Our geographical location at the very end of the supply chain, our reliance on imported materials, and the post Covid price increases on materials and machinery, highlight the need for a shift toward greater resource resilience in real economic terms. The construction sector contributes around 50% of Aotearoa New Zealand’s total waste produced, and there is a lost opportunity to capture the value in that waste, with added co-benefits for climate change mitigation.
A recent panel discussion led by PwC New Zealand, served as a platform to spark a broader dialogue about the circular economy in the construction sector among organisations in Aotearoa. Andrew Jamieson, Partner, Sustainability and Climate Change, PwC New Zealand, led the discussion with Melissa MacEwen, Circular Economy Director, PwC Asia Pacific and New Zealand. We were also fortunate to be joined by Andrew Eagles, Chief Executive, NZ Green Building Council; Nicola Tagiston, Head of Sustainability, Fletcher Living, and Lisa Hinde, Head of Sustainability, Precinct Properties for an engaging panel discussion.
Some of the key takeaways that we took from the kōrero are explored in more detail below.
So what does moving to a circular economy in the construction sector mean?
Moving towards a circular economy would be a departure from our current linear economic model, where we ‘take-make-consume-throw away’ resources. Shifting to a circular economy involves promoting sustainable production and consumption patterns, by following a hierarchy of circular actions:
reducing waste significantly by beginning upstream with circular design (including modularity and designing for adaptable spaces) and circular sourcing (for instance, renewable bio based materials and recycled materials),
keeping materials within the economy through reuse, repair, refurbishing, remanufacturing and repurposing, thus reducing the embodied carbon of buildings,
at the end of a product’s life, recovering and recycling resources to feed them back into the same or different processes, thus capturing and creating further value.
Aotearoa New Zealand is already transitioning to circularity, but we are at the beginning of the curve
Aotearoa New Zealand is just at the beginning of the curve when it comes to the circular economy transition, especially in comparison to our European counterparts, but also compared to the wider Asia Pacific region.
The European Union (EU) has been leading the transition, introducing a raft of circular economy policies in quick succession since 2018, with implications beyond the region. Policies which affect companies exporting to the European Union include the Corporate Sustainability Reporting Directive (read more about the implications of this to companies in Asia Pacific here) and the carbon border adjustment mechanism, and forthcoming legislation on eco-design and digital product passports, will similarly affect companies all around the world. In Asia Pacific, the majority of countries have introduced some form of extended producer responsibility policy, making producers responsible for the whole lifecycle of their product, including waste generated.
In Aotearoa New Zealand, the intent to transition to circularity has been formalised by the government in the emissions reduction plan, the infrastructure plan, and updates to waste legislation. Product stewardship schemes for priority items are starting to be introduced and the waste to landfill levy for construction and demolition waste is being increased in phases. Lisa Hinde shared that “for the construction sector, other important changes have also been signalled as forthcoming - such as the introduction of circular design guides and mandatory recycled content for public infrastructure projects, as enacted recently in New South Wales, Australia.”
Resource efficiency is also gaining traction in Aotearoa New Zealand through material credits provided by certification schemes like Homestar and Green Star, from the New Zealand Green Building Council. These provide internationally recognised rating systems that help set the standard for healthy, resilient, positive buildings and places. The Government’s requirements for a Green Star certification on government buildings with a capital value over NZ$9 million started from April 2023.
What are the challenges in transitioning to circularity in the construction sector and how can these be addressed?
In order to ensure the widespread adoption of circular practices, construction companies and Government bodies must integrate these principles into existing policies and protocols. This involves starting with the end in mind as a staggering 80% of waste generated on construction sites is predetermined during the design phase. Nicola Tagiston remarks, “it’s commonplace to apply a value engineering process but the incorporation of a “design out waste gateway” which considers the full lifecycle of materials and structures, into construction policies is key. It ensures that circular practices become a standard part of project planning and execution.
As Andrew Eagles observed, “While the global and domestic regulatory trajection shows that the construction sector will need to transition to greater circularity, this doesn’t mean it is without its challenges. These exist at multiple levels, including changing procurement models and design practices, ensuring on-site skills and knowledge, shoring up domestic infrastructure, integrating circularity into existing sustainability strategies and business models, and ensuring greater access to financing.”
Quantity surveyors (QS) and procurement teams also play a significant role in the overall construction process. It is crucial to raise their awareness of circular economy principles. They need to understand the value of sourcing sustainable materials, as well as the economic benefits of reducing waste and optimising resource use.
On site, construction workers also need to be equipped with the necessary knowledge and skills. By offering a New Zealand Qualifications Authority (NZQA) such as a Level 2 resource course, we can help workers understand the principles of resource efficiency, waste reduction, and sustainable construction practices. On-site waste management plans are also critical, during demolition phases, construction workers need to be trained in techniques for safely dismantling structures to recover valuable materials and ensure proper recycling or reuse. This training would also cover effective resource sorting methods to minimise waste on construction sites. In addition to this, spaces need to be provided to hold materials for reuse, and investment needs to be made into sufficient infrastructure so that materials can be recycled onshore rather than shipped overseas. This will require collaboration between government and the private sector.
Finally, financing is a crucial factor in the transition to a circular economy. Evolving certifications provide certainty of outcomes, and banks are already offering lower finance options for more resilient and lower-carbon buildings. These products need to be extended to small and medium sized businesses.
What are the opportunities, and how should the sector get started?
Another driving force for circularity in construction is pollution mitigation and emission reduction. Approximately 20% of Aotearoa New Zealand's emissions are related to the building and construction sector, with half of them being embodied emissions. A more circular approach can significantly reduce these emissions. In fact, by 2025, New Zealand’s Building Code will require the inclusion of embodied emissions data, making circularity a standard practice.
Melissa MacEwen noted that “there's a clear case for enhancing domestic resilience by keeping tools and materials within Aotearoa New Zealand for recycling and refurbishment instead of shipping them overseas. 70% of our building products are currently either imported or contain imported components, making us vulnerable to price shocks such as those experienced during the COVID pandemic.” She added, “a greater circularity not only reduces reliance on international supply chains but also contributes to value creation and to capture the circular economy's value creation.”
The starting point for businesses should be awareness, as what can be measured can be managed. Businesses should do a thorough assessment of their current circularity and preparedness for the transition, against key performance indicators. This will inform the identification of opportunities to capture revenue such as how being more efficient about resource use through optimised design, and capturing and reusing materials can affect their bottom line in the short, medium and long term.
Several residential and commercial construction businesses inAotearoa New Zealand are already demonstrating impressive results in several aspects of circularity, showing not only that it can be done, but that it can have both environmental and economic benefits.
Andrew Jamieson reflected that “the dividends of embracing circular economy are clear, but the construction sector must go beyond siloed changes. Circular economy strategies must be integrated with existing sustainability strategies and the core business model. This may require changes in supply chains, revenue streams, and customer engagement strategies and is not an overnight fix. Encouragingly, some businesses in Aotearoa are starting to transition; we need to build this momentum to reap the positive benefits for business and the planet.”
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