All around the world, governments, companies, and NGOs have committed to minimizing raw material usage in the real estate and construction industry. In the Netherlands, for example, it was recently agreed that by 2030 a 50 percent reduction of raw materials usage needed to be realized.

Financial incentives of a circular economy There are several avenues of financial incentives that can be pursued to achieve a circular way of working in the real estate and construction industry. One example is increasing the adaptability of buildings. If buildings can be easily adapted to changing needs over time that can translate into lower costs. This also creates an increased expectancy of real estate usage as the building can be used for a longer period of time with decreased renovation costs and perhaps lower periodic maintenance.

This approach is particularly apt for real estate with high maintenance, such as schools, care facilities and offices, with reversible building design having the potential to lower periodic in- use costs. While this definitely applies to new

Actions like these dictate a fast transition toward a circular economy—that is an economy where resources and energy are renewable and regenerative and cycled back into supply chains. Though the transition to circularity faces several barriers, there are also opportunities. One of the opportunities being explored is the possibility of “activating” materials in financial reporting.

Use cases have shown that real estate owners are often unaware of or underestimate the financial value of the materials in their real estate assets. These use cases show that upon demolition of a real estate asset, substantial financial value—adjusted for demolition, transport, and re-usage costs— can be captured. This untapped value can impact financial reporting, prompting the financial incentive needed to transition the real estate and construction sectors to a circular economy.

Facilitating the transition to circularity

The potential positive impact of applying circular ways of working in the real estate and construction industry is huge: research shows that buildings consume approximately 40 percent of all energy and approximately 40 percent of all primary raw materials. And while circularity can be achieved through a combination of material reuse and efficiency improvements, only strict regulation and/or financial incentives can achieve the desired radical change circularity can accomplish.

Promoting circularity in buildings via regulation, however, ultimately comes down to political will—which is not expected to emerge any time soon. And current circularity financial incentives are not as clear and straight-forward as a circular office building’s impact on brand. As such, not all stakeholders are motivated to support the transition toward circularity, with many waiting for hands-on tools.

Source: Deloitte