Circular construction: new income models for construction industry

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A construction site

Circular construction presents new opportunities for the Dutch construction industry. It improves the environmental performance of buildings and creates new income models for companies. The environmental impact of the sector in its current form is immense – the construction industry generates 37% of the total waste produced in the Netherlands, and 5% of the country’s CO2 emissions are caused by the manufacture of building materials. Methods for recycling construction and demolition waste are far from optimal and reclamation of raw materials and other resources is unprofitable. The solution might be to transition to a circular construction approach. However, this will require a radically different set-up for the construction industry than its current linear supply chain. This is the conclusion that ABN AMRO and Circle Economy present in the report entitled Circular Construction, published earlier today.

Environmental impact of construction industry calling for new approaches to building

Although 95% of the construction and demolition waste produced in the Netherlands is repurposed, ABN AMRO believes the recycling methods themselves to be suboptimal. The overwhelming majority of the waste consists of stony rubble that is used for building roads, which is a highly energy-intensive process. The area where the sector has the greatest environmental impact is its dependency on fossil fuels, which represent 96%, while the built-up environment claims 45% of the total energy consumed in the Netherlands. Construction waste, environmental pollution, noise pollution and harmful emissions from heavy-goods transport also have a negative impact on the environment.

Circular construction leading to a shift in ownership models

What defines a circular construction sector is its lifecycle approach. Buildings are designed with a view to optimising their useful lives. They accommodate alternative functions and allow for modification. Only renewable resources are consumed while the building is in use. With high-yield recycling of the components and raw materials that are released during the final phase of the building’s life playing a prominent role, the impact of producing building materials is considerably reduced. A circular supply chain is based on an unconventional ownership model: raw materials are no longer sold to the developer, and the final product is not sold to an owner. Instead, a consortium provides the service of supplying residential housing or business space, while the raw materials remain the property of the manufacturer. Through the combination of these factors, circular construction offers the potential for greater added value at lower cost. For example, high-yield reuse of materials leads to greater savings on energy costs.

Gradual transition from linear to circular construction

‘The transition from a linear to a circular construction and demolition industry will take time. Industry leaders are shaping the construction sector of the future. Circular construction creates new ways for them to generate income. This means that the existing fragmented supply chain in the construction industry needs to be transformed into a smoothly running consortium of operators working together. The new supply chain is based on a comprehensive lifecycle approach. This lifecycle model results in improved planning, creates savings and leads to responsible material choices,’ explains Annemijn Fokkelman, Sector Banker for the Construction Industry at ABN AMRO. ‘Technological advances will also have a positive effect. For example, developments in smart building, BIM and product passports are helping to improve environmental performances, leading to more efficient building processes and yielding a greater understanding of the origins of materials.’

The full report is available for download below (Dutch only).



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