Is it a surprise that environment, social and governance (ESG) has become the hot topic for construction? It has been talked about for some years, but with the exception of those at the vanguard, not fully embraced by the industry.
To some extent, budgets have dictated this. As schemes that included environmental aspects looked for costs to cut, it was these elements that were removed or watered down. Now seems to be different. Ask for the big challenges in construction technology and net zero or sustainability are firmly in the mix.
It can be argued as to what is driving this change. On the surface perhaps it is clients. Better buildings will make higher long-term returns. There is also the prestige of owning an exemplar that attracts plaudits and attention. Better buildings will also attract more discerning tenants, or achieve higher sales fees, good for financial returns.
Larger, more sophisticated end users want an attractive workplace for staff, with comfort and greater energy efficiency. They want to be seen to be occupying the best-performing buildings, and if they have to report emissions from their office space, expect the owner or operator to have the technology in place to monitor this.
But the real change agent is the investor that funds new builds.
Major investors want – as far as possible – to guarantee their returns and don’t stranded assets on their books. They also have investors themselves, scrutinising where their money goes, and pension funds in particular can have significant sway. As they place expectations on the money they lend, it is resulting in sustainability-linked finance that is more closely tied to environmental or social performance
Green bonds, green loans, and ESG linked loans will become more widespread in construction. As their issuance increases, so do expectations around careful monitoring and reporting – a future use for digital twins driven by lenders who will give more favourable repayment rates if terms are met, and reporting will need to be accurate.
But what aspects are companies trying to tackle?
One of the challenges faced is having a clear idea of targets and timelines for any decarbonisation strategy. And coupled with this are the twin approaches – reducing their company’s emissions – those associated with the organisation itself rather than a construction scheme it is working on – and those of the projects they are working on.
36% of final energy use comes from the buildings and construction sector
39% of global energy and process-related carbon dioxide emissions are from buildings and construction
11% of those emissions come from materials manufacturing, including steel, cement and glass.
Source: International Energy Agency
Some emissions can be more easily tackled. Those that are energy related – known as Scope 1 – can be directly reduced by an organisation through equipment updates and policy change. Improved lighting (such as LEDs or use of sensors), better performing air conditioning, an improved Building Management System, sealing the building envelope to reduce air flow from outside in (or vice versa), or changing fleet vehicles to electric are examples of approaches that will reduce scope 1 emissions.
Scope 2 emissions are indirect – such as how the electricity a company uses is generated. Here, more planning is needed, but they can be reduced through actions such as use of renewables or where an option, switching provider. Onsite, replacing or minimising daytime diesel generator use with photovoltaic solar will reduce emissions, particularly as there are no regulations covering off-highway diesel engines. Longer term, battery storage will also reduce onsite emissions, although today, this would be an expensive option for many.
By far the hardest greenhouse gas emissions to tackle – be that for a company’s internal reduction or those on a project – are Scope 3. These are indirect upstream and downstream emissions from associated third parties, such as the supply chain, customers and employees.
- Emissions associated with how goods or products were manufactured (metals, glass, concrete and plastics are major considerations for construction)
- Transport miles and fuel used
- Waste generation and how it is dealt with
- Work-associated travel by employees – be that daily commute or for business
- How assets are managed when they reach end-of-life (the circular economy is going to become important for construction).
These are all examples of upstream and downstream indirect emissions that a company must tackle to reduce their emissions. None are quick or easy to do, but it will be interesting in coming years to see the effect that modern methods of construction such as modular and 3D printing have in reducing emissions.
More emphasis is being placed on reducing emissions associated with construction, and for many companies the first step can be difficult, particularly as benchmarking information can be hard to find. But the industry will be expected to account for emissions in future, meaning they will need to monitor, track and understand where they come from.