New ways of collaborating and sharing information are vital to the circular economy’s success.
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Developing a sustainable construction model is about far more than just recycling, it requires a dramatic change in mindset when it comes to design, build and use. And driving that change requires a change in business models, according to a recent report by Arup and Dutch contractor Bam.
Carol Lemmens, leader for global management consulting at Arup, says that circular production will undoubtedly create a “more prosperous, liveable and sustainable society”, but will require a “radical rethinking of every aspect of the built environment’s production”.
Changing the environment
“Circularity changes the very environment in which we live, work and invest,” she adds.
The report, Circular Business Models for the Built Environment, sets out the financial, social and environmental benefits of adopting the models and how it can be done.
Much of the talk about the circular economy has related to the reuse of materials, but this report puts forward three innovative business models which are central to the transition; they are labelled design, use and recovery.
Firstly, built structures will have to be designed to last longer and retain their value. They should be easier to maintain, repair, upgrade and disassemble at the end of their life, and be built from more materials which are fully recyclable.
Investors will have to be persuaded away from traditional buy-sell methods
More circular thinking could also have a major effect on commercial buildings, with more workers sharing office space, digitisation reducing the need for storage and mobile staff requiring fewer desks.
Finally, circular recovery business models would see revenue generated by transforming existing built structures into new ones, adding value while cutting waste.
Combining business models
For the value chain to reach its true circular potential, a combination of these business models must be employed and all parties must contribute. The rewards are clear though; a 1% rise in resource efficiency is worth £20bn or more for businesses.
Nitesh Magdani, group director of sustainability at Royal Bam Group explains: “The entire value chain needs to work together for mutual gain. Products need to be designed with future uses in mind and all members of the value chain need to work with different business models, and levels of incentivisation, to give the client longer term benefit and higher residual value of their asset.”
The opportunities on offer for the construction industry in a circular economy are certainly exciting, but, as the report says, it is not a simple transition to make.
All stakeholders must collaborate and play a part, from investors to tenants and even the government. In practical terms, it requires designers and investors to take a longer term view, carefully mapping out the future use of materials and components.
Suitable databases must be created to store information about the materials in a building, so they can be fully harvested at the end of its life.
This will require unprecedented levels of collaboration and information exchange, as well as financial incentives for investors so they can benefit from the building’s residual value.
The government also has a key role in easing the transition to a circular economy, in terms of taxation and building code regulation.
In the UK, new construction is currently exempt from VAT but refurbishment is not, adding a discouraging 20% cost. Changes are beginning to be seen in Europe though, with the Swedish government introducing a lower rate of VAT for repairs.
In Denmark, two government agencies have helped create a toolkit which sets out the transition to a circular economy, while the Netherlands has also developed a specific programme for it.
New technology will play a major role in the transition, including digital platforms, product passports, 3D printing and tagging sensors. These innovations, and there are more to come, will help to cut waste and track materials so they can be recovered and reused in the future.
Jad Oseyran, lead for the Global Centre of Competence for Circular Economy at IBM, says: “Construction industry models are being reshaped in the context of the circular economy, reinventing the business models of the existing conventional players and introducing new actors such as ‘urban minors’.
“This is largely enabled by intelligent insights from the integration of relevant data.”
There are of course risks in embarking on the road to a circular economy. Investors will have to be persuaded away from traditional buy-sell methods, while setting contract prices related to the operation and maintenance of buildings could be very difficult.
But the need for sustainability in the construction industry will only become more pressing, and the report shows a circular business model can prove financially beneficial to all parties if they work together.
There are already success stories in the UK where behaviours have changed. Armstrong Ceilings introduced an end-of-life take-back programme for its own mineral ceiling tiles in 2006, and has now recycled over 15M.m2 of old ceiling globally including ceilings produced by its competitors.
“We decided to ‘learn by doing’ and the knowledge and experience gained along the way has opened up new possibilities and commercial opportunities that have allowed us to move away from the traditional take, make, dispose business model,” says Armstrong Ceilings marketing manager Jeremy Sumeray.
Tradition, it appears, is set to make way for new circular business models built on long-term thinking, designing for deconstruction, flexibility, innovation and collaboration.
Circular Economy | Businesses Sharing Information