Out-Law / Your Daily Need-To-Know

The role of procurement and construction in ‘net zero’ real estate

Out-Law Analysis | 06 Sep 2021 | 9:14 am | 4 min. read

There needs to be a concerted effort across the construction industry to change how developments are designed, and a focus on the whole life cycle of a building during procurement, on the materials that are used and re-used and on new methods of construction.

This change is necessitated by the fact buildings are the second largest source of greenhouse gas emissions after transport in the UK and the increasing legislative requirements aimed at achieving ‘net zero’ emissions.

Embodied carbon and net zero construction

The impact of embodied carbon is often overlooked when assessing the efficiency of a building, but it accounts for well over 50% of a building’s carbon footprint over its lifetime. The real estate construction industry needs to be aiming for net zero construction – i.e. zero or negative carbon emissions, up to practical completion. Net zero carbon operation of the building once completed is equally important. To achieve both net zero construction and net zero operation, a sustainable approach must be adopted from the initial design and discussion stages.

Whole life cycle assessment

Procurement

Most developers want to adopt sustainable approaches to constructing new developments but their simultaneous focus on construction costs and the relative immaturity of new sustainable methods of construction often conflicts with these aspirations and may lead to less ambitious plans for the development’s emissions and energy efficiency performance. Developers should assess the value of such plans in terms of the cost over the life of such development and any enhancement in underlying value that more ambitious plans will achieve.

The initial costs of adopting new materials, such as timber frames compared to steel and concrete, as well as new construction methods like modular construction and new energy solutions like district heating and on-site renewables, may be initially more expensive than conventional designs and construction. However, as climate change mitigation measures become increasingly important and increasingly legally required, making such upfront investments may result in avoiding future retrofit costs and increases in rental and capital values and also deliver savings in energy costs.

A number of developers are already embarking on changing their procurement objectives and assessment criteria for future developments to ensure that carbon emissions are minimised with the aim of net zero construction and operation. To implement these objectives in practice during the procurement of designers and contractors, the selection criteria and scoring should increasingly include consideration of carbon neutral or negative solutions proposed both in the design and construction of new developments.

The assessment of sustainable solutions needs to continue through to delivery with key performance indicators for the carbon emissions during construction and energy performance during operation being reflected in consultant appointments and building contracts. These documents could go as far as offering financial rewards or penalties for a designer or contractor if certain metrics are achieved or missed. Such metrics should be passed down the supply chain to promote sustainable development in the industry.

From September 2021, to be eligible to bid for major UK government contracts worth over £5 million a year, tendering organisations, including contractors and consultants, will have to be committed to achieving net zero by 2050. This entails publishing clear and credible carbon reduction plans by measuring and reporting on their scope 1, 2 and 3 emissions.

Design

To successfully construct a building which will achieve net zero carbon construction and net zero operation, consultants need to be incorporating these objectives front and centre in their designs from the outset. The sustainable options available for a development only narrow the further along the design process a development progresses. Contractors need to be involved much sooner in the concept design phase for a new development, and this should form part of improving the collaboration between contractors, designers and developers required in the construction industry generally.

Contractors can provide practical input and ideas on new methods of construction and alternative sustainable solutions which need to be factored into the planning approval designs – RIBA stage 2 designs – after which it becomes increasingly more difficult for new designs to be incorporated into a development. Developers need to have a whole life cycle expectation around costs and to embrace new solutions which will provide long term cost savings. This is particularly applicable to the energy source for a development where alternative solutions such as district heating, air source heat pumps, on-site renewable generators such as wind turbines or solar panels can be designed into the overall energy performance of the development.

Demolition

When buildings are demolished the embodied carbon used in that building is wasted. Developments should aim to minimise embodied carbon and be built to last for as long as possible, or with circular economy principles in mind to maximise the use of the embodied carbon to its fullest potential.

Although 90% of waste is recovered from over 50,000 buildings demolished each year in the UK, very little is recycled into other products or materials and subsequently reused. More consideration will need to be given to repurposing existing buildings. We are already seeing this happen with inner city commercial developments being repurposed for housing as residential flats.

Construction

The green credentials of contractors will become ever more important in their selection for projects to ensure alignment with the developer’s objectives and to demonstrate successful delivery of sustainable developments and initiatives for achieving sustainable, net zero construction.

Contractors are already considering their carbon footprint and changing fleets to electric vehicles and utilising electric generators and machinery over petrol-powered power sources. Contractors able to assess their current carbon footprint as an organisation and the carbon footprint of specific developments and extrapolate from this data the most efficient ways to minimise carbon emissions will have a competitive advantage when tendering.

In the same way that there is an industry standard of prohibited or deleterious materials which cannot be used in constructing a development, a list of materials which are carbon intensive and non-sustainable which cannot be used could be included in appointments and building contracts. Conversely, contractors could be contractually required to re-use materials from demolished buildings and recycled materials where possible.

Building contracts need to set clear targets for relevant certifications or standards which should become contractual requirements for practical completion, such as a set EPC rating or BREEAM (Building Research Establishment Environmental Assessment Method) rating, or simply metrics or KPIs for maximum carbon emissions for the construction phase. Main contracts between developer and contractor need to require the contractors to flow down or impose consequent carbon reducing requirements on to their supply chain, both in their designs and delivery in constructing developments. Where such works are for plant and equipment, the recently introduced corporate tax super-deduction will assist landlords that bear the cost of the works.

Infrastructure technology can take this one step further and play an important role in ensuring buildings are maximising their potential energy performance. Adequate measuring equipment should be installed as part of the construction process to allow owners and occupiers to properly assess the efficiency and energy performance of the development during the operation phase. Building Information Modelling (BIM) needs to be fully utilised to capture this data during construction. This data, if collected and shared, can provide much needed information on how to improve future designs and build developments which maximise energy efficiency and power generating potential.

An electronic inventory of the materials and products across a development could be recorded by a contractor to allow for decisions to be made for how materials can be re-used at the end of a building’s life cycle.

Modern methods of construction, including modular construction, could be championed and promoted as these provide emissions reductions by drastically reducing the construction period and wastage common to conventional construction sites. This in turn can reduce the embodied carbon in developments.

Contractors need to ensure their workforce is upskilled to understand sustainable construction and delivering green developments. With an estimated 350,000 new construction jobs needed to deliver the net zero targets for 2050, the construction industry should be primed to capitalise on this.

Co-written by Jonathan Vickers of Pinsent Masons