials we use in construction, such as steel, which is extremely carbon intensive to produce. Each year Lendlease along uses almost 60 Eiffel Towers worth of steel for construction. Last year we were the first property and construction company to join ResponsibleSteel, to help support the transformation of a sector which currently contributes around 7% of global carbon emissions.

What we want to achieve

Going forwards, we want to galvanise demand for zero carbon steel within the construction and buildings sector. By doing so we can demonstrate to the supply chain that there is real and growing customer demand for low to zero carbon materials.

We will soon be at the forefront of a new campaign called SteelZero led by ResponsibleSteel and the Climate Group. Our aim is to make zero carbon steel a reality and support the supply chain and end buyer to transition to net zero steel.

Many assume that it is too hard to transform large industrial sectors like steel or cement. But there are some great examples of how other sectors have been transformed in terms of sustainability. For example, the Forest Stewardship Council has provided a robust means of purchasing sustainably produced timber, with full chain of custody. And it is the customer demand of large companies like Lendlease that have helped drive the investment in this transformation.

The cost of inaction

Failing to act poses the biggest long-term risk. The most effective way for us to manage cost is to build the changes into the building process over time – much like the way the UK housebuilding industry responded to the Government’s target for zero carbon new homes announced in 2005. Housebuilders who estimated that the additional cost might be in the region of 30% at the outset recognised that it had all but disappeared 10 years later, as a result of improvements in productivity and reductions in costs that were kickstarted through innovation to achieve the target.

Whilst voluntary for now it is likely that corporate reporting along the lines of TCFD will become mandatory within the next few years. Then the demand for the supply-chain to mitigate the carbon intensity of products and materials will become unavoidable.

My message to other companies is to look closely at your business plans (using methods such as TCFD) through the lens of climate change risks. By doing so you will better understand your business’s likely exposure and can take appropriate action to mitigate the impact. The sooner you start, the better and more affordable it will be.

Secondly, don’t underestimate the influence you have on your supply chain. Be a demanding customer and ask them to do more. The more business demands from the supply chain to decarbonise, the quicker and more effectively the supply chain can invest, innovate and change.

[This article is based on an interview with SteelZero, a project of the Climate Group in partnership with ResponsibleSteel.]