Housebuilders and the proposed Part Z
The Part Z authors have over the past few months spoken with housebuilders of all sizes to discuss the Part Z proposals. All of the housebuilders we met were supportive of the proposed Part Z, calling for the level playing field that will benefit all in the industry. We have already received endorsing statements from the likes of Barratt Homes, Lendlease, Thakeham Group, Greencore Construction and The Offsite Homes Alliance.
During our discussions some housebuilders (not necessarily the above) raised potential concerns. This blog is a summary of our conversations around those concerns. Most of what follows is relevant to all building industry sectors, not just housebuilding.
The housebuilder market is highly competitive. Won’t the expense of Part Z reporting squeeze the already small margins?
WLC is fundamentally calculated by applying a set of carbon factors to a bill of quantities. Before work starts, the proposed Part Z requires a preliminary assessment using standard factors. Industry discussions are already underway between the Part Z authors and the Future Homes Hub to create a table of such standard factors, and to produce a simple spreadsheet for use by builders and anyone else.
Post-construction a further assessment should “as far as possible” use final material quantities and actual carbon and life cycle factors. For products and materials where this may not be possible, the builder could reuse the pre-start calculations, only updating the quantities. Accordingly, the expense of meeting the Part Z proposals is expected to be minimal.
Won’t the small housebuilders will be particularly badly hit?
Part Z has been written so that its requirements apply only to schemes with GIA of 1000m2 or more, or creating 10 or more dwellings. Most small housebuilders’ projects therefore won’t need to be assessed under the proposed Part Z. We also propose that these numbers are consulted on, so could be changed if called for by industry.
Are the proposed Part Z calculations sufficiently clearly defined? Is there a risk that some could conceal carbon emissions by deliberately misinterpreting the requirements?
The proposed Part Z methodology is as set out in the RICS Professional Statement (RICS PS); the reporting format is also based on the RICS PS and will be closely aligned with the Built Environment Carbon Database (BECD). The RICS PS is unambiguous about the calculation method, and which aspects of the project must be included as defined by the system boundary – for example, ground works and below-ground infrastructure are excluded. Outputs will be consistent and easily comparable between projects. The 2nd Edition of the RICS PS (due for launch Q1 2023) will bring further consistency still.
Won’t the increased demand for Environmental Product Declarations (EPD) create additional work for supply chains, and disadvantage companies with high embodied carbon products?
Proposed Part Z reporting does not require that all products/materials used have EPD (although helpful); standard carbon factors can be used wherever necessary.
Suppliers are not mandated to provide product EPD, but in a world where carbon reporting is increasingly prominent (not only in the context of the proposed Part Z), doing so should provide a competitive advantage and they neglect to do so at their peril: some housebuilders have already told us they will soon stop sourcing products without EPD. This, and the commitment by designers to select products with EPD is likely to encourage all suppliers to provide them, which will in turn spur innovation to reduce carbon.
The proposed Part Z limits on upfront embodied carbon should initially be set to discourage a minority of projects with unnecessarily wasteful design. Rather than precluding potentially carbon-intensive products, these limits should encourage innovation towards efficient design and lower-carbon equivalents. Housebuilders have indicated they would welcome this.
Timber is a common material in UK residential construction. Will the proposed Part Z reporting reflect sequestered carbon?
The proposed Part Z follows RICS PS, which is in turn based on EN-15978, the standard for life cycle analysis (LCA). According to this, when reporting Stages A-C, the benefits of sequestration should be shown, but separately.. This is consistent with the view that the benefit of a lifetime of carbon sequestration in trees can only be recognised over the lifetime of the building in which its timber is used.
In housebuilding, timber schemes are expected to be lower carbon than business-as-usual equivalents, and so are expected to comply with upfront embodied carbon limits; and the benefits of sequestration, allowed for long-term reporting, will show up in reported whole life carbon (WLC).
Operational carbon can be reduced by air source heat pumps and triple glazing, but these can increase embodied carbon. Won’t this make it harder to achieve the proposed Part Z?
We would expect the proposed Part Z limits to reflect the need to meet the requirements of Parts F, H, L, O, and any other legal constraints – such as the banning of gas boilers – that will have an impact on both embodied and operational carbon.
How do the upfront carbon limits in Part Z sit within the wider requirements to achieve Net Zero?
The definition of Net Zero in the built environment will be set out in the UK Net Zero Carbon Buildings Standard (“NZCBS”), a cross-industry initiative supported by BBP, BRE, the Carbon Trust, CIBSE, IStructE, LETI, RIBA, RICS, and UKGBC. The NZCBS will define the metrics and limits by which Net Zero performance is evaluated across the UK construction industry.
Embodied carbon is a large and growing share of WLC. Focusing on whole life – and not just operational – carbon will encourage designs that optimise the balance between operational and embodied emissions and reduce them in total. It is therefore almost certain that the NZCBS will be defined in terms of both operational and embodied carbon, which is aligned with the proposed Part Z. The proposed Part Z-aligned NZCBS is expected to be adopted by the housebuilding sector.
Net Zero in the NZCBS will be defined to align with science-based targets (SBT) so that allowable carbon emissions will decrease year on year. As the proposed Part Z will in turn be aligned with the NZCBS, it will be an effective instrument in the SBT-guided decarbonisation.
Aren’t many housebuilders already reducing carbon in accordance with their science-based target (SBT) pledges?
Yes they are. And, to demonstrate SBT compliance, these housebuilders already carry out all the calculations required by the proposed Part Z; it is simply a matter of restating the outputs in the format set out in the Part Z proposals, which are aligned with RICS PS.
Many leading housebuilders are using low carbon as a marketing tool. Won’t different definitions of emissions and ‘net zero’ emissions cause confusion and allow some to greenwash?
Implementation of the proposed Part Z (and, in parallel, the adoption of the NZCBS) will help prevent this sort of thing from happening: the standardisation of the definition of carbon emissions, encapsulated unambiguously in the proposed Part Z, will ensure a level playing field when evaluating projects and comparing across them.
Funders increasingly demanding that large housebuilders declare the WLC emissions on their schemes. Should this concern SME housebuilders?
TCFD carbon-reporting is already mandatory for very large investors, lenders and asset managers. The still-developing reporting standards are likely to align with the NZCBS and therefore the proposed Part Z. As TCFD reporting beds in, investors and lenders will want to enumerate the carbon impact of all assets in their portfolios – including loans to SME housebuilders.
To sum up, meeting the proposed Part Z requirements should not be onerous given the provision of standard carbon factors and basic tools currently under development alongside wider industry developments making more detailed information (such as EPD) more readily available. Capital providers and the growth in voluntary SBT commitments will increasingly require the calculations and reporting of metrics that are also required by the proposed Part Z.