Adopting a circular economy model for the built environment’s transition to net zero

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@Khanchit Khirisutchalual

As population growth fuels demand for new buildings and materials, the construction industry faces a pivotal moment. Embracing a circular economy model is crucial to reducing waste and emissions while meeting future demands, explains Summit Rosenberg, associate, KOMPAS VC

The built environment, which encompasses all homes, offices, and public infrastructure,
is currently responsible for 40% of global waste, yet only a third of this is estimated to
be recycled.

As we look to the future, the numbers will likely get worse – as the global population increases, so will the demand for new buildings and, consequently, new materials.

If the built environment wants to decrease both waste and emissions while keeping up with growing demands, it needs to rethink its approach to construction.

One way to approach this is for the industry to adopt and maintain a circular economy model – which prioritises the regeneration and reuse of building materials.

Stakeholders within the built environment have pledged that by 2050, all new buildings,
infrastructure, and renovation should operate at net zero. A circular economy will be the
key to supporting this pledge whilst catering to the impending surge in demand.

Some industries are already implementing a circular economy model

Several industries within the built environment, including cement and concrete, steel, glass, aluminium, have already implemented circular models into their day-to-day
construction practices.

As a result, they are at the cusp of a technological shift, which will hopefully improve their environmental record.

The concrete and cement industry, for example, is beginning to introduce waste streams from other industries into its supply chains, which is proving to be a promising method of improving the industry’s circularity.

Instead of using newly mined limestone and clay to produce cement’s main constituent – clinker – manufacturers are using mine tailings and other byproducts such as coal fly ash or blast furnace.

Not only is this a sustainable way to produce clinker, but these waste streams have the potential to be used as an alternative fuel source to power cement kilns, replacing coal and reducing the sector’s carbon footprint even further.

Waste streams alone are projected to eliminate 1.5 billion tonnes of CO2 by 2050, but are also estimated to inject $116bn into the industry.

Similarly, with steel production, the transition to a circular steel sector involves improving material and process efficiency, increasing recycling rates and integrating renewable energy sources into its production. While recycling rates for steel have reached approximately 85%, significant efforts are still needed to achieve a fully circular lifecycle for steel.

The aluminium industry is another example of an industry that has reduced its emissions and enhanced its efficiency after implementing waste streams into production processes.

Despite the industry already being somewhat circular, with approximately 75% of all aluminium ever produced still being in use today through recycling, stakeholders have recognised the importance of addressing the remaining 25% of unrecycled low-grade aluminium scrap industry.

They have identified challenges which may hinder recycling optimisation, such as alloy contamination and limitations in sorting technologies, and integrated circular loops which address these.

For example, manufacturers have increased their recycling rates through improving sorting

The concrete and aluminium industries are important examples of industries that have
already begun to reap the economic, sustainability and efficiency benefits of adopting a
circular economy model.

The solutions to existing challenges

Scaling the supply of reclaimed materials and ensuring their safety and compliance with
local building codes is a major barrier to overcome.

This would mean a shift in roles and business models that enable scaling materials at such a speed, which may be costly and inefficient for businesses, therefore delaying their adoption of this model.

Existing engineers and labourers within the circular economy will also need to be upskilled.
Transformations and innovations also typically require significant capital expenditure,
necessitating investment from both private and public sectors.

If companies do not have this capital, they will not be able to implement the procedures to achieve circularity.

Risk also remains a significant challenge, particularly within the conservative construction sector, highlighting the importance of engaging in pilot projects which confirm feasibility, establish credibility and foster trust among stakeholders.

These pilot projects can help steer the industry towards embracing new solutions which enhance the built environment’s circularity.

However, it is important that stakeholders, such as investors, designers, and policymakers, do not focus solely on these pilot initiatives. Instead, an approach that considers factors contributing to the industry’s fragmentation, such as the economics of scale and long-term cost dynamics, is needed.

Regulation is an imperative

Solving the above challenges, and adopting circular economy principles in the built
environment, would bring about significant environmental, economic and societal

However, this optimisation relies on significantly increased collaboration between industry stakeholders – including investors and policy-makers – across the value chain.

Innovation around capturing the value and opportunity of more circular approaches through a project’s lifestyle, digital tools to improve transparency, knowledge and information sharing, and innovative techniques to incorporate circularity into mainstream materials are all critical to gaining traction.

Circularity is important in material production, and ensuring that the approach is integrated into all stages of the building process.

The policy landscape is also evolving to take into account the carbon impact. The
regulatory frameworks that are required to bring circular solutions to scale are still far
from complete.

Encouragingly, initiatives like the EU Green Deal have spurred substantial investments in the market, including from private equity.

Circular solutions are increasingly viewed as future-proof investments and clear and deliberate legislation can create signals to industrial players for investment in technologies and solutions that support the realisation of a circular built world.

Implementing incentives to promote circularity

Some potentially significant drivers of change to incentivise companies to promote
circularity include stricter carbon tax frameworks and landfill usage penalties.

Future-forward industry players will anticipate the needs of a changing world, and strive
to adapt from a linear material landscape to a circular one.

Companies who make changes to their business models and processes early and increase their levels of collaboration will be the ones who benefit the most (financially and environmentally), and capture the most value in a circular economy.

If the built environment wants to achieve circularity, and see the same environmental
and economic benefits as industries who have already adopted a circular model,
collaborative efforts are required across value chains.

Through collaboration, existing barriers that are preventing the industry from adopting this model, such as lack of jobs and capital, will also be knocked down, ensuring efficiency across businesses.

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