Without doubt the buzzword of all industries is sustainability, and for one of the largest material intensive sectors the race is now on to find viable modern methods of construction that meet the needs of the planet while retaining profitability. The construction industry is currently on a trajectory to seriously struggle to meet sustainability targets and regulation throughout Europe.
It has been estimated that the construction sector accounts for nearly 40% of total global carbon emissions and produces enormous amounts of waste. The industry’s long established practices must now be challenged and changed, like many industries, it is ripe for innovative ideas, and a wholesale change in how we build our homes. In all sectors this innovation, and thirst to try new practices and ideas comes from start-ups and scaling SMEs, and with 90% of new homes in the UK delivered by a handful of large building firm in the past decade, this must be the time for start-ups and SME’s to re-establish themselves in the market.
Investors from private equity through to traditional lenders have never shown more appetite to fund such projects. Let’s look at some of the key areas in which innovation is being pursued.
The first of these is the use of technology. The supply chain of the industry is vast in terms of funds and materials. The key area where this can be improved is the use of the circularity of materials as well as transparency as to their provenance and sustainability. We are seeing communities built with technology to establish ecosystems of companies in all specialisms, so if you are a developer or housebuilder you can tap into these communities to ensure your project is built with vetted, suitable partners, and can establish the credentials of materials, in order to improve the carbon footprint of your processes, and thus meet the obligations to buyers and regulators.
With such vast use of materials waste is a key issue in improving the construction sectors environmental impact. The cost of materials is increasing which is encouraging builders to look for ways of either recycling more effectively, or indeed using less material in a particular project, both of which will improve profitability as well as the ecological credentials.
Modern methods of construction are again key, and we have seen over the past few years many new entrants claiming to be able to build more efficiently with such processes as modular and off-site construction. The problem has been that when put into practice, many failed to meet cost objectives, and we saw a reluctance of surveyors and lenders to appreciate equivalent values from traditionally built homes. In this area I feel that we may have finally reached a point where lenders and surveyors are mostly on board, which is great progress, and now we wait to see who can deliver the efficiencies promised at scale we have been awaiting for so many years.
There is undoubtedly now a real pressure from consumers for construction companies to improve their sustainable credentials, which helps towards change. However, most agree that for serious, wholesale improvements, it is political regulation that will be the key driver to make this happen and meet green targets. There is a great deal of encouraging rhetoric in that regard, but time will tell the substance behind it. Regardless, this is a time of great opportunity for smaller, innovative players to revolutionise an industry dominated by big, stubborn firms for so long.
Patrick McCreesh – Partner, Vantage