Construction companies have largely dodged the level of scrutiny that environmentalists have levelled at oil and gas explorers, or banks. Yet cement and other building materials are responsible for substantial carbon emissions, which the industry is trying to clean up.
According to the International Energy Agency, about one-third of global energy- and process-related emissions in 2021 arose directly or indirectly from the buildings sector, with about 6 per cent of the global total coming from manufacturing the cement, steel and aluminium used in construction. The IEA also says that the emissions intensity of cement making — the amount of CO₂ per tonne — increased about 1.5 per cent a year from 2015 to 2021.
“Buildings are the epicentre of quite a significant part of the carbon footprint,” acknowledges Guy Grainger, global head of sustainability at JLL, an international commercial property company.
For years, environmental activist investors and pension funds for religious organisations have sparred with companies over their carbon emissions. But almost no campaigns have been directed at US construction companies, regulatory filings show.
Now, governments are increasingly stepping in to prod construction companies to be greener. In the US, sections of the landmark Inflation Reduction Act of 2022 aim to reduce greenhouse gas emissions from federally funded construction projects. US cities are also bringing in tough standards, from New York City to Scottsdale, Arizona. In October 2022, New York Mayor Eric Adams signed an executive order to cut carbon emissions in municipal construction projects — and it includes a call for the increased use of low-carbon concrete.
In Europe, the European Commission proposed updates to its energy performance of buildings directive in December 2021. Among the biggest changes put forward was certification of the “lifecycle global warming potential” of a building — all the greenhouse gas emissions arising from its construction, operation and decommissioning.
These proposed updates have already prompted Europe’s biggest construction companies to invest in new, greener products. They are also updating the way they bid for work.
Swiss building materials company Holcim sells its green branded products at a premium, analysts at Morgan Stanley noted in a report last year. Currently, its low-carbon concrete product, EcoPact, represents 10 per cent of sales, but the company expects that to grow to 25 per cent by 2025, Morgan Stanley said. Holcim recently announced that its low-carbon concrete is being used in new data centres for Amazon’s web services division.
In France, construction company Eiffage is working with Hoffmann Green Cement, one of an emerging cohort of low-carbon cement makers. Thomas Atkinson, Hoffmann’s head of international development, says that, because its process requires no kiln-heating — a source of significant carbon emissions in conventional cement manufacturing — its product became more competitive when energy costs jumped last year.
“We are close to having the same price today — maybe [it’s] a little more,” he points out.
Thanks to this growing regulatory and public pressure, “demand for low-carbon products in the building materials industry will progressively surge over the next five years,” predicts Renato Panicho, a credit analyst at S&P Ratings.
“We could see the industry gradually diversifying away from standard cement only,” he says, with companies able to keep profits stable as carbon costs rise by charging more for being greener.
But one of the biggest obstacles to faster adoption of low-carbon cement is the challenge of securing warranties and insurance for a new product, Grainger says. “You are often testing new technologies and you are taking on risk.”
JLL estimates that 80 per cent of today’s office buildings will still be in use by mid-century. So, to keep carbon emissions low, companies are likely to retrofit existing buildings rather than tear them down to start again.
Grainger also points to timber’s growing use in new buildings, thanks to tightening regulation on carbon emissions and more tenants asking for green construction options. In northern Europe, new buildings incorporating timber can reach up to 10 or 15 storeys, he says, and “look absolutely stunning”.
Nevertheless, few materials can replicate cement’s sheer toughness and affordability, Panicho says. That means the industry must redouble its efforts on technology to capture and store carbon, he argues — but only the top manufacturers are taking a lead on this.
As to whether cement companies can achieve carbon neutrality by 2050 — a declared aim of industry body the Global Cement and Concrete Association — Panicho is reserving judgment. “[It] is a difficult call to make,” he says.
