Sustainable buildings: Designing and delivering a greener future

by arslan_ahmed | October 23, 2023 6:00 pm

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By Misha Nikulin and Michelle Meisels

Everyone who cares about this planet likely wants a more sustainably built environment. In the architecture, engineering, and construction industry, there can be considerable control over one important aspect of sustainability: greenhouse gases (GHGs). In fact, the built environment accounts for 39 percent of gross annual CO2 emissions.¹

Emissions come in two general forms. One is operational CO2, or the CO2 emitted in the production of energy needed in the operation and use of a building (e.g. to power, heat, and cool it). The other form is embodied CO2, which is emitted in production, transportation, assembly, and eventually disposing of construction materials.²

Fortunately, the industry has opportunities before it to reduce these emissions and help humanity reach its consensus emissions goal of net zero by 2050.

To achieve a carbon-neutral built environment in less than three decades, there should be a sound, realistic, globally applicable strategy for greener design, construction, and operation. This article lays out the pillars of such a strategy, drawing on extensive research and analysis by Deloitte.

Where we are today

More than nine out of 10 U.S. energy and construction companies receive requests from customers to lower the amount of embodied carbon used in construction projects.³

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Many new design processes, materials, and construction techniques have been developed to achieve this goal, and sustainable buildings are frequently cost-effective, but it often takes a considerable investment to save money. In 2019,
the International Energy Agency (IEA) estimated that realizing the potential of sustainable buildings can save $1.1 trillion by 2050; but these savings necessitate an increase of $270 billion in annual capital expenditure until 2030, with 70 percent of that being new construction and retrofits.⁴

Despite perceptions of higher investment, sustainable construction is not necessarily more expensive than traditional construction. Some sustainable design and construction costs have eased as sustainable building codes have become stricter globally, technologies have evolved, and the industry has become more adept at delivering sustainable buildings.⁵

Materials, methods, and models

It is helpful to view sustainable building development through three lenses: materials, methods, and models.

 Materials

Sustainable materials, such as treated wood and smart glass, help reduce emissions throughout their lifecycle. They require end-to-end strategic sourcing capabilities, including cost, quality, and supplier management. If their upfront cost is higher, the difference can be offset by a lower long-term life-cycle cost, particularly for high-performance facades and energy-efficient systems. Costs of sustainable or low-carbon construction materials will likely gradually decline compared to conventional materials due to lower ingredient costs of recycled or by-product materials.

 Methods

Sustainable methods such as prefabrication, modular construction, 3D printing, advanced manufacturing, and generative design can dramatically reduce the waste lifecycle of construction projects, further saving costs. These methods require effective supplier collaboration and development programs to manage cost and risk. These methods can also help reduce labor costs, ensure better design and quality control (QC), and shorten project schedules to help minimize budget overruns.⁶ Deloitte found that nearly half (46 percent) of respondents to its 2023 Engineering and Construction Industry Outlook will likely invest in prefabrication and modular construction capabilities next year.⁷

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Models

Sustainable materials and methods frequently call for new commercial, organizational, and operational models. Sustainable models require oversight across procure-to-pay (PRP) processes and a high focus on spending compliance. A connected construction ecosystem can help by ensuring that developers and operators have a continuous flow of data and information about all aspects of a project, including carbon reduction and cost. Returns can come instantly or over decades. For example, incorporating high energy efficiency in buildings helps save significantly on energy costs over a building’s lifetime.

Industry forces both impede and fuel progress

Even with a stronger focus through these lenses, getting to net-zero will likely be a formidable challenge. Environmentally conscious engineering and construction companies may face significant challenges as they endeavor toward serving customers and meeting climate goals.

Among the headwinds are rising material costs and interest rates, as well as labor shortages and supply chain constraints.⁸ Four in five engineering and construction organizations cite supply chain disruptions as one of the top three challenges in their companies.⁹ In addition, homebuilders will likely experience sluggish demand as real consumer spending is forecast to fall in 2023, amid an uncertain economic environment.¹⁰ Then there is the cost of money: In May 2023, the average rate on a 30-year fixed-rate mortgage was 6.39 percent, which is more than double the pandemic rates.¹¹

On the other hand, infrastructure projects are likely to remain relatively insulated from the economic slowdown, driven by strong infrastructure buildouts and the substantial project backlogs developers and contractors have in their pipeline. In addition, starting October 2022, the next round of $1 trillion funding in the Infrastructure Investment and Jobs Act (IIJA) entered the market for several projects.¹²

Four ways to reduce emissions

Other possible tailwinds for sustainable engineering and construction include innovative materials, digital technology, regulation, and policy incentives.

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New emission-reducing materials include advanced concrete, recycled glass and plastic, algae-based limestone, low-carbon bricks, synthetic siding, wood treatments, and smart glass.

Digital technologies such as Internet of Things (IoT), sensors, connected devices, advanced analytics, generative design, and simulation software can drive down emissions and help developers conserve resources. Advanced controls, systems integration, data analytics, and energy optimization can actively reduce energy demand and consumption.

In particular, building information modeling (BIM) software can be valuable technology. It allows developers and operators to conserve energy and resources while shortening project timelines.¹³ Global BIM standards will likely drive growth in the U.S. market as they become more consolidated and widely adopted. More than half of construction executives who responded to Deloitte’s Engineering and Construction Industry Outlook survey agreed they would likely invest in digital technologies such as artificial intelligence (AI), digital twins, and BIM in the next year.¹⁴

On a broader scale, government incentives have supported substantial progress toward a net-zero built environment. Global investment in the energy efficiency of buildings reached $180 billion in 2020, up from $129 billion in 2015, driven primarily by funding from European countries.¹⁵ In the U.S., investments from the Inflation Reduction Act (IRA) include tax breaks for energy-efficient commercial and public buildings¹⁶ and more than $4 billion to incentivize low-carbon material use in federally funded projects.¹⁷

LEED, meanwhile, is an important regulatory lever, serving as a significant driving force behind the increased development of green buildings worldwide.¹⁸ Buildings can receive LEED credits for optimizing energy performance by analyzing efficiency metrics and focusing on load reduction and HVAC-related strategies during the design process.¹⁹

Similarly, construction projects can earn LEED credits for building operations and maintenance by installing new or using pre-existing energy meters or submeters that can be combined to produce data at the building level showing the overall energy usage of the building.²⁰

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So, what might a building look like when all the elements of a sustainable building strategy fall into place? Figure 1 is an example of a sustainable building that employs innovative materials and advanced digital technologies.

Call to action

Where can engineering and construction companies begin overcoming current challenges and work toward increasing the successful implementation
of sustainable buildings?

• Define a vision, strategy, and roadmap for sustainable construction with particular attention to alternative-material and energy-efficiency incentives.
• Survey, select, and procure the technologies that will make the greatest and most cost-effective impact on emissions. Develop an implementation plan, and distribute technical guidelines to key partners, creating an ecosystem that magnifies benefits.
• Support and drive sustainability-targeted projects through policies, regulations, penalties, or carbon taxes. Seek collaborative efforts involving developers, real estate companies, and technology providers to incent green building.
• Promote data sharing standards to make information more valuable and useful. The European Commission’s Digital Agenda promoting integrated information and communication technology in sustainable construction is an example.²¹

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Achieving the vision for sustainable buildings and creating a zero-carbon built environment will likely require engineering and construction companies to adopt transformational approaches, collaborate through global platforms, and work with governments for incentives that can take new solutions to a commercial scale.

Fortunately, virtually everyone wants to move in this direction. The architecture, engineering, and construction industries are perfectly positioned to lead. However, before making any decision or taking any action that may affect the business, it is important to consult a qualified professional advisor.

Notes

1 Consult the World Economic Forum, “This is the next hurdle in the construction industry’s race to net-zero.”

2 Read Deloitte’s report, “Sustainable Buildings: Designing, building, and operating to help create a greener future,” page 3.

3 Refer to the Dodge Construction Network, “Building Sustainably: The Drive to Reduce Embodied Carbon in Concrete Construction.”

4 Visit the International Energy Agency (IEA), “The Critical Role of Buildings.”

5 See GreenBiz, “Navigating climate disruption in the building sector.”

6 Read the report by Dodge Data & Analytics, “Prefabrication and modular construction.”

7 See the survey in Deloitte’s “2023 Engineering and Construction Industry Outlook.”

8 See note 7

⁹ See note 7

¹⁰ See note 7

¹¹ Visit Freddie Mac, www.freddiemac.com/pmms.

¹² Read “Building a better America” by The White House.

¹³ Refer to Deloitte report, “Sustainable Buildings: Designing, building, and operating to help create a greener future,” page 6.

¹⁴ See note 7

¹⁵ Refer to the document by the Global Alliance for Buildings and Construction (GlobalABC), “2021 Global Status Report for Buildings and Construction.”

¹⁶ Refer to the Inflation Reduction Act of 2022.

¹⁷ Read the International Code Council’s (ICC’s) news release.

¹⁸ Read “USGBC announces Top 10 Countries and Regions for LEED in 2021.

¹⁹ Learn more about LEED by reading, “LEED for Building Design and Construction.”

2 See note 19

²¹ Learn more at “Europe’s Digital Decade: digital targets for 2030.”

Authors’ note: This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services.

Authors

Misha Nikulin is a managing director in the Industrial Products & Construction practice, focusing on technology strategy, data and analytics, emerging technologies, and innovation—primarily serving in engineering and construction. He helps clients by leveraging his more than 20 years of engineering, procurement, construction (EPC) experience across different sectors to improve productivity, profitability, and enable new growth. Nikulin has led large strategic initiatives, enterprise-level global IT transformations, and intrapreneurial innovation programs. Nikulin’s construction emerging technology experience includes smart jobsite solutions, digital twin, Internet of Things (IoT), visual intelligence, artificial intelligence (AI-enabled) generative design, and business intelligence.

Michelle Meisels is a principal in Deloitte Consulting’s technology practice and leads the engineering and construction practice. She brings more than 27 years of consulting experience, with a focus on leading large, often global, finance, and IT transformation programs by leveraging technology. Meisels helps clients integrate digital technologies with organizational and process standard practices to achieve both qualitative and quantitative benefits. She specializes in JDE, EBS, and Cloud. While Meisels has served clients across many industries, her primary focus has been serving engineering and construction (E&C) companies. She has served many global E&C, EPC, and construction companies throughout her career. Meisels was born and raised in Southern California and graduated from UCLA. For more about Deloitte, please see www.deloitte.com/about.

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