“Let’s talk about Scope 3 emissions: the next critical phase in decarbonising the real estate sector.”
This was the title of a blog post written by Cate Harris, group head of sustainability at Australia-based property giant Lendlease, shortly after the launch of its climate protocol last September, which aims eliminating its supply chain emissions, or Scope 3 emissions, without the use of offsets by 2040.
Such bold climate communications are increasingly rare in an age of greenhush. But under Harris’ leadership, Lendlease has been anything but mum about its “absolute zero” commitments – which unlike a regular “net zero” target, excludes the possibility of offsetting the firm’s residual emissions.
In the foreword to the protocol, Harris argued that not having the safety net of offsets “is what is necessary to address the climate crisis” and “the best way to drive investment in harder to abate materials”.
Scope 3 emissions, from the manufacturing of construction materials to the use of electricty and natural gas by building tenants, make up 90 per cent of Lendlease’s total emissions. But they also tend to be the trickiest to mitigate, given large companies have the least direct control over this category of emissions.
Harris’ work to spark a global conversation and drive an industry-wide consensus around the boundaries of Scope 3 reporting – which will soon be mandatory for listed issuers as jurisdictions across Asia, like Australia, Singapore and Malaysia, move to legislate the International Sustainability Standards Board (ISSB)’s standards – won her a place in the Eco-Business Sustainability Leadership A-List 2023.
“We’ve been super overwhelmed by how well-received the protocol has been within the industry, ” said Harris, who began working on greening the built environment two decades ago as an environmental engineer in Australia’s local governments, before starting her own sustainability consultancy and embarking on her 15-year career at Lendlease.
“We were worried that people might think it’s just Lendlease pushing out something that no one else can do, but the industry has been really open to it. At the moment, lots of the climate targets organisations have put out are just addressing emissions they’ve got direct control over. Not many have targets that include Scope 3.”
In this interview, Harris tells Eco-Business why it is in Lendlease’s business interest to advocate for suppliers who are piloting low-carbon building materials and to openly share about its journey in identifying and cutting out Scope 3 emissions.
You’ve been working in the sustainability space from as early as 2004. How did you end up in this role?
I cut my teeth on the other side with policy and strategy from a government perspective with some really progressive local and state governments in Australia that were coming up with new planning schemes around green buildings. But I was sick of being told by the government that consultants and developers didn’t want to do this sort of stuff, as that was not my experience having worked closely with them. So I decided to jump the fence and set up a sustainability consultancy arm through Hyder Consulting at that time, which has since been bought out by a larger conglomerate. Then an opportunity came up to work with Lendlease, firstly in the investment management business. Over the last 15 years, I’ve had seven different job titles.
Five years ago, I took on a secondment as the managing director for the United Nations Global Compact’s network in Australia. It was nice to be able to hear how the who’s who of corporate Australia were approaching their sustainability-related challenges. I brought that knowledge back into Lendlease, where I took on the group head of sustainability role and global head of the foundation. We’ve repositioned our sustainability strategy in the last five years and set some ambitious climate targets: to be net zero for our Scope 1 and 2 emissions [a company’s direct and indirect emissions] in 2025 and absolute zero by 2040. So no offsets and no excuses for our Scope 1, 2 and 3 emissions. We’ve also set a target of creating A$250 million (US$165 million) worth of social value by 2025.
In the past two decades, where have you seen the most progress and where have things remained around the same?
We’re starting to see some acceleration around the climate agenda. We’re now speaking a much more technical and complex language of different types of carbon emissions. Scope 3 emissions are really exciting because it’s where we have to advocate for change across our value chain and work with suppliers on decarbonising some of the hardest to abate building materials like the steel, cement, concrete, glass and aluminium sectors. So we’re investing significantly in innovation and providing that market signal and access to a pipeline for our supply chain partners to pilot new low-carbon products.
Some of the slower moving agendas that often frustrate me are around nature and biodiversity as well as social value. The former is finally starting to move faster with the Taskforce on Nature-related Financial Disclosures (TNFD) framework. Hopefully it will gain the same momentum that the Taskforce for Climate-related Financial Disclosures (TCFD) created for the climate and carbon agenda. On the social value agenda, it frustrates me that a lot of well-meaning academics in the social return on investment space want everything to be so perfect that the rate at which we’re developing ways to account for social value creation has been stunted. We’re letting perfection get in the way of evolving as we go, like we did with green building rating tools 15 years ago, where we started somewhere, looked at what worked and did not work, and made improvements along the way.
Having set our social value target almost five years ago, we want to change the dialogue in the industry from one of philanthropic giving to one of social value creation. So being accountable for the social value we create by delivering the community’s needs, not just handing over a cheque to a charity and wishing them luck. That’s an area that I’d like to see move faster.
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Our change alone is not going to create the transformation we need to address climate change in the time we have left.
What are some of your proudest achievements over the past 12 months?
Last year, we published the Lendlease Scope 3 emissions protocol. We wanted to drive a consensus on how the industry should define the boundaries for Scope 3, so that when schemes like ISSB are legislated, like they’re going to be in Australia very soon, we’ve all got a clearer idea of what to report on and investors, governments and other key stakeholders will be able to compare apples with apples, because the data will be consistent and transparent. The work that Lendlease does is great, but our change alone is not going to create the transformation we need to address climate change in the time that we have left.
We’re starting to see changes in our supply chain and people collaborating more openly to tackle systemic challenges, whether it be piloting new low-carbon products in projects or the sector working together to promote the use of renewable diesel on construction sites and organise buyers clubs to access it.
Artist’s impression of the new Singtel Comcentre in Singapore which Lendlease is helping to redevelop by 2028. It is aiming for a 30 per cent reduction in embodied carbon compared to the country’s 2021 green building certification baseline. Image: Singtel
But once we agree on the boundaries of Scope 3, we’ve got two other big systemic challenges to address. Firstly, how do we send the right signals to transform the pace and scale of our supply chain’s decarbonisation? Another piece is the access to transparent and high quality Scope 3 data up and down the supply chain. Lendlease has roughly 40,000 suppliers on our books, so we’re looking to get behind an industry-led solution for an open source data platform that enables the supply chain to securely share their Scope 3 data.
Internally, we’re coming up with our own software tools by harnessing all of the project lifecycle assessment work we’ve done, where the team can type in the basic information – such as if it’s an office building in Singapore of roughly these dimensions with these number of floors – and readily understand the embodied carbon impacts of that building depending on the different construction methods. So if I’m using steel and concrete versus timber, what’s the embodied carbon from that? We’re able to use the supplier information that we have to make that data quite accurate by selecting a particular type of steel by Steel Company A versus Steel Company B, and assessing where the project would sit within our own emission reduction trajectory.
So Lendlease is obviously huge and can afford to make that switch to low-carbon materials and invest in a sustainability team with the right capabilities, technologies and tools. But how can smaller companies start embarking on a similar journey?
First and foremost, we’re a listed organisation, so we are accountable to our shareholders about making smart business decisions. We can’t just willy-nilly spend extra to make our sustainability credentials stack up. When we were developing our targets and getting our global leadership team and board to sign off on them, we invited them to test the targets and assess whether we could genuinely achieve those targets. So we did a lot of work to understand where our emissions were and recognised when we first set our targets that some solutions weren’t yet available to us, certainly not at a commercially sensible rate.
But the idea is that there’s a whole bunch of advocacy work that we can do between setting our targets in 2020 and 2040. We can advocate for governments to support those decarbonisation solutions through tax incentives, subsidies and policy drivers. But like any small to medium sized enterprise, we still have to choose commercially sensible decisions. We’re just lucky that there are a lot of really good solutions coming on the market now that are priced comparably in some markets.
Organisations like ours can help small to medium enterprises by sharing our knowledge and information, because if we’re the only ones doing it, then we’re not going to address the climate challenge. We are being very transparent about our journey, sharing case studies, what’s worked, what hasn’t worked, so that others don’t have to spend the time and resources to do the research.
What are some of the unique challenges the Asia Pacific region faces in decarbonisation, compared to other parts of the world Lendlease operates in?
If I look at Singapore in particular, the bulk of our Scope 1 emissions relate to the use of red diesel fuel on our construction sites to power plants and equipment. Firstly, we want to electrify all the plants and equipment that we use on sites to construct buildings, so we can use renewable sources of electricity. But until the electrification of all the plants and equipment becomes commercially viable, we need to look at other pathways to address that Scope 1 from diesel usage.
One of the best transitional solutions is renewable diesel, which can significantly reduce Scope 1 emissions from diesel use. It’s an automatic swap so it doesn’t create any issues from a performance perspective. Interestingly, we source for renewable diesel for our Australian operations from Neste in Singapore, one of the biggest refineries of renewable diesel; yet our Singapore business can’t buy it locally from Neste, because they’re so busy exporting it all around the world. That is the particular nuance to Singapore and the Asia region.
Our United Kingdom and Europe markets get access to renewable diesel at a price comparable to red diesel, so it’s a no brainer. Now that our business has introduced an alternative fuels policy which requires the use of renewable fuel on all our UK construction sites, our Scope 1 from construction activities has been significantly reduced. So those sorts of mechanisms are really powerful.
In Asia, you’ve got the additional challenge of renewable electricity. In Europe, it is easy as the electricity grids are greening much faster than other regions, so purchasing green power directly from the grid is much simpler and more economical; check the green box and you’re good to go. In Australia, we utilise power purchase agreements (PPAs) and the purchase of renewable energy certificates (RECs) to use across our assets and projects. It’s a similar situation in America.
However, in Asia, the grids are not yet green and there is not a well-established RECs market in Singapore, Malaysia, or elsewhere in the region, so the team needs to procure international RECs (I-RECs). I-RECs are less preferred, with no national government oversight over the scheme and more effort required to drive good governance outcomes through your purchase. So there is more work required on the purchaser’s side to verify their attributes. The challenge within Asia is looking at how to access clean energy.
The Exchange, TRX in Kuala Lumpur collaborated with the supplier to develop a lower carbon cement mix. Image: Lendlease
Can you tell us more about what you’re doing at ResponsibleSteel and how readily adopted the certification has been so far?
I joined the board [of ResponsibleSteel] a couple of years ago. It’s a really exciting international organisation with some significant members from the steel sector, like ArcelorMittal, BlueScope and Tata. It’s all about creating a responsible steel standard to hold the production side to account around 13 sustainability principles, from the greenhouse gas emissions component to the broader environmental impacts of steel production.
We’re the end user part of the equation, but there are other members on the production and certification side of things. We’re advocating for the application of the standards globally and trying to drive as many steel producers to become members as we can.
For up-and-coming issues you mentioned, like nature and social value, are they areas that Lendlease also wants to establish market leadership in? How are you going about doing that?
Certainly from a social value perspective. In our sector, we work very much at the grassroots level. We create the places and the spaces that people live, work and play in. So we are trying to change the narrative in the sector, from just being about philanthropic giving to actual social value creation – so understanding what communities need and co-creating social value with them.
For nature and biodiversity, at the moment we’re just like many organisations trying to come to grips with what that looks like in our sector. Obviously, our sector has a big touch point with nature. Our urban regeneration project, for instance, has some amazing stories to tell about regreening hard urban environments and bringing biodiversity and nature back into cities. One of our buildings in Barangaroo, Sydney has a green roof attached to it that has beehives, which has brought back biodiversity into a very manmade landscape. At the same time, that biodiversity is helping to keep the rooftop solar panels cool so that they work at a higher efficiency.
But we’re conscious too that as developers, our work has the potential to have a negative impact on land and encroach on green spaces. At the moment, we’re just embarking on a process of understanding where our impacts are using things like the TNFD’s LEAP (Locate, Evaluate, Assess and Prepare) framework, so that we can start to get some data, analyse where our biggest impact is and where we should focus our attention to put the right strategies in place. We were front runners with TCFD and we learned a lot from being leaders in that space. But at the moment, we’re involved in so many lines of work. Our social value and climate targets are coming up in 2025, so we want to make sure our eyes are on that while we work on the nature and biodiversity space.
There are so many different reporting standards to keep up with and so much reporting to do. Do you ever feel burned out?
There is a huge amount of reporting to do. A huge percentage of my role feels like it’s just tied up with reporting these days. What we have tried to do is focus on the transparency of our data for a start. So we publish our own environmental, social and governance (ESG) databook annually in November, which is a one-stop shop for whoever’s interested in our ESG-related data sets. So you can clearly see how we define ESG, the different metrics we collect and all the information reported year on year. We started doing that because we found that the reporting frameworks and schemes out there were growing exponentially and you would need a whole other organisation just to get your reporting done.
We looked at what our investors valued and used that to shape how we pull together our ESG databook. So we started to say ‘no’ to some of the schemes to be honest, because we weren’t seeing demand from our key stakeholders to report under them. As long as they’ve got a certain type of information in a format they were happy with, which for us ended up being the data book, they were fine. So we just thought we were better off putting time and energy into our data book that serves a number of different purposes. Then we can focus on the reporting schemes that meet legislative requirements as well as what our investors and analysts extract the most value from, rather than trying to stretch ourselves too thin and spend all of our time pulling together the same numbers just in different ways, for not much value.
We’ve been reporting under the United Nations Global Compact for a decade and TCFD for the last five years. We’re just gearing up for the ISSB standards, which the Australian government is bringing into legislation. Being a listed entity in Australia, we’ll be reporting under that framework by the end of FY25.
What’s exciting is the fact that our finance teams are starting to get much more involved now as a result of the ISSB standards and the coming together of SASB [Sustainability Accounting Standards Board] and TCFD. The consolidation is brilliant because it means we’re not reporting under four different things, we’re reporting under one. Since it’s attached to accounting standards, it also means our finance team is working alongside us as we prepare these reports, and ultimately it will be them reporting under these schemes once we’ve onboarded them and brought them up to speed.
It appears to be increasingly risky to publicly put out ambitious climate goals in an age of greenhush. How should sustainability heads navigate this landscape?
Ambitious climate targets, which include a commitment to tackle Scope 3 emissions, are what the world urgently needs. Not communicating – or worse, not even setting goals – is a risk to organisations who will be unable to meet their regulatory reporting obligations, let alone the growing demand for transparent disclosure from investors, customers and the community at large.
When we publicly launched our absolute zero by 2040 target, we called it our ‘moonshot’. We knew it was ambitious and we didn’t have all the answers to achieve it at that point, but we decided it was our responsibility to lead and to act. As part of our Mission Zero campaign, we made a commitment to share our journey. For us that means sharing the wins as well as the challenges we are yet to solve.
Our commitment to balanced and transparent reporting is a good antidote to overstating claims or making misleading statements and what leadership in sustainability requires of us. Making accurate and verified claims with appropriate qualifications is the best way to build trust and confidence with investor and customers.
Cate Harris was one of 10 sustainability leaders selected for the Eco-Business A-List 2023. Read our stories with the other winners here.
