Money is a key factor in the transition from a linear to a circular economy. A small-scale example of this in everyday life is the container deposit system. Yet on a large scale manufacturers also retain ownership of the construction materials in their products. The financial, business and public sectors are facing an exciting development, though with no clear path in mind.
Where we are headed: produce things in a manner that allows for recycling with a minimum of dismantling
Richard Kooloos Head of Sustainable Banking
Sustainable construction: well begun is half done?
We know where we are headed: we want to produce things in a manner that allows for recycling with a minimum of dismantling after use. If at all possible, an appliance’s components should be reused, rather than simply the materials: these can always be reclaimed at a later stage. At present, the economy is still based on the old way of doing things. Production is geared toward achieving maximum sales – anything else is of lesser concern. So the question is, how can we make a smooth transition from where we are now to the new situation? The most important step, though, is quite simple: just begin.
Circle Scan of the construction industry
ABN AMRO joined the Circle Economy platform in 2013. This Dutch sister organisation of the Ellen MacArthur Foundation, which operates on an international scale, brings together small and large companies to share knowledge and help each other. Working with our Circle Economy partners, we have prepared a ‘scan’ of the Dutch construction industry. The scan shows that 84% of all construction waste goes toward ‘infrastructure’. This rubble is reused in the foundations of new roads. A mere 9% is used for making new concrete, while some 3% is incinerated or dumped in landfills.
Upcycling versus recycling
In principle, therefore, the construction industry is making a good effort at recycling. Yet demolition waste can also be used for other purposes than simply for laying roads. With the large amounts of CO2 that are released in the production of cement, rising costs are a very real possibility: we expect that business cases will increasingly include plans for reusing old concrete to make new concrete.
Real-life Lego building sets
Another alternative is even cleverer: construct a building (preferably one that generates its own energy) in such a manner that it offers a variety of uses. It might begin its life as an office or hotel, for example, but then be rearranged into a production workshop or a residence further down the road. If planning permission for the new purpose is refused, the building can simply be taken apart and rebuilt elsewhere. If even this is no longer possible, the building can always be deconstructed, similar to a Lego set, and its steel girders and window frames reused. This might sound futuristic, yet these buildings already exist, for example Delta Development’s project Park2020 near Schiphol.
Buildings as material banks
What are the implications for a bank asked to finance a building like this? First, it is important to understand what the developer means by ‘circular construction’. Then the bank needs to estimate what current value and residual value the building represents, in each of its possible forms: as an office, hotel or residence, but also as a pile of materials. Slowly but surely this will lead us to a system of ‘materials financing’, where buildings become banks of construction materials.
The most important element in these developments is working with all the various partners in the supply chain and seeking to learn from one another. With its Circle Scan of the construction industry, ABN AMRO has initiated a dialogue with our clients in that sector. Together we are uncovering new business models and creating alternative financing forms to make this innovative approach to construction possible. Everything that we develop together will be ‘open source’. This will give the market a boost and help the Netherlands become an example of circular entrepreneurship and so a ‘Circular Hotspot’. So if you have any ideas for a business case, I look forward to sitting down with you to discuss possible solutions.