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Carbon Accounting & ESG Reporting for Real Estate & Construction: A Practical Guide

2025-03-28

As part of the Navigating Net Zero webinar series, this session focused on the unique challenges and regulatory expectations of the real estate and construction sector when it comes to ESG (Environmental, Social, Governance) reporting and carbon accounting.

Understanding the ESG Landscape in Real Estate

Real estate companies and construction firms face overlapping sustainability mandates—some directed at individual buildings, and others at the corporate entity level.

Building-Level Requirements:

  • National Building Codes (e.g., NBC India, BCA Singapore)
  • Energy Codes (e.g., ECBC India, EPBD Europe)
  • Environmental Clearances for new/brownfield constructions
  • Voluntary Certifications like LEED, IGBC, WELL, Fitwel

Company-Level ESG Requirements:

  • India: BRSR & BRSR Core for listed companies
  • Europe: CSRD and SFDR, especially for REITs and institutional investors
  • Middle East: Estidama Pearl Rating (UAE), Saudi Vision 2030 ESG guidelines
  • Global Benchmarks: GRESB (for REITs), MSCI, Moody’s ESG ratings

Key ESG Regulations for Real Estate

India:

  • BRSR (Business Responsibility and Sustainability Report): Mandatory for top 1000 listed companies.
  • BRSR Core: Introduces assurance for ESG KPIs starting with the top 250 companies.
  • Green Building Incentives: Certain municipalities offer higher FAR/FSI for certified buildings.

Middle East:

  • UAE: Estidama Pearl Rating—mandatory for new developments.
  • 2025 UAE Net Zero Law (Upcoming): Will require GHG accounting and reporting for all emissions sources
  • Saudi Arabia: Vision 2030 emphasizes ESG alignment for infrastructure growth.

Carbon Accounting for Real Estate & Construction

All three scopes of GHG emissions—Scope 1, 2, and 3—apply to real estate, but Scope 3 is the most complex and often the largest contributor.

Scope 1 (Direct Emissions):

  • Fuel combustion on-site (generators, boilers)
  • Company-owned transport
  • Fugitive emissions (HVAC leaks, fire suppression systems)

Scope 2 (Indirect Emissions):

  • Purchased electricity or steam.
  • Emission intensity depends on grid mix or power purchase agreements (PPAs)

Scope 3 (Value Chain Emissions):

Upstream:
  • Embodied carbon in construction materials
  • Transportation and logistics
  • Waste generated during construction.
  • Employee commuting
Downstream:
  • Tenant energy use
  • Waste management during operations.
  • Leased assets and franchise emissions.

Scope 3 often contributes 80–90% of total emissions in real estate, especially for developers and asset managers.

Boundary Setting in Carbon Accounting

  • Organizational Boundaries: Use equity share, financial control, or operational control methods to consolidate emissions across subsidiaries, SPVs, or joint ventures.
  • Operational Boundaries: Define activities that fall under each emission scope. Clarify inclusion/exclusion of leased buildings, construction activities, etc.

Challenges & Best Practices

1. Regulatory Complexity:
  • Evolving frameworks (e.g., CSRD, BRSR Core)
  • Country-specific ESG disclosure formats
  • Recommendation: Break down standards (like ESRS in CSRD) into manageable chunks and upskill internally.
2. Conceptual Confusion:
  • Misunderstandings around Scope 3, traceability, carbon credits, and green building metrics
  • Solution: Refer to GHG Protocol, LEED/IGBC training, and platforms like CDP for industry benchmarks
3. Data Collection Hurdles:
  • Stakeholders (e.g., property managers) often don’t understand data needs.
  • Solution: Simplify collection templates, provide training, and align units/formats
4. Emission Factor Misuse:
  • Incorrect regional emission factors applied.
  • Recommendation: Use accurate databases (e.g., IPCC, CEA India, DEFRA, IEA)
5. Tracking and Goal Setting:
  • Growing assets = rising emissions; Net-zero becomes harder to track
  • Best Practice: Use online tools for real-time tracking and modelling emissions scenarios

Carbon Accounting: Steps to Success

  1. Define Boundaries (Organizational & Operational)
  2. Choose Calculation Methodology (Spend-based, Activity-based, Hybrid)
  3. Gather Accurate Activity Data (e.g., electricity usage, fuel consumption)
  4. Apply Appropriate Emission Factors
  5. Use Digital Tools for report generation and tracking
  6. Validate & Assure Data (Especially for BRSR Core or CSRD compliance)

Tools & Platforms: Sustainium Example

Platforms like Sustainium support:

  • Automated Scope 1, 2, and 3 emissions tracking
  • BRSR-compliant report generation
  • Integration of ESG KPIs into dashboards
  • Forecasting tools for net-zero target tracking

Conclusion: Building Towards a Net-Zero Future

Real estate and construction companies face a unique challenge—balancing growth and sustainability. With robust carbon accounting and ESG reporting practices, the sector can lead in climate-conscious development.