From waste to wealth: How RICS and circular practices are transforming construction podcast

Transcript

From waste to wealth: How RICS and circular practices are transforming construction

Rebecca Torr (RT): Hi I’m Rebecca Torr and welcome to the Emerald Podcast series. Today, we explore the concept of the circular economy and how it challenges the traditional linear model of take-make-dispose by emphasising the elimination of waste, continuous use of products and materials, and regeneration of natural systems. The circular economy is essential for both environmental sustainability and economic value creation. We are honoured to have Tina Paillet with us today. Tina is the President of the Royal Institution of Chartered Surveyors (RICS) and CEO and co-founder of Circotrade. In our conversation, Tina will share her deep insights on how the circular economy can revolutionise the construction sector, significantly reduce carbon emissions, and drive the adoption of sustainable practices. We will discuss the current state of the industry, the growing appetite for change, and examine forward-thinking initiatives like Circotrade that are driving this transformation. Stay with us as we explore the numerous advantages of a circular economy, the complexities of its adoption, and the steps needed to make the construction industry more circular and sustainable.

Tina Paillet (TP): A lot of times, there's a bunch of misnomers when it comes to what the circular economy is. And in fact, today, our industry, the construction, the real estate industry, in the wider sense of the word, is quite wasteful. The circular economy is all about ensuring that our materials and our resources never become waste and are constantly reused, recycled and put back into a usable format where they continue to be profitable and valuable. And value there is a huge, huge point, because what we do when we're in the linear economy, take, make, waste, is that we are actually destroying value. I'm going to give a little example, because I know that sounds really vague, but let's take the example of Structural Steel in a building. Today structural steel, I'm going to use some UK numbers, uses about 2.4 tons of carbon to form a ton of steel, structural steel, and that steel is then put into a building, and that steel could last for generations and generations. It's very, very durable. And what happens in most demolitions and some buildings are demolished as early as 20 years, 30 years, 40 years after they've been developed for various reasons, which may be right or wrong. I'm not going to go there. That's not the topic. But in these demolition projects, it is much cheaper, and it is the modus operandi to just tear the buildings down with a minimum amount of people, a maximum amount of machines. So that means that this steel is torn down with wrecking balls and other machines, therefore is twisted, bent, broken, and then it goes into a recycling stream in most cases. Where we use again, we have to smelt that material down. Goes to a factory. It's remelted down, and in most cases, actually the steel is sent to another country. In the UK, just talking from where I'm based today, in the UK, a lot of the steel from demolition is actually sent to China or India, and it is there, refabricated into some lesser form of steel. So structural steel, when it's been treated that way, is very rarely used to build more structural steel. It is then downgraded into rebars for concrete reinforcement, and those reinforcement bars are then reimported into the UK to be used in our concrete. So while you could say that is the circular economy because we are recycling, it's still not in the pyramid of retain, reuse, recycle. It's really recycling has become the new land fill. We need to keep in mind that recycling, especially when it's down cycling like we've just seen, is very wasteful, wasteful in carbon and wasteful in materials. There's other forms of down cycling which are even more wasteful. Let's take concrete, for example, that which will be crushed along with other waste, and then used to grade roads to create, you know, the lower levels of of roadways. And that, again, is so wasteful when you think of how much value those materials have when they're in place and being used as structural materials.

RT: I mean, thank you for sort of outlining what it really means. Because I think you really illustrated it very well. And I think we can all relate to seeing buildings being knocked down frequently. There's always construction works going on, you know, around our neighborhoods. And I think we understand, you know, we can all relate to that. We all understand it, but, yeah, where that waste goes, and just seeing, you know, the cycle of that, I think it is. It's quite um eye opening, actually, and you think that's a good thing, like the recycling, you think that would be a good thing. 

TP: Well, well, it's better than putting it into landfill, correct. But, but in the you know, there's also incineration, and oftentimes when we say it's been diverted from landfill and we're creating value out of it, it could mean that you take perfectly good timber structures, for instance, but also, you know, timber flooring, etc, and actually incinerate it. And when you think about our planet and how much we need to save our forest and save those very precious resources which can be used as carbon sinks themselves, it seems like such a shame that that in the recycling and diverting from a waste fill, we find practices such as incineration. Now, we can't reuse everything, all right, but we can do much better than we're doing today. Today in all industries, all of them, all types of industries, not just ours, only 7.2% of materials are are circularly used. Okay, circular so that includes recycling and down cycling 7.2%. Now, if you go to the construction industry and you want to know how much we actually reuse, so one of the higher, you know, most value accretive value savings forms of the pyramid, retain, reuse. It's way up there. Only 1% of our materials from construct, from a typical demolition project, only 1% of those materials are actually find themselves into reuse. So it we have a huge opportunity there to grow those numbers. 

RT: I mean that's absolutely astounding in that it's just 1%, but as you say, you know, it is a huge opportunity. And if something can be done, which it can be, then what massive difference it would make. And I guess, you know, obviously you've mentioned about sort of the construction being, industry being so wasteful at present anyway. And I just wonder in terms of the industry embracing the idea of circular practices. I mean, is there an appetite for change? I mean, are you positive? Are you sort of optimistic that you know, change is on the horizon. 

TP: Well, I mean, I am, because there are a number of groups that have been working on providing the statistics and and doing the studies and seeing what is in the art of the possible. And I'd like to cite the Ellen MacArthur Foundation here is doing some fabulous work with Arups on the circular economy. And you know, they state clearly in their report, which is First Steps Towards a Circular Built Environment, that a circular economy could reduce CO2 emissions from building materials by 38% in 2050 now that is a huge opportunity. Huge opportunity. So I think that given that opportunity, and given where we stand today, and largely also driven by carbon considerations, and we can talk a little bit more about that, the circular economy will and is gaining traction.

RT: Oh, I mean, that's, that's just heartening to hear, you know, that there is, there's change on the horizon, you know, and that we can look forward to, you know, making it this carbon that, like we said about the carbon situation, we can see that coming down, which would be absolutely amazing if we can make a dent on that. And, I mean, obviously the construction industry's got, you know, it's got a massive role to play. And I just wondered, obviously, you know, you you've mentioned the sort of, some of the advantages, obviously, carbon being one of them. I just wondered, in terms of, like, the ability to move towards circular economy principles in the in construction. I mean, how difficult is it to adopt these principles? I mean, are there lots of barriers there, or is it just a change of mindset? I mean, what is it that's stopping the industry from from making that change? 

TP: Yeah, so in order to make the change, it is a vast change of ways of working, changes to business models, changes to the way we design buildings, the way we construct buildings, the way we deconstruct buildings, the material selection, the data and information management. And you know, perhaps above all of that, the idea of cooperating across silos within the industry and the supply chain. We're very siloed today. We need to be working much more together, and so this is where I believe RICS can be bringing things together, working together, creating the standards that allow us to measure circularity, measure the embodied carbon in the materials, allowing us to benchmark work together, set goals. These are all really important things, and I think, you know, we need to keep in mind that changing the way we do things is very difficult, and I see a number of barriers that need to be addressed there. One of the main barriers today, I do not believe is on the demand side. I believe the main barrier is on the supply side. Let me explain, on the demand side, there are more and more legislation and regulation coming in that require low carbon construction with low carbon materials. And there are also a number of, I think, most major cities, country governments, as well as a large part of our corporates. I believe it's 70% of corporates on the on the stock exchange that actually have net zero goals and plans for 2040, 2050, and so there is a demand for bringing, for decarbonising through low carbon materials. And there is nothing more low carbon than a material that has already expended its carbon into the atmosphere, and is there ready to be reused, rather than to be wasted. So, so the demand is there, but it's latent, because the offer, the supply side isn't there. And why isn't the supply side there? Because for an owner of a building that needs to have it re, redeveloped, or refurbished, or even simply stripped out for a new tenant that's moving in. Let's talk about commercial office buildings. It's quite easy to talk about that those owners are faced, are in front of a conundrum, either they continue business as usual, they go out to a demolition contractor. The demolition contractor says, pay me X and I'll tear your building down, and you can get on your way and I'll take care of all of the waste. Or they can take another approach, which would be to ask that construction deconstruction contractor to deconstruct, to carefully sort the materials at source, to send them off for reconditioning, maybe even recertifying, in some cases, recalibrating. And that cost a lot of money, and most of those owners do not have any visibility on whether or not those materials will be gainfully reused at one point by anyone, and how much they might be able to sell them onwards for. So there is a real issue there, which means that there is a barrier at that instant. And so I'm doing two things to break down those barriers. One of them is with my company Circotrade, where we have introduced futures trading in order to actually offset those sort of risks that an owner may have. So what does it mean? Simply, once you have a building and you have it inventoried, which I'm calling the Circoscan, then you have it valued, which is the Circopass, you can then trade it forward, trade it as a futures option to a willing buyer. And that means that before you've even undertaken the hard lifting, heavy lifting, of having those materials deconstructed, and you've expended that money, you actually know where the outcome is. You know who's going to buy it, you know how much they're going to pay for it, and you can therefore afford to finance upfront those investment costs to have this. And I think that's going to hugely improve the supply. Likewise, on the design side, designers today don't have access to a large quantity of materials, of reused materials, like they do new materials. And what they really need in order to integrate reuse materials into design in early stages is to have a sort of a online catalog of reuse materials in that are all reconditioned and re you know, recalibrated, and have a good technical specification which is known and that they can position themselves early on, maybe a year, two years in advance, to actually having the project built, because that's when the design is taking place. So this is what Circotrade is doing. And at the same time with our RICS, we have with the market for the market by the market created what we're calling a circular do tank. So instead of a think tank, it's about doing rather than thinking. And the idea there is that we are garnering, as we speak, a certain number of pledgers to sign on to the pledge of the circular do tank, which is for owners, investors, developers of real estate, to actually undertake reuse of building materials in their projects, to undertake audits of those resources prior to any demolition or strip out, and to share, and this is important, to share the outcomes, whether they are positive or negative, to share those lessons learned with the circular do tank, where there is a core team there that is there to support the pledgers in troubleshooting. Because the other problem we have is we need to experiment in order for this to take off. And a lot of times when you want to try something out, the doers, or the, you know, the principals that own the real estate, they want to try out something, they will come across barriers that need to be addressed. And those barriers might be logistics, they might be technical specification, they might be insurance, they might be financial barriers, and they need support. And so what we are there, we've gathered together a very, very high level group, which is the committee of the do tank, which is there to help troubleshoot those problems we have, financiers, insurers, lawyers, architects, engineers, planners, you know, the whole gamut of experts that are there to support. So I think with those two initiatives, I'm hoping to really support the industry in moving towards a more circular economy and more reuse of materials. 

RT:  I mean, it's absolutely incredible, and it's very exciting hearing you talk, and the passion that you have to make a difference. And obviously these things are in place. And, I mean, I think it'd be quite interesting if some, I don't know, if you can tell us a little bit about, sort of, you know, how people can find out more about Circotrade and the do tank and. I mean, if you got any successes so far, I don't know how long either of these initiatives have been, have been running, so it'd be quite interesting to find out, sort of where we are in that sort of, you know, are we just starting out on this.

TP: So you're getting, actually, from a sort of public standpoint, you're getting a sort of sneak preview, because we're actually getting a number of pledgers to sign up as we speak. And then, I think probably in September, September, October, we're actually going to go public with the do tank. So right now, it's quite confidential, but I'm sharing it. I'm sharing it because I think it's going to be such an impactful initiative.

RT: Amazing! Yeah. I mean, it's that it's so exciting to hear that there's a group of people that are dedicated to making this happen. And I think a lot of the time it is that knowledge, you just don't have the awareness. You don't know, you know, sort of how to overcome these issues. And then you'll just, you know, you just go ahead. It's like as you say, it’s business as usual, because what, what else can you do? So if you've got, actually, like, you know, a group that you can go to and you can troubleshoot and say, this is happening to me, but likewise, share, you know, what did you do to overcome that? What were your solutions? I think this is just going to be such a massive resource for people that is going to really change the industry. And once you can start getting those messages out as well and tell those case studies, I think it would be great. And we'd love to support that too. I think it would be good to go on to the carbon issues that you mentioned. And I know there was a lot of talk when you read about this, it's a lot of talk about the importance of measuring carbon. I just wonder if you could talk about that, and maybe more about decarbonising.

TP: Yeah, I'd love to. I'd love to, because RICS is really leading on this topic, and it's it's going to be extremely useful, because RICS has actually developed what is called the whole life carbon assessment standard, which came into force yesterday, but which has was, which published last September of 2023 and this whole life carbon assessment standard actually is very unique for the built environment. We are, RICS has worked with and consulted very widely in order to develop this standard, which is our second version. Our very first version was in 2017 and I have to say, a lot of things changed since then. I think in 2017 most people didn't even understand what whole life carbon was. But even for those who may, may still need a bit of clarification, the idea of a whole life carbon assessment is that you need to measure to improve when you're designing a project, when you're redesigning it, when you're refurbishing it, everything you put into the building has embodied carbon, and everything you do during an operational phase of a building. So let's take two forms of carbon. We talk about the embodied carbon, which is what is inherently in the materials, what the carbon that is expended in order to mine, manufacture and transport those materials and construct them into into the project, and then you have everything that we call operational carbon emissions, which is Once the building is handed over, the lights go on, the heating, the ventilation, the cooling, all of that is the operational carbon. So while our sector has been focusing on operational carbon for a very long time now, probably upwards of 20 years, and we're getting quite good at understanding how we can make our buildings more efficient through better insulation, through better cladding, through, you know, more efficient air handling and cooling and heating systems. We haven't really been working very hard on the embodied side, that's sort of the hidden part of the iceberg. And the other thing is, is that our grids will be coming greener. We are getting more and more share of renewable resources in the energy grid, and therefore that operational part, which is part of the whole life cycle. These two forms of carbon, embodied and operational, actually work hand in hand, and while the operational will be decreasing over time, with a greening of a grid and more efficient systems being developed, we have a problem with the embodied carbon. The embodied carbon is going to be used in anything we construct, and we construct a city the size of Paris every week globally. So that is not going to stop anytime soon. Those are equivalent square meters or square feet of new surface area that is being constructed every single week across the globe. So all of those materials that go to construct or to reconstruct or to renovate or refurbish or retrofit, all of those materials are expending more carbon and the problem we have is that if we continue to spend them in the rate that we are spending them, we will blow our carbon budget before many of these very efficient buildings, from an operational standpoint, will actually even pay back their carbon debt. All right, so what whole life carbon assessments do is that they put these hand in hand together in one assessment, and you can play off how much carbon you expend in your initial development versus how much operational carbon, and you can decide whether it's really worthwhile to put in that triple pane of glass, which could maybe give you some very good savings in 40 years time you would need maybe to pay off the actual embodied carbon that you're using to add that extra pane of glass. So these are the sort of playoffs that need to be measured in whole life carbon. So, so the first thing is, is that this whole life carbon assessment standard of RICS is the first and the only existing international standard for the built environment in measuring whole life cycle carbon across all asset classes, including infrastructure. So what we are doing with RICS is working really hard to ensure that this standard can be embedded in local and national legislation and regulation. And why is that important? And it's being adopted very widely by number of governments. And it's important because we also have a planetary issue, and the carbon does not know frontiers. It doesn't have any boundaries, country boundaries. So if we want to meet our net zero goals, we need to be able to measure things comparably, across the board, benchmark them from one country to the other, from one city to the other, we cannot have different measurement standards. And so what the whole life carbon assessment standard really is, is like in the accountancy world, you have the IFRS standard, which overlies that sort of individual local gap, local accounting practice. In order for corporations to take an overview of what their accountancy looks like from a global perspective, they need all those individual global accounting practices to come together for one view. And this is what the opportunity of the RACs whole life carbon assessment standard does as well, is local measurements of carbon can be fed into a much higher framework so that we can compare, benchmark and improve. So that's really important, and I know I'm making a long answer, but there's also other work we're doing with things such as the built environment carbon database, and it's a free to use platform that you can source and share carbon data at both project and product levels. So this is really important because and right now it's UK only, but we are hoping to expand that out. We're also contributing to the development of the UK net zero carbon building standard, which is going to be creating clarity on levels of building performance that are aligned to the UK Net Zero trajectory. So those are also initiatives that are really impactful, that RICS is leading today.

RT: Amazing. Thank you. I mean, thank you for bringing to life why it's important. Because I think understanding sort of in the round, you know, was it's really, actually, you know, you can see the importance of why we all need to be getting involved in this. And it's something that hopefully will change the industry quite considerably. But to understand that, you know, it's no good having these really spending loads and loads of money on this, these efficient buildings, if the you know, it's not really going to make much difference in the whole round of the project. How do you think the the industry as a whole is likely to change over the coming years? I mean, do you think change is going to be a slow process, or is it something that you think, you know, with standards, it's going to be easier than than you know it has been in the last few sort of decades. 

TP: No change is very difficult to predict. I think, prior to the covid crisis, no one could have predicted the sort of changes that would happen when it comes to, you know, adopting IT solutions, when it comes to, you know, different consumption practices. So sometimes, and it's not necessarily something you wish for, but sometimes there are moments where the penny drops and things change. Change extremely rapidly. I think that there are a number of conditions today that mean that we are ripe for the circular economy. And I'm going to tell you why. The climate crisis, and it's linked to embodied carbon, has actually really come to the forefront. It's something that we now know exists and and it's become, it's a real realisation. And I have to say, I was at COP28 in Dubai last year, at the end of last year, and over 27 countries came together to actually sign what is called the building breakthrough initiative. And the building breakthrough initiative is really a recognition that we cannot get to our carbon, our net zero goals without the built environment. And the built environment is all about whole life carbon, including that embodied carbon, which is really important. So that's one of the things. Embodied carbon and the circular economy really go hand in hand. The second impetus for change is the decarbonisation plans, as we were saying earlier, countries, cities, corporations, have all signed on to a number of decarbonisation plans, the net zero goals, etc. And that means that there is now technology and the methodology to support them, so things like RICS whole life carbon assessment standard, but also the technology, the tools, the carbon calculators, online. These are things that are going to allow the impetus for change, and they will also allow a number of governments actually to embed these methodologies and these technologies into their planning permission system, for instance. So I think that could go a long way to being an impetus for change. And then the final one is supply chain disruptions, I think, with the material shortages, and there's always been, you know, this sector is immensely atomised when it comes to, you know our supply chain for construction materials, it's, it's very piecemeal. And I think we didn't, we knew that there was quite a bit of disruption and volatility in normal times. But with both the covid crisis and then followed shortly after, with the major disruption and conflict in Ukraine, we realise that our supply chains are very, very fragile, and that local sourcing is something that we should be looking much more closer at, and being much more independent and locally sourced. So I think that the circular economy is the answer to all three of those solutions, and that is what's going to be really the impetus for change. I think you know, having materials which are circular, reused within a major metropolitan area, means that those supplies are just there. They're just a hop, skip and a jump away. And that's going to be also very important.

RT: A huge thanks to my guest Tina Paillet and to you for listening. We hope Tina’s insights have provided you with a deeper understanding of how adopting circular principles can fundamentally change the construction industry for the better. You can find more information and a transcript of the episode, on our website. A final thanks goes to Podcast Producer Daniel Ridge, and the studio This is Distorted. This is Rebecca Torr, signing off. See you next time!