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NET ZERO TRANSITION PLAN

New net zero targets

We were the first national housebuilder to set a near-term greenhouse gas (GHG) emissions reduction target, aligned with the Science Based Target Initiative (SBTi), in September 2020. In 2024 we set four new targets which are currently being validated by the SBTi. These incorporate the ambition to be net-zero across our full value chain by 2040.

• The baseline for all targets is 2018

Figure 1: Net Zero Targets

For comparison, our previous targets committed to reducing absolute Scope 1 and 2 emissions by 29% by 2025 and Scope 3 emissions intensity 24% (from a 2018 baseline) by 2030.

Our value chain emissions

Figure 2: The origin of our emissions

Our carbon reporting methodology provides detail on scope, organisation boundary, calculation and reporting methodology.

Our transition pathway

We have undertaken a detailed assessment of our total value chain footprint, gaining an understanding of which elements contribute most over time. We have identified six principal ‘decarbonisation’ levers that we consider having the most material impact on achieving our transition towards net zero operations and supply chain. Within each of these levers we have identified several actions we can take – some of these are currently underway, while others require further work with value chain partners to understand when and how they can be deployed. Inevitably there are challenges and barriers to achieve our goals and more detail can be found on page 84 of our annual report.

The figure below sets out the broad levers and actions that will be fundamental to delivering our carbon reduction ambitions.

Figure 3: Emission reduction levers

Our direct operations

Our potential pathway for our direct operations, relating to the specific actions we have identified is shown below.

Figure 4: Emissions from our direct operations

Reducing value chain emissions

99% of the Group’s emissions arise from our value chain, both upstream and downstream of our direct operations.

The following chart outlines potential emissions to 2040 based on the current assessment of the contribution of each element, and hence where we will have to be innovative in our approaches, the materials we use and how we work with supplier partners to help drive emission reductions.

The key to meeting our ambition is through genuine collaboration and the sharing of knowledge and insight between us and our suppliers, as well as sector-wide groups we lead or participate in. Alignment with the Future Homes Standard will play a significant role in decarbonising our downstream emissions

Figure 5: Emission reduction potential in our value chain

Transition Plan Governance

To enable the Group to make decisions on specific activities, a more complete view on the likely costs and benefits associated with each activity is required. The Group has put a robust governance process in place to incorporate our transition planning and modelling to the business planning cycle.

We will reassess our transition plan on an annual basis in line with our financial reporting cycle, but we will monitor progress throughout the year the via the Waste and Sustainable Operations Groups and the Sustainability Committee. This allows for the transition plan to be informed by views of forecast activity and expertise on operational delivery.

Sectors critical to our transition plan

Most of our estimated footprint arises from the transformation of raw materials into products, transport to sites, site preparation and groundworks, and the impact of the homes that we build over their lifetime.

Figure 6 shows the estimated contribution of materials to our total emissions, based on FY23 data. This is distinct from figure 5 which shows the expected emissions reduction potential over time.

We have identified and reviewed the critical sectors that contribute the greatest share of emissions by sector (top-down) and supplier (bottom-up) emission projections to 2050. We have analysed the main actions to reduce emissions at sector level, evaluated how supplier emissions reduction plans align with our ambition and if their actions follow the sector specific recommendations. The aim of the critical sector analysis was to identify risks to the Group transition plan and provide insights into embodied carbon reduction and supplier performance.

The information used for these deep dive reviews came from publicly available reports and discussions with Group functions, and direct engagement with 20 key suppliers from critical sectors with high contributions to our total footprint. The deep dives showed the impact of each sector in the Group’s transition plan, discussed the relevant supply chains, analysed each sector’s decarbonisation plans and identified any risks for the Group’s carbon emissions targets and trajectory to net zero emissions by 2040.

The evidence collected was used to interpret the sector decarbonisation plans for each material, within the context of the Group transition plan and timelines. The results have also informed the newly introduced model and projections of material decarbonisation to 2040.

Figure 6: Estimated contribution of materials to value chain emissions

Sector plans contain risks

In general, suppliers are aligning with the sector roadmaps where action is within their direct control. However, most critical sectors expect carbon capture, usage and storage (CCUS) to be implemented from 2030 which is a technology yet to be deployed at scale, and there is also some reliance on offsets. Of the 20 suppliers, most have plans that are aligned to 2050, in line with the Government’s commitments.

As our ambition is to achieve net zero in 2040, we will need to continue to engage with suppliers to encourage them to take bolder action on reducing emissions more rapidly, and to choose materials with lower embodied carbon.

Alongside this we will engage with trade bodies and government to catalyse action and build cross-sector partnerships to drive ‘one voice’ e.g. our work with the Future Homes Hub to lead the development of a sector roadmap.

Carbon offsetting

The SBTi guidance for housebuilders recognises that offsetting may be appropriate to use for residual emissions, but we await further clarification from them.

We do not currently use offsets. However, at an appropriate time we will consider the role that they could play in achieving our targets once all reasonable and practicable opportunities to reduce greenhouse gas emissions have been implemented.

The use of offsets would require a clear and robust strategy that tests their credibility and requires the use of a recognised standard.

Standards that may be considered, in due course. include those recognised by the NextGeneration benchmark of housebuilders:

  • Verified Carbon Standard (VCS),
  • Gold Standard Verified Emissions Reduction (GS VER),
  • Voluntary Offset Standard (VOS),
  • Climate Community and Biodiversity Standards (CCB).

Otherwise, we would ensure the offset meets the requirements of the Quality Assurance Standard for Carbon Offsets and is aligned with The Oxford Principles for Net Zero Aligned Carbon Offsetting.

ESG Data & Controls

Through our ESG Data and Controls Working Group, we have devised a roadmap to automate ESG data collection, fortify internal controls and facilitate prompt decision-making across our sites and offices.

In FY24, we supplemented our Carbon Emissions Dashboard with a new Plant and Machinery Dashboard. This tool provides deeper insights for both Group and divisions into fuel consumption across our sites and identifies opportunities for enhancing fuel efficiency.

We have also set ourselves a three-year pathway to move away from calculating supply emissions using a spend-based methodology to a quantity-based methodology, by pairing quantities of materials purchased with environmental product declarations (EPDs). The move to a quantity-based methodology will allow us to recognise the direct impact that supplier and materials selection has on our transition pathway, but we are also interested in understanding what actions and materials choices we may need to take over time to achieve our 2040 net zero target.

We have progressed this work in FY24, comparing data on direct and spend-based measurement for groundworkers and subcontractors. In FY25, we will explore automated data capture for scope 1 and 2 emissions from our operations, to strengthen timely decision-making processes, and external reporting will be a mixture of quantity-based and spend-based data using Bill of Quantities and supplier data.

In FY26 – External reporting to be predominantly quantity-based using Bill of Quantities, invoiced data and supplier data.

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