Aerial view of curve road in forest against buildings in Hong Kong

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 COemissions.This is a higher percentage than transport (23%) and all other industries (32%), making building construction and operation the world’s largest COemitter 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.

Governments are offering incentives and penalties to transform

To meet the ambitions of the Paris Agreement and achieve their long-term strategy of becoming climate-neutral by 2050, the entire construction value chain needs to take urgent action to reduce both energy-related carbon emissions for  building operations and erection, as well as the buildings’ energy consumption. To spur action, several governments around the world are offering incentives — and imposing penalties — to motivate companies in the industry to reduce their greenhouse gas emissions.

For example, the European Commission (EC) recently unveiled a new strategy to double annual energy renovation rates of European Union (EU) buildings in the next 10 years.5 Through the European Green Deal, the EC has also budgeted hundreds of billions in subsidies over the next five years for climate friendly construction and renovation. The carrot of this incentive and others, combined with the stick of a proposed European Climate Law that will convert the EU’s commitment to climate change into a legal requirement, will create a boom in demand for optimization and sustainability retrofits.

In the US, as part of the US$2 trillion Build Back Better spending framework announced in 2021, US$555 billion has been earmarked for clean energy investments. Offering more carrots than sticks, the framework offers tax credits, rebates and other incentives that encourage companies and consumers to go green.

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 COemissions 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 COsavings 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.


Construction companies that move quickly to develop strategies and business models that help their clients and themselves get them one step closer to achieving net zero by 2050 will have a significant competitive advantage. By adopting a lifecycle perspective of both individual products and entire sustainable buildings, construction-related companies can understand their CO2 contribution in the larger context and make adjustments that benefit everyone.

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