Enabling Circular Economy in the Construction Industry

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By: Kadambari Uthayasankar, Rishitha Chennupati and Swati Sharma

The building construction industry is the largest consumer of raw materials worldwide. 30% of greenhouse gas emissions are attributable to buildings. 50% of the solid waste in the United States is produced by the construction industry. 70% of India is yet to be built. About 180 million people globally work in construction – in many developing countries, majority of these jobs are informal.

The above figures suitably capture the global impact of construction industry. It has potential to directly and indirectly impact 10 (highlighted below, Figure 1) of the 17 sustainable development goals defined by the United Nations.

Figure 1: Influence of the construction sector on the UN SGDs

Specific industry goals can be set in context of each of the relevant SDGs as described below:

  1. Good Health: Eliminate Sick Building Syndrome by ensuring good building design and maintaining high indoor air quality
  2. Clean Water and Sanitation: Install closed loop water systems in all building projects
  3. Modern Energy: Integrate renewable energy equipment as well as minimize energy consumption through smart building designs.
  4. Innovation and Infrastructure: Continuously deploy new building designs, materials and services for greater efficiency and comfort
  5. Reduced Inequalities: Ensure that the built environment is inclusive by design, provides universal accessibility and meets the needs of all sections of the community.
  6. Sustainable Cities and Communities: Seek green building certification for all new buildings as per local/ regional standards
  7. Responsible Consumption: Facilitate minimum waste in the building precinct
  8. Protect the Planet: Measure and evaluate the environmental impact at all stages of pre and post construction
  9. Life above water: Preserve the local natural ecosystem while planning and constructing new building projects
  10. Peace and Justice: Practice responsible and ethical construction methodologies
  11. Partnerships for the goals: Partner with relevant institutions, suppliers/ distributors, investors to support construction of green buildings

Sustainability Goals can be integrated in all stages of the construction process: Vision àPlanning à Implementation à Evaluating & Measuring à Results and Feedback.

The WBCSD, as part of its Energy Efficiency Toolkit, (Figure 2) has highlighted specific measures that can be undertaken in each phase to achieve sustainability goals.

Figure 2: Screenshot of online EEB Toolkit

Industry Standards 

The industry’s current sustainability goals are mostly restricted to achieving green building certifications.

Several rating systems, building standards and certifications have been developed for the building industry which help to evaluate environmental impact of individual building projects. For example, the LEED rating system developed by the Green Building Council is one of the most widely recognized certifications.

More recently, there have been initiatives which aim to capture the energy consumption and other post design/ construction/ occupancy statistics for gauging energy efficiency of a building. The Edge tool developed by IFC is one such example, picking up in the corporate sector.

Zooming in to the Indian market, the construction industry is undergoing significant transitions. There is a clear shift in focus in metropolitan cities towards use of new & renewable energy sources and in Tier 2 and 3 cities towards a more environmentally conscious approach to development.

There is also considerable central government focus on building sustainable cities, best reflected in initiatives such as the National Mission on Sustainable Habitat, and more recently the Smart Cities Mission. Two aspects which stand out, are the development of bye-laws for green building construction and adaptation of international certification standards to suit the local context:

  1. Bye-Laws: In India, the Bureau of Energy Efficiency has launched Energy Conservation Building Code (ECBC) which lays guidelines for green building construction according to different typologies and climatic conditions.
  2. Certifications: The Indian Green Building Council offers GRIHA certifications to buildings which account for adjustments in the evaluation criteria of LEED, as per context. It is also very active in promoting awareness of green building practices and equipment through state chapters.

Industry Limitations

Most initiatives cited above set aspirational benchmarks for stakeholders in the construction industry. However, they provide little assistance in implementation while simultaneously falling short on enforcement.

Barriers to Implementation

There are four observable barriers to implementation of green building practices

  • Lack of Awareness: Most stakeholders in the building sector, are either unaware of the range of solutions available in the market or do not fully understand the multiple benefits of investing in sustainable practices
  • Lack of Capacity: The workforce is not suitably trained to integrate green technology solutions in the building systems
  • Lack of Financial Incentives: Most banks do not differentiate between green infrastructure projects and standard infrastructure proposals. It is critical that innovative financing mechanisms be set in place for attracting greater funds at lower costs to ensure higher investments and returns.
  • Lack of enabling policies: Most national policy makers who address adoption of green building practices do not have a direct communication channels with businesses. As a result, businesses and technologies aiming to make inroads into the local sustainability market do not come through.

Barriers to Enforcement

  • While there are even tools in place for evaluation and measurement, initial design and construction phase is largely unattended in most parts of the country.
  • The Energy Conservation Building Code, is not yet mandated by law. This makes it further difficult for regulatory bodies to ensure compliance
  • Even in states where sustainable building construction is enforceable by law, they lack capacity to conduct systematic checks and evaluations.

Towards a Circular Economy

As per the Green Building Council, the construction and demolition sector is the largest contributor to waste in the UK, responsible for generating 120m tones every year. *

In India, it is estimated that the construction industry generates about 10-12m tons of waste annually. At the same time, projections for building material requirement of the housing sector indicate a shortage of aggregates to the extent of about 55,000m cu.m. * This demand-supply mismatch will only grow in the future, as nearly 70 per cent of the building stock that will be there in 2030 is yet to be built in India. *

Therefore, a business model innovation that promotes circular economy (See Figure 3) within the building sector could be of immense value, both financially and environmentally. The following aspects pertaining to buildings industry in India, further support the design of a suitable business model innovation in this context.

  • Many developers and construction companies cater to a mixed portfolio of buildings: Temporary as well as permanent. Materials from one project can hence be reused for another.
  • Reducing the amount of construction and demolition waste not only eases the burden on landfills*, but also results in savings against transportation cost of waste materials
  • In line with the global trend, there is a growing shift towards sharing economy in India which can be tapped for reuse and refurbishment of furniture and fixtures as per requirement.
  • The above is particularly relevant in light of recent urban renewal policies in India, which mandates 15% of every housing project be reserved for the urban poor. This could be a target segment for utilization of retrofitted and refurbished products.
  • Finally, as with most other industries, IoT and other Technology Disruptions are likely to engulf the sector and must be utilized to full potential.

Figure 3 Circular Economy in the Building Sector

In reflection, the following business model is proposed for perusal by large scale developers:

Setting up a database for tracking the use of all finished and unfinished building materials or goods in different project locations at any point in time. Once developed, it could be used to track inventory across all sites and enable greater sharing and reuse of products and materials, both internally across projects as well as in the external market.

This could initially be practiced in two areas:

  1. Swapping furniture and fixtures between different building projects depending on changing interior design theme with every refurbishment project
  2. Designing small scale and temporary building structures, entirely using materials posted on the portal.

Developing an online inventory, categorized by product, location and utility could be an effective way to mobilize construction materials for reuse in various forms. Greater economic feasibility of such a service would result in greater number of businesses investing in circular economy. A greater resource pool would hence begin to build up and the overall industry would see a boost in supply of materials at a much lower cost and a much lower environmental impact.

An overall boost in environmental quality with mainstream usage of waste material or reuse of building materials will further incentivize demand for such products and services. Economies of scale would hence come into play, resulting in greater financial profitability of the model.

As mentioned previously, there is already a demand-supply mismatch in waste materials such as sand and gravel, traditionally used in the construction industry.  Further, expenditures are soaring in installing furniture and fixtures of high quality that align with the overall decoration theme of most new buildings. While there is no dearth of excess materials on most project sites, companies/ individuals are not aware of their availability: across the industry as well as across different projects within the same company. Both above-mentioned needs can be addressed by using this sourcing platform.

The costs for building such an inventory are negligible as compared to overall construction project budgets but the initial expenditure on logistics and transportation of materials is high. In fact, the current infrastructure for such initiatives is limited to the local economy and carried out by small-micro enterprises. It is hence cheaper to source new materials as against a second-hand inventory. However, as the business picks up, there is scope for setting up a sizeable marketplace.

The Marketplace Hub, an initiative undertaken by the World Business Council, has organized a similar platform for private companies to log their materials inventory data. Currently catering to a fragmented market across the globe, the tool has high potential to scale up, decentralize its operations and make significant impact in the construction industry.

References

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