In this episode of Corrs' High Vis podcast, Kirsty Davis, Rosie Syme and Anna White explore the complexities of decarbonising the construction industry, critical to Australia achieving its net zero emissions target
Corrs High Vis is a series of podcasts, offering insight and analysis into the Australian construction industry. Presented by Corrs Chambers Westgarth, it considers the issues which really matter to professionals in this ever-evolving industry.
Transcript
Rosie Syme, Partner, Corrs Chambers Wesgarth
Kirsty Davis, Partner, Corrs Chambers Westgarth
Anna White, Partner, Corrs Chambers Westgarth
Rosie: Welcome to another episode of Corrs High Vis. My name is Rosie Syme and I am a partner in the Environment and Planning team here at Corrs. I am joined today by my fellow partners Kirsty Davis and Anna White to discuss today's topic, ';decarbonising the construction industry'. A huge topic for us to cover in just 15 minutes or so.
Before we begin, I would like to acknowledge the traditional owners of the land on which we record this podcast and from where you might be listening. For me that's the Wurundjeri People of the Kulin Nation and I pay my respects to the elders past and present and emerging and I extend that respect to all Aboriginal and Torres Strait Islander People who might be listening. To kick us off, Kirsty can I throw to you to set the scene for us, why are we talking about decarbonisation?
Kirsty: We are talking about it in the context of mitigating climate change and the international effort to limit global warming by transitioning to low carbon economies. As most people would know, in September last year the Australia government updated its emissions target and committed to reducing Australia's greenhouse gas emissions by 62 to 70% below 2005 levels by 2035 and it recommitted to Australia's achievement of net zero by 2050.
So we've been seeing and we are going to continue to see an increasing suite of policies and regulatory reforms at all levels of government that are aimed at decarbonisation, and the construction industry is a particular area of focus because according to infrastructure Australia, buildings and infrastructure directly responsible for almost a third of Australia's total carbon emissions and indirectly responsible for over half of our total carbon emissions. So decarbonisation of the construction industry is really going to be critical to achieving our net zero emissions target.
Rosie: Thanks Kirsty so decarbonisation of the construction industry is important but what does it mean, what does that look like on the ground?
Kirsty: Yes it means using less energy to build so less energy to extract resources, to produce materials, to transport those materials, to construct, to use buildings, demolish and then dispose at end of building life. There's lots of different levers that a driving change in this space and the big one that's in focus at the moment is the concept of embodied carbon.
Rosie: Thanks Kirsty I am going to jump in there because embodied carbon is talked about a lot but from my experience it can mean different things to different people, so it might help just to iron that one out upfront. As we understand it, embodied carbon describes the emissions associated with the built form as opposed to its operational use. So it can be distinguished from operational carbon.
Not with standing that distinction, there are a number of different aspects of embodied carbon that reflect different parts of a building's life cycle. So there's the upfront embodied carbon which is associated with initial construction so, as Kirsty was describing, raw material extraction, processing, transportation with manufacturing and assembly. There's also in-use embodied carbon which is associated with maintenance and refurbishment works of a building during its lifetime and then of course the end of life embodied carbon which is associated with its demolition and disposal or, as we move towards circularity, it's recovery of materials for reuse. Now obviously all of the life cycle of a building is important but Anna, I am curious where are we seeing focus at the moment?
Anna: Yes, that's a good question. We obviously don't want to downplay the significance of all parts of the building life cycle but I think it's fair to say that upfront embodied carbon is a key focus area at the moment. This is probably because there's growing recognition, anxiety really, that the carbon embodied in buildings constructed today is baked in once the building is complete. If we can urgently reduce that upfront carbon by early carbon-conscious decision making the carbon implications of built form can be significantly reduced.
Rosie: Exactly. So then we can make greater inroads in hitting those targets that Kirsty just outlined in terms of decarbonisation. So against that context Anna, Kirsty can I ask you to share some reflections on how we are seeing embodied carbon and other decarbonisation initiatives play out in practice?
Anna: Yes absolutely. Well, when we think about legislative initiatives, we had legislation to mandate climate related financial reporting commenced in Australia last year and we're currently in the first reporting year for Australia's largest corporates at the moment.
Commencement of this regime is a stage process so other corporates will be commencing reporting over the next couple of years if they essentially meet relevant size criteria and already reporting under Chapter 2M for their financial reporting under the Corporations Act. This climate reporting regime applies to both publicly listed and privately held companies which will obviously include a range of participants in the construction industry and really this is a very significant reform in terms of introducing an entirely new form of financial reporting in Australia. The Chair of ASIC actually described these as one of the most significant changes in financial reporting in a generation which really is a very fair characterisation.
So under this new regime reporting entities must now file with ASIC each year and provide to their members a sustainability report. That report must set out information that's required under the Corporations Act and Climate Related Disclosure Standards or S2 that have been published by the Australian Accounting Standards Board. Those standards have been modelled off the International Financial Reporting Standards or the IFR Standards which are being applied in other jurisdictions internationally and it's really a very comprehensive regime so the new sustainability report which companies have to prepare each year has to disclose against a range of mandated categories of information. That includes information about the entities material financial risks and opportunities related to climate, metrics and targets relating to their scope 1, 2 and 3 greenhouse gas emissions, governance and strategy information in relation to those risks, opportunities, metrics and targets.
So similar reporting regimes have been introduced across a range of other jurisdictions but Australia ended up leapfrogging ahead and being one of the first jurisdictions to actually commence this IFRS modelled reporting. So there is certainly significant focus being placed on this climate related information about companies that is now going to be available in the market in Australia.
Rosie: Thanks Anna. It's certainly a very significant and comprehensive regime in terms of its reach to corporate Australia. Perhaps, in that context, and something that I hear a lot about is scope 1, 2 and 3 emissions. I am conscious that the audience might not all understand the distinction between those, can I perhaps get you to just outline this for us?
Anna: Sure. I think it's always helpful to recap on what we mean by the three categories. So scope 1 emissions, the emissions that occur from sources that are owned or controlled by the entity - so operating plant and machinery on a construction site is a really good example so they're the direct emissions. Scope 2 emissions are an entity's indirect greenhouse gas emissions from the generation of purchased or acquired electricity, steam, heating or cooling that the entity might consume. So on a construction site if you are plugging in equipment into the socket on the wall and flicking on a switch, that's contributing to your Scope 2 emissions. Scope 3 emissions are all the other indirect greenhouse gas emission that are generated both upstream and both downstream in an entity's value chain. So scope 3 emissions can fall across 15 different categories and include things like the upstream transportation and distribution, emissions from waste generated in the operations, business travel, employee commuting and investments. So when we are thinking about this in the context of a construction company, a construction company's scope 1 and 2 emissions that are generated by activities on a particular construction project will ultimately become the scope 3 emissions of the principle on whose behalf those construction activities are being undertaken.
Rosie: Demonstrating, I think, the complexity of this reporting regime and how multiple people are going to be sourcing information for their own reporting obligations but needing inputs from others that they are dealing with. Thanks Anna.
Look another area of change that I've seen is one that's been perhaps around for a longer period of time and that's in building standards, rating tools and building efficiency disclosure obligations. There's obviously some degree of overlap there, where the disclosure obligations concern things that will be captured by the CRFD, but I think it's important to recognise that these regulatory controls have been around for a long time but they have historically focussed on operational emissions as opposed to embodied carbon. In addition, they've been narrow in terms of the built form sectors to which they apply but this is something that's changing with industry groups and participants mobilising to share data and create tools to help drive lower embodied carbon outcomes across a much broader range of built forms. One example of this is that NABERS [National Australian Built Environment Rating System] in partnership with the Green Building Council of Australia has released an embodied carbon rating tool which can be used with an emissions factor database to measure the upfront embodied carbon of buildings in Australia. This is a significant step forward to understanding the embodied carbon impact or the impact in terms of embodied carbon of built form.
We're also seeing these tools shift from voluntary industry-led initiatives to becoming mainstream and eventually will be mandatory obligations. This is obviously occurring through levers like the CRFD, which Anna just described, but also through updates to the national construction code and through other things like procurement requirements so Kirsty you're based in New South Wales and I understand New South Wales is leading the charge on this. Can you perhaps tell us a bit more about that?
Kirsty: Yes. This shift to a focus on upfront carbon is certainly something that the New South Wales government is championing at the moment in the public infrastructure delivery space - so road, rail, schools and hospitals. In the last 18 months the government has introduced a framework policy for decarbonising public infrastructure delivery, and it's also released a proposed sustainable construction policy that will support that framework that's expected to commence this year.
These suite of policies are going to be setting mandatory actions for New South Wales government agencies that deliver public infrastructure to seek to reduce these upfront carbon impacts from business case assessment through to design and procurement, construction and practical completion.
Some of the mandatory obligations that are going to be imposed on agencies include preparation of carbon management plans. Those plans will need to be prepared from business case stage and they're going to be reviewed by the New South Wales EPA and commented on if they're not up to scratch during critical project delivery stages.
There's going to be a much sharper focus on design initiatives to reduce carbon emissions so, for example, by preferencing sites where possible that have existing infrastructure that can be reused and repurposed or in the context of linear infrastructure, optimising vertical and horizontal alignments of projects so that we can reduce the amount of construction materials, the extent of earthworks and therefore waste generation from the delivery of these major projects in New South Wales. Finally, and quite importantly, a real emphasis in this policy shift is for agencies to try to the extent possible to preference the use of recycled materials or, if recycled materials aren't available, low carbon materials such as low carbon, concrete and steel. So while New South Wales, I am proud to say, is leading the charge in this space we also expect that at the Commonwealth level these things are starting to happen already and at the state and territory level they're going to follow suit with their own decarbonisation policies in order to meet their own targets but also the Australian national target.
Anna: Yes, that's definitely the case Kirsty. Certainly some of the other initiatives that jump to mind at the Commonwealth level, as part of the Australian public sector net zero by 2030 commitment; the Australian government has developed a road map to achieve that target by 2030 and one element of that policy is that from 1 July this year, where a contract is entered into by or for the Commonwealth for the construction of office space for Commonwealth departments, where that contract has a value greater than $15 million the office space must have and maintain 6 star NABER's energy rating and a 4 star green star rating under the Green Building Council of Australia and that includes complying with a climate positive pathway that the Commonwealth government has set. So we are certainly seeing it start to trickle through at least in terms of Commonwealth government office structure.
Up here in Queensland we're all busy at the moment of course preparing for the Brisbane 2032 Olympic and Para Olympic games. In that context, the original Olympic Host Contract between the International Olympic Committee so the IOC are the state of Queensland and Brisbane City Council included in undertaking to deliver games that are carbon positive so that was to aim to off-set more carbon than the games actually produce. That commitment was adjusted somewhat in 2024 to modify the climate commitment such that it's now to minimise direct and indirect games related carbon emissions and to aim to minimise emissions and remove more carbon from the atmosphere than what the games project to emit overall. So this includes emissions from a range of sources including those generated from the construction of permanent infrastructure that's been built specifically for the games. So we can certainly see how these initiatives are going to drive a heightened focus on the greenhouse gas emission profile and decarbonisation efforts of participants in the construction industry across a wide region in Australia.
Rosie: Thank you both. I am very conscious of time and I am also conscious that we could probably speak for an hour and run through all of the different states and territories with the various initiatives that they're taking, so mindful and recognise that today is not an exhaustive summary but what we've hoped you've gained from today's podcast is an understanding that you know this is really important, there's a heightened focus on various regulatory contractual and procurement initiatives and that this is really driving a lot of momentum to decarbonise the construction industry. Anna and Kirsty, before we close, do you have any parting reflections on the implications of this for the industry as a whole.
Anna: Sure, just to reflect that with a new mandatory Climate Related Financial Disclosure Regime in Australia this really is an enormous shift in terms of preparing for the energy transition, there's a significant amount of work that needs to be done by reporting entities to prepare the annual sustainability reports and through that process we will now see a greater level of transparency around the greenhouse gas emission profile of corporates, including participants in the construction industry more so than we've ever seen before and that's a real game changer.
Kirsty: And for me I think really it's for those who are delivering buildings and infrastructure to the extent that they hadn't been engaging in these reforms already, there really is a need for partners to start focussing on low carbon procurement, supply chain matters, measurement and reporting capabilities to ensure that they're keeping up with these reforms and, particularly in the public infrastructure space, that delivery partners are going to be able to meet requirements that are likely to be passed through to them by government agencies.
Rosie: Thank you both, and just as a final reflection from me, I think it's really important that industry as a whole continues the conversation. You know, this is new and a pretty different way of going about things to think about your embodied carbon upfront and to factor that into design and material selection and every other step of the construction process. So there's lots of really positive stories of lower embodied carbon outcomes that have been achieved, so keep talking, keep following the regulatory and policy reforms they are shifting rapidly and it's really exciting I think to see how much energy is being devoted to this important issue and with that we will close today's podcast and Corrs looks forward to having you join us on our next Corrs High Vis Podcast soon. Thank you.