Marsh & McLennan Advantage Insights logo
Conversations and insights from the edge of global business
Menu Search
Environment

Innovating to Ensure Sustainability in the Construction Industry

The COVID-19 pandemic increased the focus on climate-related issues, including the need to build a cleaner and greener construction industry. Global construction companies face rapidly evolving challenges, including increased scrutiny regarding their environmental, social and governance (ESG) stance.

Various strategic changes are being made to business models as companies look for product and process innovation to create a more sustainable industry and “build better.”

Construction’s Carbon Footprint

Globally, the built environment generates 30% of total greenhouse gas emissions annually, and construction consumes approximately 32% of the world’s natural resources. While the industry is one of the larger contributors to climate change, it also has an opportunity to effect positive change.

Public interest in sustainability investment has grown significantly over the past 12 months. There is increased activity worldwide to promote greener construction. Reinforced by commitments to the Paris Agreement, a growing number of government entities are encouraging net-zero carbon buildings. The U.K. government became one of the first to provide a roadmap to all private and listed companies in the lead up to the 2025 proposed mandatory climate-related disclosures — 50% of large private construction companies in the U.K. must report by 2022. At the same time, consumers are demanding ecologically responsible business practices and projects.

Innovation in Action

Innovation can play a key role in sustainability as the construction industry actively seeks ways to enhance processes, products and established working models.

Process innovation: A key to reducing the industry’s carbon footprint is to develop and implement processes that improve the use of sustainable materials.

With the growing green movement, many construction companies have set higher standards and requirements. “Better use of natural resources is important to promote better energy efficiencies. Process innovation will be key to drive growth within the industry after the pandemic,” says Borja Agullo, corporate risk manager at construction company Grupo OHL.

With an increasing focus on sustainability, many construction companies have set themselves tougher internal standards. Corporate social responsibility departments work across project areas to embed new processes and strategies into the business. At OHL in 2019, 45% of all raw materials were reused materials, Borja says. “It is all about making more efficient use of natural resources and finding ways to construct with sustainable materials,” he says. “We try to implement innovation into the design process. This results in a positive and direct effect on the environment.”

Innovation in the built environment has a key focus on sustainability — including new forms of construction that are cleaner and greener and that help to reduce waste.

Building design: In many regions, the construction industry has targeted 2050 to reach carbon neutrality, with ambitious companies looking to achieve this milestone sooner. Organizations that fail to source sustainable materials or comply with environmental legislation may suffer reputational damage and revenue impacts. The Paris Agreement says that by 2050, carbon emissions from buildings worldwide should be 80% to 90% lower than today. The construction industry is embracing the challenge.

Matt Gough, director of innovation and winning work at Mace, says, “When you tally up the carbon used in the construction and operation of buildings and infrastructure, construction accounts for close to 40% of global carbon emissions.” He adds: “What we are now witnessing, as a result of the economic impact of the pandemic, is a massive rush toward green investment globally.” This includes investment in green projects — including renewable energy, retrofit programs, and research and development plans — all focused on improving the sustainability of the built environment in response to the climate emergency.

Numerous solutions, from incremental innovation of traditional methods to radically innovative materials with entirely new functionalities, are emerging from the building material industry and are expected to reduce the industry’s carbon footprint. Modularization, 3D printing, robotics, drones and artificial intelligence are all helping to decrease project duration and encourage efficiencies, including testing ideas and design concepts before building starts. Harnessing the use of AI and machine learning algorithms to generate product or building designs within minutes allows architects and designers to optimize their ideas and create structures once thought impossible.

Innovation in the built environment has a key focus on sustainability. This includes new forms of construction that are cleaner and greener and that help to reduce waste. The construction industry is looking to use new materials and find better ways of storing renewable energy, as well as to increase the use of electric plants and biodiversity in project design. The opportunities to make a positive impact are many. Much of the technology required to reduce construction’s carbon footprint exists — the industry just needs to scale it, quickly.

Working Together to Improve Sustainability

All institutions — public, private and cities themselves ­— have important roles to play in providing the best solutions and in managing risks such as climate change. 

Oliver Wild, chief risk and insurance officer at Veolia, agrees that “eco-design” is critical and that reducing the carbon footprint at the start of a project is a key area that is often overlooked. “The industry has a key role to play in ensuring that we have resilient cities, smart cities and livable cities,” he says. Like many leading construction companies, Veolia actively seeks innovation during the design stage to improve the sustainability of projects and reduce the need for rework and retrofits.

Questions about sourcing of materials and reducing carbon emissions in the manufacturing stage also need to be addressed. Increasingly, companies are looking at key partners in their supply chain to ensure an alignment of corporate values, including in relation to ESG metrics. Many take this further by considering where goods are sourced from, the environmental impact of transporting them to site, and the ecological impact of the packaging, which traditionally has relied heavily on single-use plastic.

As companies seek ways to include process or product innovation in projects, creating contract frameworks that allow for greater risk sharing between the parties should be encouraged. Construction project risk, including the procurement of insurance, is often the responsibility of contractors, and is at times passed further down to subcontractors. As the industry strives to deliver improved value through innovation, traditional contract models are evolving, which means that closer working relationships between all parties are needed. Particular focus should be on understanding project risk and how to collaboratively allocate it in the right manner to support the development and implementation of products, systems, and processes that transform the industry and ensure its sustainability.

Promoting sustainability and reducing emissions is front of mind for everyone involved in the construction industry. As Stephan Lämmle at Munich Re says, “Innovation will be a major pillar not only for saving costs, but for increasing sustainability.”

Kelly Outram

Head of Global Contractor Development at Marsh

Kelly Outram is currently responsible for Marsh Specialty’s Global Contractor development strategy, coordinating construction teams across the globe to ensure we bring the best of our offering to major contractor clients – irrespective of geographies. Kelly is based in London and her global remit brings industry lead insights and solutions to contractor clients that transcend beyond traditional transactional construction insurance. Kelly has worked closely, and continues to work closely, with many international insurers as well as other specialist construction teams within the global network.

Get ahead in a rapidly changing world. Sign up for our daily newsletter. Subscribe
​​