How the Construction Industry is Navigating Climate Change

How the Construction Industry is Navigating Climate Change
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October 12, 2023 27 mins

How the Construction Industry is Navigating Climate Change

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As the need for climate-resilient infrastructure grows, the industry contends with changes in regulations, building strategies and risk.

Key Takeaways
  1. Climate-resilient building projects require strategic planning and compliance with new government regulations.
  2. The construction industry can build climate resilience by rethinking its operations and choice of building materials.
  3. Risk awareness and collaboration can help builders increase efficiency and keep green projects on track.

Overview

Climate change touches all areas of life, including where we live, work and socialize. Natural disasters and extreme temperatures are destroying some structures and making others uninhabitable, resulting in staggering personal and economic loss: in 2022, extreme weather events caused more than $165 billion in damages in the U.S. alone.

To confront the effects of climate change, construction companies are exploring new approaches to buildings, materials and project planning. However, these transformations are often accompanied by logistical challenges, uncertainty and risk. Depending on their roles in the construction life cycle, businesses in the construction industry have different goals when it comes to cost, design and sourcing. Some contractors may resist abandoning established building methods and materials in favor of new alternatives. And new climate-resilient construction must be accessible as well as durable.

But as the planet warms and atmospheric CO2 levels reach record highs, the industry is recognizing the importance of collaboration, innovation and risk management to meet the challenges of climate change.

In Depth

With building projects and companies generating more than 40 percent of the world’s annual CO2 emissions, the construction industry has a unique opportunity to make changes for greater climate resilience and energy efficiency. Construction companies, project owners and designers are realizing the importance of considering the environmental impacts of building design, materials and onsite operations as well as making sure structures can withstand heat waves, torrential rain and other climate extremes. Yet no part of the construction industry operates independently, and conversations about climate-resilient construction require shared awareness of the benefits and limitations of today’s sustainable building techniques.

Planning Efficient, Compliant Construction

Alignment around climate strategy in the construction industry can be challenging due to varying priorities and timelines. Developers, suppliers and contractors each have unique cost considerations, which can influence decisions about green construction materials and building strategies.

Brenna Mann, head of strategy, U.S. Construction and Infrastructure at Aon, highlights how developers consider incentives and building codes when planning construction, but depending on a contract’s structure, contractors may have little input in building design. “They are there for the construction phase and focusing just on that part of the timeline of a building or a project,” she says. “Owners are responsible for the life cycle of buildings, and they must work with designers to ensure future weather is contemplated.”

A strategic approach to scheduling a construction project will be critical as the industry pursues climate resilience. By planning according to seasonal limitations, developers and contractors could minimize negative environmental and financial impacts. “If construction happens during the right time of year, they save on emissions, overall energy costs and gas,” Mann explains. “Generators are operating to keep things heated or cooled during construction as well. Post-construction project owners focus on lower operating costs because they’re heating and cooling a site or building more efficiently, a factor that is taken into account during the design, sourcing and installation phases of a project.”

Location-specific guidelines also influence climate-friendly building decisions. For example, the government of British Columbia has proposed an update to its building codes, requiring all new homes to have at least one temperature-controlled room. Cities around the world are also adopting embodied carbon policies, which specify the building materials and methods that are approved or encouraged by local governments.

Though understanding these policies can accelerate permit processes, Chris McLean, managing director, national leader, Construction and Infrastructure at Aon, explains how new government carbon policies for green building materials may not be popular with everyone. “Local governments are requiring the use of cross-laminated timber with little consultation with contractor and owner stakeholders,” he says. “Trade performance and availability of the manufactured product need to be considered in order for this material to be used successfully and sustainably.”

Climate-Conscious Building Materials and Technology

Making changes to construction materials and methods could create lasting and positive outcomes for the environment, though in some cases, builders may face higher up-front costs or logistical problems. Sourcing the right supplies takes time, and the definition of what truly makes a building material or process “green” is still up for debate. As the industry pursues climate resilience, construction industry leaders are exploring ways to balance the pros and cons of emerging materials and methods.

Technology is enabling climate-friendly solutions from the initial phases of building to ensuring energy efficiency. For example, 3D printing gives builders a way to cut down on construction time by quickly generating materials and sections of a building. Though industrial 3D printing often uses carbon-intensive cement, new models use a low-carbon mix of natural and recycled materials.

Smart building sensors also make use of technology to reduce energy output by monitoring air quality, humidity and other conditions within structures. Sensors can have long-term value in monitoring a building’s heating and cooling efficiency, though short-term considerations about saving costs may keep some construction projects from using this technology unless required.

Reconsidering how structures are designed and where they are built could also drive sustainability in construction. Passive House, for example, is a building standard that describes energy-efficient structures that use insulation and the strategic placement of high-quality windows to keep energy from being lost through walls. Though Passive House design can reduce energy expenses, higher initial costs may limit the wider adoption of this practice. Developers are also exploring infill housing, which brings construction to vacant lots in cities and leads to greater benefits for the environment and infrastructure.

Some climate innovations come in more familiar forms. White paint can reduce building temperatures by reflecting light and heat, and a new kind of paint could reflect up to 98 percent of the sun’s rays. Though this advancement raises potential geoengineering concerns, it offers a way to take fast action to counteract global warming. Bricks made from algae are also on the horizon, giving builders a way to lower their carbon footprints from the ground up.

Construction, Risk and Climate Resilience

Builders are now considering the financial consequences of creating structures that fail to meet current standards for energy efficiency. “It’s changing the risk profile for contractors. By doing that, it’s driving different contractual or risk transfer behavior. Now, there’s a surety product that needs to be pursued to guarantee performance, or a letter of credit that needs to be issued,” McLean says.

Meeting these needs requires an agile approach to insurance coverage. “If owners are trying to transfer liability to guarantee performance around energy efficiency, then we’ve got to be smart contractually,” Mann says. “All parties need to understand what risk they are taking and whether, as a contractor for instance, they can insure, mitigate or transfer the risk.”

Contractors face liability risks after a project’s completion, and newer climate-resilient materials may create uncertainty about their long-term performance. “Contractors also take on the risk for means and methods — and if those are being driven by the specifications of a building or a material, that gets complicated,” says Mann, adding that these contractors may need to turn to outside experts for guidance. “Construction is generally a low-margin, high-risk business. If you are a smaller or midsize contractor, it’s hard to allocate the resources and become experts about a new building material or method.”

Quote icon

Construction is generally a low-margin, high-risk business. If you are a smaller or midsize contractor, it’s hard to allocate the resources and become experts about a new building material or method.

Brenna Mann
Head of Strategy, U.S. Construction and Infrastructure, Aon

Collaboration for Climate Resilience in Construction

Uniting construction stakeholders over climate resilience is no easy feat, but it will be essential to future structures. Having critical conversations in early phases of building development can lay the groundwork for environmentally sound decisions throughout construction. Contractors and designers can work together to ensure that newer green approaches are the right fit for a project, in addition to determining realistic timelines for construction.

Leaders within the construction industry and in government should also be well-informed on new materials and methods and look to research, testing and a sense of what the public wants to shape their decisions.

McLean explains that there is no single industry solution to the challenges of climate change; critical thinking and innovation needs to happen at every stage of construction. “We need our business leaders to be challenged. Politicians need to be challenged, too. Collaboration is the only way that all these things are going to be addressed.”

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We need our business leaders to be challenged. Politicians need to be challenged, too. Collaboration is the only way that all these things are going to be addressed.

Chris McLean
Managing Director, National Leader, Construction and Infrastructure, Aon

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

Terms of Use

The contents herein may not be reproduced, reused, reprinted or redistributed without the expressed written consent of Aon, unless otherwise authorized by Aon. To use information contained herein, please write to our team.

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