As businesses increasingly commit to net zero targets, the focus on emissions linked to their leased properties, particularly commercial spaces, is intensifying, according to Property Council.
A recent report by Deloitte, titled The Net Zero Tenant, found that a significant portion of an organisation’s emissions come from the electricity used (Scope 2) and the goods and waste it procures (scope 3).
“For many organisations, the emissions associated with their leases represent a significant portion of their total emissions footprint and their aspirations for achieving net zero,” the Deloitte report said.
The Australian government, aiming for a net-zero public service sector by 2030, has set new standards for building leases, including mandates for all-electric buildings and Green Star certifications. Similarly, commercial tenants, especially in premium sectors, are aligning their leasing decisions with net zero ambitions.
“From a developer point of view, it’s incredibly important to be building product that supports their tenant’s net-zero ambitions,” said Sarah Kinsela, a partner at Deloitte.
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The Deloitte report outlined strategies for tenants to manage emissions across different scopes.
For Scope 1 emissions, which include refrigerants and combustion emissions, the recommendation is to move towards all-electric building solutions and negotiate green lease terms that support such transitions.
Regarding Scope 2 emissions, linked to purchased energy, tenants are encouraged to switch to renewable energy options like GreenPower or engage in direct power purchase agreements.
“While there’s a rise in on-site renewable generation and renewables in the broader electricity grid, a significant portion is still generated from fossil fuels,” said Tom Yankos, senior manager at Deloitte.
The Deloitte report also discussed how tenants can push for environmental considerations in both existing and new leases.
Recommendations include opting for energy-efficient building features like LED lighting, efficient HVAC systems, and considering the use of low-carbon office equipment.
In terms of Scope 3 emissions, which involve indirect emissions such as those from manufactured building materials and waste disposal, tenants are urged to adopt circular economy principles to minimize their carbon footprint during office fit-outs.
Kinsela stressed the importance of green leases in achieving net-zero goals through tenancy arrangements. She suggested that tenant demand for green features can drive broader adoption in the market.
“There’s still opportunities in existing leases to make a difference,” she said. “The more tenants ask for, and push for green lease type approaches, the more they’ll be offered in the market.”
The Deloitte leader underscored the potential for tenants to influence environmental impacts even through smaller-scale decisions like furniture updates or refurbishments.
Read the Property Council article here. Read Deloitte’s paper, "The Net Zero Tenant", here.
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