How construction companies can combine profitable growth with net zero

To reach net zero carbon construction by 2050, companies need to find ways to reduce carbon emissions across the construction value chain.

In brief

• Building construction and operation are responsible for a substantial share of global CO₂ emissions.
• Governments are offering incentives and imposing penalties to motivate construction companies to reduce a building’s carbon footprint.
• Construction companies have a pivotal role to play in innovating new products and services that drive clean energy investments like decarbonization.

According to a report from the UN Environment Programme, in 2019, CO₂ (carbon dioxide) emissions from the operation of buildings reached their highest levels ever. If emissions from building construction are included, the global share of emissions represent 38% of all energy-related CO₂ emissions.¹ This is a higher percentage than transport (23%) and all other industries (32%), making building construction and operation the world’s largest CO₂ emitter by sector.² In 2020, global carbon dioxide emissions from building operations declined 10% from 2019 highs.³ However, the decline seemed to be temporary, with emissions rising again with an increase in economic activity. The global share of emissions from building construction only dropped 1% and stood at 37% in 2020.⁴

COP26 reinforced the urgent need for companies and the public sector to put robust decarbonization plans into action to keep hope alive for limiting global warming to 1.5°C. For sustainability-minded construction companies, there are significant opportunities to reduce carbon emissions and energy consumption within the sector, while simultaneously generating profitable growth.

Innovation in products and services driving decarbonization

There are significant opportunities to invest in research and development to innovate products and services that help building owners and operators reduce their carbon emissions and energy consumption to reach net zero carbon construction, while simultaneously generating profitable growth. These include:

• Energy-efficient retrofits and investments in the right products and innovations that focus on heating, ventilation and air conditioning (HVAC), lighting, plumbing, and building envelope (walls, windows, roofs and insulation). Companies striving for net-zero carbon construction have enormous opportunities to work with building operators to help them pull these levers to maximize a building’s energy efficiency. Opportunities can include offering products and services for everything from insulation to entire building management systems.
• Smart software and business model innovations that automate when, where and to what degree HVAC and lighting are provided, combined with holistic services and solutions. Building automation systems and smart energy management can improve a building’s operational performance and enhance the comfort of occupants. Building automation systems can also monitor operational performance of the equipment so that building operators can optimally maintain building assets, all of which can reduce carbon emissions and improve energy efficiency. Meanwhile, holistic solutions should focus on maintaining a building at a certain temperature or lighting a room to a certain wattage or number of lumens, rather than solely focusing on an HVAC installation or lighting retrofit.
• Certification, energy conservation awareness and training that help building owners demonstrate the sustainability of their buildings and help their investors meet their ESG goals. For example, LEED certification is available for both new building construction as well as existing buildings and spaces. At the same time, construction companies can create training programs that enlist building occupants in helping to maximize a building’s energy efficiency.

Emission reductions lie along every point in the construction value chain to aim for net-zero carbon

In addition to helping others achieve their net-zero goals, construction companies need to consider where they can reduce CO₂ emissions along every facet of the value chain. Here are some ideas.

1. Focus on product innovation

There are numerous opportunities to improve traditional products and introduce new ones. For example, wood composites in a growing number of applications constitute a strong substitute for conventional materials such as steel and concrete. They have a higher load-carrying capacity and low weight. They are electrical and heat resistant. And their higher insulation rating makes them more energy efficient. Moreover, wood has the potential for regrowth. Most importantly, from a sustainability standpoint, substituting concrete and steel with wood — where possible — provides the potential to reduce CO₂ emissions by 15% to 30%.

2. Improve process efficiency

All players along the value chain can contribute to decreasing emissions. For example, during the design and planning phase, architects and planners can design for low energy operational consumption and disassembly, as well as adaptability and flexibility. Building material manufacturers can choose to use fewer hazardous CO₂ intensive materials, prolong the lifespan of the materials, source local materials and standardize materials wherever possible. Suppliers can adopt new technologies that reduce energy use and switch from fossil fuels to renewables. Distributors can optimize transportation flows. Building contractors can adopt technologies that optimize usage and decrease fuel consumption. Throughout the building construction process, contractors can leverage data management systems to streamline operations.

3. Close material loops

According to the World Economic Forum and EY-Parthenon analysis, 70% to 80% of unused construction materials demolition waste are discarded. Much of this waste can be reused or recycled. For example, 40% of discarded lumber can be repurposed for wood flooring material. Leading companies are already realizing substantial CO₂ savings through circular material models. A recycling center in Retznei, Austria, for example, processes 130,000 tons of construction and demolition waste annually — 70% of the waste materials are recycled or reused, while 30% are used as back-filling material for a quarry.

Make the most of platforms and ecosystems

Ecosystems and platforms provide companies in the construction industry opportunities to profit from mutually beneficial partnerships; access to new technologies, business models and talent; and shared investments that can accelerate emission reductions — within the organization and across the ecosystem.

Opportunities abound, and everyone can benefit

Companies across the construction value chain — from architects and engineering firms, to materials manufacturers, to suppliers and distributors, to contractors, to operators, to demolition crews — should avoid seeing actions that lead to decarbonization as yet another check-the-box compliance exercise. Rather, it’s a huge opportunity for companies to generate profitable growth and differentiate themselves in the market using decarbonization strategies.