Embodied Carbon Regulations Are Coming. The Real Estate Industry Can Get Ahead with Improved Portfolio Carbon Accounting

You may not realize it, but the past 12 months have been a reckoning for the emissions from building materials and construction — otherwise known as embodied carbon.

California now requires disclosure and improvement of embodied carbon for all commercial buildings over 100,000 square feet. The City of Vancouver’s building code now requires that new developments be below a certain embodied carbon intensity figure.

The U.S. Green Building Council has shared its draft of LEED v5, which will have a much greater emphasis on embodied carbon, including embodied carbon caps for certain product categories.

Cities from Boston to Los Angeles are considering additional embodied carbon requirements for building permits. And that’s not even touching on requirements for companies that do business in the EU, where imported goods with higher carbon emissions will be taxed accordingly.

Carbon disclosure in general is becoming mandatory in certain markets and for companies of a certain size. While the SEC has punted on Scope 3 emissions disclosure requirements for now, leaving it up to companies to decide what is relevant, the State of California will require disclosure of carbon data from 2025 onwards for all companies that make more than $1 billion in annual revenue, including Scope 3 on 2026 data.

For real estate companies, the embodied carbon emissions associated with building materials and construction comprise a sizeable portion of Scope 3 impacts.

All of this means that embodied carbon, for many real estate companies, has become a hidden risk — a material part of their sustainability matrix, if you’ll pardon the pun. There is the risk of non-compliance, the risk of undue exposure to high-carbon materials, and the risk of losing reputational credibility. However, most commercial real estate developers in North America are not in the practice of measuring embodied carbon, much less understanding their impact or knowing how to improve.

The landscape of embodied carbon requirements is evolving quickly -—the above requirements were all passed in the last year — and things are unlikely to slow down at a city or state level anytime soon. In addition, requirements are subject to change as we learn more about best practices. As such, the tools for managing embodied carbon data need to be able to evolve alongside requirements, so that data can be used dynamically.

Current State of Practice

While new regulations are poised to drive widespread adoption of embodied carbon accounting across the real estate and construction sector, action on this topic has, until recently, been led by sustainability-minded developers and owners. These developers and owners have seen economic value in pursuing third-party green building certifications, such as LEED, and their journey into embodied carbon accounting has been defined by the reporting framework and criteria established by these rating systems.

Without a doubt, the embodied carbon framework developed by green building rating systems over the past 10 years has been the key catalyst driving embodied emissions reporting through a combination of environmental product declarations (EPDs) by product manufacturers, plus whole building life cycle assessments (WBLCA) by design teams. This kit of parts, namely EPDs and WBLCA, have provided a shared foundation for the development of public policy to tackle embodied carbon. At the same time, sustainability professionals have worked to improve the accuracy and standardization of the data ecosystem supporting this reporting framework.

There have been efforts underway to standardize frameworks for LCAs, including by the ECHO Project, an initiative spearheaded by Building Transparency, Climate Leadership Forum, and other leading sustainable building organizations A standardized definition of a “net-zero carbon building” and “low-carbon materials” will also help move the industry forward, such as efforts by the Net Zero Carbon Building Standard in the UK, the Biden administration’s multi-part definition of a net-zero carbon building (Part 2 on embodied carbon has yet to be released), and the EPA’s Label Program for Low Embodied Carbon Construction Materials.

That said, even if the accuracy of the data improves and definitions are more aligned, the current workflow for using EPDs and WBLCA tools has a major limitation: it is incredibly static.

Let’s take the well-known strategy of procuring materials from suppliers with EPDs.

In the best-case scenario where embodied carbon has been highlighted as a priority, today, the process looks something like this:

Many real estate actors, even those who have been ahead of the curve in measuring embodied carbon, often struggle with this process. Some of the limitations include:

A Carbon Ledger for the Building Industry

But what if the true value of this data is that it can be leveraged even after the building is constructed and occupied? What if this data could be stored, accessed, and updated in a manner that is true to the dynamic nature of buildings, which see a range of renovations, tenants, owners, and market trends over their long lives?

Researchers have been making the case for ‘building passports’ that provide robust logs of building-related data that can be managed and updated throughout a building’s life. While a comprehensive building passport solution that compiles a broad range of building-related data is a daunting task, a data tool that allows for the tracking of carbon data in alignment with building passport principles is possible today.

Centralizing and standardizing embodied carbon data, alongside other lifecycle carbon emissions data such as operational utility data, will help real estate developers prepare for the future. As the real estate and construction industries digitize further, having a cloud-based platform with dynamic data — and dynamic access to data — allows for many knock-on effects, as outlined below.

A dynamic carbon reporting tool, or a ‘carbon ledger’, can unlock value for the real estate sector. The time is right for the real estate industry to leverage embodied carbon data to reduce environmental impact and create economic value. RMI and its partners are organizing industry meetings and discussions to develop a pilot for carbon ledgers in the US. If you are a real estate professional interested in learning more about this initiative, please contact Anish Tilak at atilak@rmi.org. This article was developed in partnership with Tangible Materials, a thought partner and collaborator for RMI’s Embodied Carbon Initiative.