Sustainable construction – meaning what?
The adoption of the UN climate agreement in Paris in 2015 initiated a shift in the way we think about doing business. The impact of many areas of the economy on the environment, the importance and opportunities for interaction with local communities and stakeholder groups were recognized. This has translated into new market practices and the gradual inclusion of various groups of actors with obligations to conduct business in a sustainable manner.
The construction industry has a significant impact on the environment. Construction consumes about 40% of the world’s energy resources and contributes to the production of up to 30% of the world’s annual greenhouse gas emissions[1]. Thus, it is particularly important that owners, investors, as well as construction companies, in order to maintain a competitive position in the market, identify environmental, social and governance risks of their operations and are able to actively manage them.
Basic legal framework
There are a number of guidelines from various organizations on the market for assessing whether an activity is sustainable, such as the OECD or UN guidelines. A company’s adherence to them is voluntary, although it increasingly affects business relationships.
ESG legislation is adopted at the European level. Some laws apply directly in member countries (regulations) or are later implemented by member states (directives). Currently, the most important acts of the European Parliament and the EU Council in this area include: Corporate Sustainability Reporting Directive (CSRD), Sustainable Finance Disclosure Regulation (SFDR) and Taxonomy Regulation. Work is also underway on the draft of the Corporate Sustainability Due Diligence Directive (CSDD), although its adoption will probably wait until after the new elections to the European Parliament.
To determine what economic activity qualifies as environmentally sustainable, one should refer to the provisions of the Taxonomy.
Taxonomy – meeting environmental objectives
According to the Taxonomy, an economic activity is considered environmentally sustainable if: (i) it makes a significant contribution to the environmental objectives listed in the Taxonomy, (ii) does not significantly harm them, (iii) is carried out in accordance with minimum safeguards (i.e., procedures to ensure the application of the indicated guidelines and conventions on sustainable development, including respect for human rights, also at work), (iv) meets the technical screening criteria adopted by the Commission in the Delegated Regulation 2021/2139 of 4 June 2021, as amended and supplemented by Commission Delegated Regulation EU 2023/2486 dated 27 June 2023 (the “Regulation“).[2]
Running an environmentally sustainable business must meet at least 1 of 6 environmental objectives (while not causing harm). These goals are defined in the Taxonomy as: (i) climate change mitigation, (ii) climate change adaptation, (iii) sustainable use and protection of water and marine resources, (iv) transition to a circular economy, (v) pollution prevention and control, and (vi) protection and restoration of biodiversity and ecosystems.
The regulation specifies technical screening criteria by industry sectors. Within the area of construction there are activities such as: construction of new buildings, renovation of existing buildings, installation, maintenance and repair of renewable energy technologies, or acquisition and ownership of buildings (real estate).
From the perspective of the construction market, it is important to look closer at the first two areas of activity and their sustainability requirements.
(1) Mitigating climate change
One of the primary ways to prevent climate change and stop the rise in global average temperature at a safe level is to reduce greenhouse gas emissions. The Taxonomy suggests using product or process innovations for this purpose, such as expanding the generation and use of renewable energy, improving energy efficiency, or using renewable materials.
As the first technical screening criterion for the construction of new buildings, the Regulation indicates a reduction in Primary Energy Demand (PED), which should be at least 10% lower than the threshold set for near-zero energy building requirements in national measures. The second criterion requires air-tightness and thermal integrity testing of new buildings larger than 5,000 m2. For such buildings it is obligatory to calculate the Global Warming Potential over the life cycle at each stage. Renovations of buildings that meet this target will be considered at the level of 30% PED savings.
Buildings erected before 31 December 2020 should have an Energy Performance Certificate of at least class A. Alternatively, a building can be among the 15% most efficient buildings in the country or region in terms of PED. Other buildings constructed by that date should meet the criteria set for new buildings in effect at the time of acquisition.
(2) Adaptation to climate change
An operation that makes a significant contribution to climate change adaptation is considered to be one that introduces measures that reduce the risk of adverse impact of current and expected future climate conditions on that business, its activities or on people, nature or assets.
In the case of both new construction and renovation of buildings, meeting this goal will require the use of appropriate solutions to mitigate significant climate risks, such as changes in wind circulation, soil degradation, temperature variability or heavy precipitation (the regulation includes a classification of these risks). It is up to investors to decide on the measures to be applied.
(3) Sustainable use and protection of water and marine resources
Although technical qualification criteria specific to the construction industry have not been defined for this goal, such requirements can be derived from the Regulation within “do no significant harm” principle. In this regard, there is a precisely defined water usage limitation by specific types of water appliances (e.g., the maximum water flow rate of wash basin taps and kitchen taps is 6 liters/min). The level of water consumption should be confirmed by a product datasheet, a building certification or an existing product label valid in the European Union. The above criterion does not apply to residential building units.
(4) Transition to a circular economy
Meeting this goal requires the implementation of waste prevention measures, and the use of recycling as required by EU legislation. This can be achieved, among other things, by more efficient use of natural resources in production, increasing the durability of products or ensuring that they can be repaired.
It is required that at least 90% (by weight) of non-hazardous construction waste (70% in the case of renovation) generated at the construction site (excluding trench fill) be ready for reuse, recycle and other material recovery processes. The companies should use recycled materials and reduce waste generation. Safe disposal of hazardous substances should be possible, as well as facilitating material reuse and recycling. Building designs and construction techniques should support circularity, as well as demonstrate and provide higher level of resource efficiency, adaptability, flexibility and the ability to dismantle components to enable their reuse and recycle.
(5) Pollution prevention and control
In order to effectively prevent water, air or land pollution, construction sector players should use appropriate building materials compliant with the Regulation, e.g., building components and building materials that residents may come into contact with should emit less than 0.06 mg of formaldehyde per m3 of material or component. The development of a building in a potentially contaminated site (brownfield), on the other hand, should be preceded by a survey for potential contaminants. Measures should also be taken to reduce noise, dust and pollutant emissions during construction or maintenance work.
(6) Restoration of biodiversity and ecosystems
Construction activity should make a significant contribution to the protection, preservation or restoration of biodiversity, or to the achievement of good ecosystem status, or to the protection of ecosystems that were previously in good condition. A basic requirement for construction projects is to conduct environmental impact assessments,as required by the Regulation.
It is not permissible to erect new buildings on arable and crop land with medium to high levels of soil fertility and below-ground biodiversity, greenfield land with recognized high biodiversity value and land serving as habitat for endangered species (fauna and flora), or on forest land.
Evaluation of environmentally sustainable activities
In order for an operation in the construction industry to be sustainable in the sense of the Taxonomy, it is necessary to meet at least 1 of the above 6 environmental objectives, with the application of technical screening criteria and bringing them no harm. Entrepreneurs should remember to apply minimum safeguards to ensure that Human Rights are respected in their operations, which is secured by adopting different internal policies and procedures.
At this stage, environmental goals for the construction industry are only just being concretized at the European level. We are therefore in a transitional period between what will need to be introduced as standard in construction activities, and the outline of regulations. On the other hand, Polish technical regulations do not take ESG requirements into account at all, and it is still unclear which ministry will work on this pressing issue that entrepreneurs are raising. One thing is certain – the majority of construction investments require financing by banks, which – having their own goals to achieve – already prefer green investments. The construction industry therefore cannot abstract from the requirements towards its business and must face the gradual implementation of ESG now, despite the lack of complete guidelines.
[1] Sustainable Real Estate Investment. Implementing the Paris Climate Agreement: An Action Framework; February 2016
[2] The Regulation completes the Taxonomy in terms of mitigation or climate change adaptation, and also determines whether this economic activity does not cause serious harm to any of the other environmental objectives
Last Updated on April 8, 2024 by Anastazja Lach