The impacts of changes to environmental planning policy in NSW

Part 1: non-residential buildings
Pangolin Associates, June 2023

The recently announced changes to NSW’s environmental planning policy will have significant implications for developers in the state and around Australia.

In Part 1 of this two-part series, we look at how the changes will impact the developers of large commercial buildings and those designated as state significant infrastructure.

As the world moves towards a net zero future, embodied carbon emissions will be one of the key areas that will need to be addressed.

Embodied carbon is the carbon emissions associated with buildings, including the materials and processes used in construction, the energy and resources used by a building throughout its lifespan, and the emissions related to its eventual demolition and the disposal of waste.

According to a study by the Green Building Council of Australia, embodied carbon accounted for 16 per cent of Australia’s built environment emissions in 2019. If left unaddressed, this figure could increase to as much as 85 per cent by 2050 [1], which would be a significant impediment to Australia meeting its goal of net zero emissions under the Paris Agreement.

To meet emissions reduction targets, state governments have begun to look at the issue of embodied carbon emissions as part of their broader emissions reduction strategies.

The NSW Government was the first to move in this area with the introduction in August 2022 of the State Environmental Planning Policy (Sustainable Buildings) 2022 (known as the Sustainable Buildings SEPP). This policy, which will replace the existing State Environmental Planning Policy (Building Sustainability Index:BASIX) 2004, is the first in Australia to put sustainability at the heart of the development and construction process.

Under the Sustainable Buildings SEPP, from 1 October 2023 the developers and builders of all new buildings and residential renovations over $50,000 in NSW must calculate and report on the embodied emissions of the materials used in construction. Beyond these overarching requirements, the policy has different conditions depending on whether the project is a residential or non-residential building.

While Sustainable Buildings SEPP only currently applies to NSW, similar policies will likely follow in other states as they look to align themselves with the updated requirements under the National Construction Code and reduce emissions in line with their individual targets.

This would follow the pattern of other notable sustainability initiatives such as the National Australian Built Environment Rating System (NABERS), which was first introduced in NSW in 1998 before being expanded nationally and then internationally in subsequent years.

It would therefore make sense for developers and construction companies in other states and territories to familiarise themselves with the Sustainable Buildings SEPP to get a better idea of the types of requirements that they will likely have to meet in the future.

This article will look at what the Sustainable Buildings SEPP means for non-residential buildings and those designated as state significant infrastructure in NSW. Part 2 of this series will look at the impact on residential buildings.

What will Sustainable Buildings SEPP mean for non-residential buildings in NSW?

Up until now, the NSW Government has not had any insight into the operational emissions, water performance, or embodied emissions of new non-residential buildings in the state.

The introduction of Sustainable Buildings SEPP will require developers to provide this information to the government when planning and constructing a new building. This will give the NSW Government a better overview of embodied emissions, enabling it to identify areas for improvement and adjust the policy accordingly as part of its three-year review cycle.

Under Sustainable Buildings SEPP, developers must consider the following four elements when planning and constructing a new non-residential building:

  1. A net zero statement,
  2. Energy performance,
  3. Water performance,
  4. Reporting of embodied emissions.

Net zero statement

During the application process, developers of large commercial developments and state significant infrastructure will be required to produce a net zero statement.

The statement must include:

  • The building’s estimated scope 1 and 2 emissions out to 2050,
  • Evidence that the building has the physical space, infrastructure, ventilation, and electrical capacity to operate without fossil fuels by 2035,
  • Information on aspects that improve energy performance, such as onsite renewables and passive design features.

Large commercial developments’ net zero statements must also include evidence of the intent to procure or procurement of offsets for onsite fossil fuel use (i.e. from diesel generators) calculated over a 10-year period. This offsetting requirement does not apply to buildings designated as state significant developments.

Energy performance

Developers typically design buildings to be as energy efficient as possible, but whether this design equates to real energy savings has not been calculated.

Once a large commercial building has been constructed and occupied, Sustainable Buildings SEPP will require developers to show that the targeted energy efficiencies are being achieved.

This requires developers of office buildings with more than 1,000 m2 of net lettable area to achieve a National Australian Built Environment Rating System (NABERS) rating of at least 5.5 stars, and hotels, motels, or serviced apartments with more than 100 rooms to achieve a NABERS rating of at least 4 stars.

If these ratings are not achieved within two years of the building’s occupancy, the development must make up the difference between the operational performance and the minimum standard by purchasing offsets.

Water performance

The Sustainable Buildings SEPP requirements will also require close monitoring of potable water in new large commercial buildings.

This includes the submission of a NABERS Water Commitment Agreement with the development application, a progress report on water performance once construction is complete, and the achievement of at least a NABERS 3-star water rating within two years of the building’s occupancy.

There are currently no requirements for buildings to offset their additional water use if they fall short of the 3-star NABERS water rating.

Reporting of embodied emissions

Sustainable Buildings SEPP will require all non-residential building developments in NSW to report the quantities of materials used and the associated embodied emissions during the development application and again once construction is complete.

Developers will also be required to explain the measures they took to minimise embodied emissions, such as through re-using or recycling building materials where possible.

What will this mean for non-residential buildings and developers in NSW?

According to the NSW Government, the changes to the requirements for non-residential buildings under Sustainable Buildings SEPP will reduce the state’s greenhouse gas emissions by 720,000 tonnes CO2e over 10 years.

Sustainable Buildings SEPP will require developers to pay more attention to the embodied emissions of the materials used and the energy efficiency measures within their buildings. While this may increase upfront costs, it will reduce the likelihood of expensive future retrofitting as governments tighten regulations to meet emissions reduction targets.

In addition, developers may already meet the new requirements if they are undergoing emission reduction initiatives through programs such as Climate Active or greenhouse gas assessments. Sustainable Buildings SEPP could also serve as a catalyst for developers to improve their sustainability credentials as they will have collected much of the data needed for a carbon footprint.

Finally, the new requirements will make buildings more desirable to prospective tenants or guests who are increasingly focusing on a building’s carbon footprint when considering leasing arrangements or accommodation.

[1] Green Building Council of Australia and thinkstep-anz. (2021). Embodied Carbon and Embodied Energy in Australia’s Buildings.

If you are a developer of non-residential buildings in NSW and would like more information on the Sustainable Buildings SEPP, assistance in meeting the requirements of the new policy, or would like to find out more about reducing your emissions, contact Pangolin Associates and speak to one of our expert consultants.