Accelerating the Market Transformation towards a Net Zero Built Environment

In this first progress report, the authors argue that the Market Transformation Action Agenda for the Built Environment is visible in many individual but still separate efforts. Transparency and accountability of operational as well as whole life carbon emissions of building projects, based on common standards, are the cornerstone of a profound market change to reward low-carbon performance and to turn the decarbonization challenge into an opportunity.

This year’s Planetary Health Check has issued a stark warning that Planet Earth is “in a critical condition”. Six out of nine Planetary Boundaries have been transgressed. It is now highly likely that the world will overshoot the critical threshold of 1.5C degree warming and that we need to accelerate our efforts to reduce greenhouse gas emissions. The consequences of a warming planet are already visible today with the increase of extreme weather events affecting all parts of the world. The Planetary Boundaries concept reminds us that in order to deal with the effects of a changing climate, we need to strengthen the earth’s resilience, but instead, we are still undermining it by also transgressing the boundaries of, among others, biodiversity, freshwater, land use, and nutrient overloading.

One of the systems with the biggest impact on planetary boundaries is the built environment. The buildings we occupy, the roads, bridges, tunnels we use, the factories we build, the universities and hospitals we frequent, the energy and water infrastructure we need; all together they account for a massive 40% of global energy-related CO2 emissions, using half of the earth’s raw materials, and generating 40% of global waste streams. The energy we are using to heat, cool and run buildings emits 10 Gt of carbon every year, tendency rising; and the materials we need to construct buildings and infrastructure emit another 4 Gt of carbon per year, tendency rising as well.

Only a systemic approach engaging all actors and decision-makers involved in planning, building, occupying and using buildings and infrastructure can help us reduce the massive impact of the built environment around us and bring it in line with the planetary boundaries. The time to 2030 is now getting shorter and shorter, but if we collectively focus on the same mission, then we can still reach the goal of halving emissions from built environment, as we have argued in the past.

In March 2024, we launched the Built Environment Market Transformation Action Agenda, MTAA, together with many partners at the first Buildings and Climate Global Forum. It outlines a set of 11 strategic actions to overcome the key market barriers that prevent us from achieving a net zero built environment. And it acknowledges that we can only do this through deep and radical collaboration. The actions address the 3 foundational levers for Market Transformation set out by the Global Alliance for Buildings and Construction (GlobalABC):

1. Adopt life-cycle thinking and Whole-Life Carbon Assessment across the full value chain and align key indicators, metrics and targets;
2. Integrate the carbon cost and reflect it in the price of products and services throughout the value chain, including in procurement and taxonomy;
3. Transform the supply and demand dynamics to incentivize low-carbon solutions based on the Whole-Life Carbon approach

So where do we stand on the implementation of this strategic agenda, and how can we accelerate the market transformation to incentivize and deliver low-carbon outcomes in building projects and bring them in line with the 2030 and 2050 decarbonization goals?

There are many signals of change and collaborative initiatives that represent pieces of the built environment decarbonization puzzle. It is certainly not possible to be exhaustive, but it is interesting to shed light on certain activities and initiatives that seek to drive systemic change and contribute to the mutually reinforcing actions outlined in the MTAA. These are outlined here below.

Common vision and deep collaboration: Establish and agree on unequivocal near-term common goals to underpin action and accountability.

• The Science-based targets initiative (SBTi) issued a new framework for companies and financial institutions in the buildings value chain to set 1.5 C-aligned emissions reduction targets for buildings. It takes a “whole building approach” to include in-use operational emissions, based on CRREM regional pathways, as well as upfront embodied carbon emissions, offering a new global embodied emissions decarbonization pathway.
• A report on accountability tactics by the Autonomy Institute, commissioned by the Laudes Foundations, describes how accountability tactics used in other industries can be applied to the built environment sector. It maps the actors, mechanisms and tactics that make up the accountability network to uncover their role and relevance in the built environment. The three key tactics researched include: transparency & disclosure, reputation & self-governance, and sanctions & incentives.
• WBCSD and other partners supported the development of Minoro, an online tool providing guidance to regional best practice guidance and resources for carbon reduction management across the entire life-cycle of properties. It helps create a clear carbon management and target setting plan and identifies carbon reduction opportunities throughout a project’s life.

Lever 1 on alignment behind a common language grounded in Whole Life Carbon accounting is the foundation of a systemic approach to involve all actors behind the common goal of decarbonization. The MTAA outlines three strategic interventions regarding this Lever, and significant actions and progress include:

Drive harmonization in whole life carbon accounting: a globally consistent and transparent approach

• WBCSD worked with leading global AEC firms to conduct in-depth embodied carbon assessments using building information modeling with the goal to establish best practices for industry-wide adoption. The recently launched report “Path to Alignment in the Built Environment”, supported by Autodesk, reveals that the significantly different results from the firms points to a critical need for industry-wide standardization and transparency across workflows. The findings demonstrate a big step to help the industry strive for greater alignment.
• The Royal Institute for Charter Surveyors (RICS) and the International Code Council (ICC), in collaboration with Ashrae, are respectively working on creating alignment with built environment stakeholders behind common standards and tools that address decarbonization and resilience of the future building stock.
• A new report by the Buildings Performance Institute Europe (BPIE), published as part of the INDICATE project, summarizes the experiences of three European countries, Czechia, Ireland, and Spain, in developing a measurement methodology to establish baselines for current building design, as an initial step toward the consistent and effective implementation of Whole Life Carbon regulations.
• GlobalABC issued the “10 Whole Life Cycle Recommendations for the Buildings Breakthrough” to create a common understanding for how countries can develop and adopt policies to deliver Near Zero Emissions Buildings through the use of Life Cycle Assessments, and ensure international alignment and harmonization while considering nuances of local context.

Harnessing the data: open, shared data ecosystem for whole life carbon & scope 3

• In a forthcoming study supported by McKinsey, WBCSD will outline key data applications that are needed to drive improved decision-making along the value chain, and the challenges that need to be overcome. Five priority applications could influence 80% of value chain emissions, covering key transaction and financing decisions, as well as scope, design and sourcing choices that significantly impact both operational and embodied emissions.
• The ECHO project, led by Architecture 2030, Building Transparency, the Carbon Leadership Forum, the Living Future, and the US Green Building Council, recently issued their second publication on Project Life Cycle Assessment Requirements, issuing recommendations around project LCA requirements to drive alignment in the modeling and reporting of project LCAs.

Standards alignment: align net zero targets and metrics across major certifications and standards (public and private)

• A group of leading global real estate investors including BlackRock, Ivanhoé Cambridge, Norges Bank Investment Management, and others, convened by Systemiq Ltd. issued a call to action: “Seeing is believing: unlocking the low-carbon real estate market”. Its key message is that to truly decarbonize the global real estate market we need to create transparency around carbon performance across the full life cycle and clear targets based on agreed frameworks and real data. This will be the only way for investors to know whether their portfolios are truly aligned with a 1.5 degree warming trajectory. Going forward, this group will pursue their call to action under the Global Real Estate Engagement Network (GREEN).
• Ahead of COP29, WBCSD and its members have issued “Achieving Net-zero buildings – key actions to transform the market”. This 12-step action plan sets out the strategic actions to create an enabling environment to achieve net-zero buildings based on the definition, transparency, performance, and incentivization of net-zero buildings in operation. The report outlines examples where these actions are already being implemented in parts, but their implementation is not yet widespread or consistent.
• In the UK, leading built environment organizations and experts recently issued the pilot version of the UK Net Zero Carbon Buildings Standard. They did this in response to the market demand for a clear and unified definition for net zero carbon aligned assets in the UK, and to accelerate the design, construction and use of buildings that deliver lower-carbon outcomes in line with the UK’s legally-binding carbon targets.
• The World Green Building Council (WorldGBC) is leading the work with a coalition of partners to support the Buildings Breakthrough Priority Action 1 “Standards and Certifications” to build consensus among countries on qualitative definitions and principles for near zero emissions and resilient buildings across the entire life-cycle and outline related indicators, as well as guidelines to help ensure transparency, comparability, and accountability.

Lever 2 on integrating carbon cost in decision-making attracts significant attention from leading real estate developers as an opportunity to accelerate the pace of decarbonization across the value chain and drive innovation at scale.

• Industry co-created carbon price: In “Accelerating Accountability: the Case for Carbon Pricing”, ULI C Change outlines the business case and principles for adopting an early-stage industry wide approach to Internal Carbon Pricing. The principles, endorsed by WBCSD, have been codesigned by a group of leading real estate industry associations and are based on a full value chain approach. The report is designed to examine the wider benefits of carbon pricing for individual companies and the industry.
• ULI’s Preserve tool is designed to measure the financial impacts of both the opportunities and risks involved in the transition to net zero. By using this tool, factors like future energy costs and demand, potential rent increases, carbon pricing, and capital expenditures can be consistently and uniformly incorporated into investment decision-making.

Lever 3 on transforming supply and demand dynamics along the built environment value chain includes a potentially wide range of actions to incentivize the delivery of low-carbon solutions based on the Whole-Life Carbon approach.

• The recently launched WBCSD Center for Decarbonization Demand Acceleration will address the policy, standards and procurement function capacity building that companies need to move from demand “signal” to demand “action” for low and zero carbon materials and solutions. One workstream, currently in scoping, will focus on creating and scaling proven decarbonization solutions for different real estate asset classes through finance models and innovation.
• Cities collaborating with the C40 are committed to enact regulations and planning policy to ensure that new buildings operate at net zero carbon emissions by 2030 and to establish roadmaps for all existing municipal buildings to become net zero. They also lead by example by leveraging municipal procurement to require whole life carbon assessments and disclosure to create transparency and accountability, and to strive for embodied carbon emissions to be reduced by 50% by 2030 in new buildings and major retrofit projects.  

As stakeholders worldwide increasingly turn to the built environment for solutions, it is critical that we continue to radically collaborate among initiatives and stakeholders to tackle our common challenges together. This year’s launch of the Intergovernmental Council for Buildings and Climate, coordinated by the GlobalABC to oversee implementation of the Declaration de Chaillot, is a very encouraging signal that also governments are fully committed and are elevating the built environment to a top priority.

The Market Transformation Action Agenda provides us with a common narrative and platform for collaboration and coordination to enact the system change that we need to see, so that better carbon performance becomes integrated and rewarded in decision-making and transactions. Transparency and accountability sit at the core of a new economic paradigm that turns low carbon performance into an opportunity. We invite stakeholders from across the built environment value chain – including finance, public sector and end users – to help us drive the collective transformation.  

Join us!