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Written by Circotrade
The circular economy makes environmental sense. This is a commonly accepted fact. It is also a common fact that the construction industry extracts an unsustainable amount of primary resources and incurs far too much carbon and waste by pursuing a linear economy. Yet, current practice shows that the industry has difficulty embracing the necessary change.
Instead of looking for moral arguments to drive change and market perceptions towards the circular economy, Circotrade has set out to create the business case for the built environment. Circotrade has banked on driving change by addressing the inherent risks in the deconstruction and reuse of building materials on the one hand and by creating value and financial incentives on the other.
Risk is addressed and value is created through the development of a new tradable asset class using three interlinking steps to a capture buildings’ unrealised value. We do this by inventorying, gauging and trading a building’s components via an innovative “futures contract” and marketplace.
You can find out more about our business model in our Circular Building Coalition Blueprint paper: “Futures Trading – A way to scale up the reuse of building materials and decarbonize the built environment”
During phase two of the Blueprint project, we set out to prove our concept on a live project: an 80,400 sqft (7500 sqm) interior office space in Central London being refurbished by our client, a major UK REIT.
Over 200 categories of materials were inventoried, assigned a resale price and carbon value and listed on the Circotrade platform for trading.
More than 28% of materials inventoried were reused compared to the typical 1% of materials which are reused from a standard demolition project across the UK and Northern Europe.
A much higher reuse level was achieved here, also by carbon metrics, when benchmarked to standard industry practice: up to 30 % of the carbon equivalent of a standard office fit out was saved through reuse.
The large majority of recipients were situated in London thus supporting the local economy and avoiding carbon intensive transportation. With over a third of recipients in the charitable or community sector, the social benefits of this reuse project were also tangible.
Rich discussions and ‘lessons learned’ sessions with the client and project team lead to five lessons learned and three future challenges to shift reuse practices into the mainstream.
The main lessons learned were:
The challenges arising in this project serve to reinforce the principles of “futures trading” that Circotrade promotes, namely:
Forward planning and notably Circotrade’s “futures trading” allows to lock in costs, timelines and delivery logistics for both the seller and the buyer. This reduces risks on both sides, as well as the need for long term storage.
However, forward planning is a major change in the way services are typically procured in a demolition or strip out project. The pre-demolition auditor, as its name implies, is usually brought in just prior to demolition, either at the same time as the demolition contractor is appointed or even post appointment. This needs to change and Circotrade’s business proposition which encourages building owners to carry out a resource inventory, long before a building is slated for demolition or strip out, will support this change.
Even though the owner of a building usually has sufficient advance visibility of a tenant’s departure, another challenge arises in the timeline for early inventory; in many cases, the owner does not have access rights to the premises and almost never has the right to carry out invasive investigations. This situation delays the undertaking of the inventory process, can hinder its reliability and is detrimental to the optimal sourcing of buyers for the future materials.
In the current project, for example, it was not possible to carry out “invasive investigations” of a timber flooring which was visibly in very good condition and seemingly prime for reuse. Once access to the premises was obtained, and the clock was ticking on the removal timeline, the timber flooring turned out to be so heavily glued to the raised access floor, that both the timber flooring and the raised access floor were unrecoverable for reuse and went directly to waste streams. This represented ca 270 tonnes of material and 360 TeqCO2 which could not be saved.
To resolve these sorts of issues, we recommend that the owner contractually obtains access to the premises, by including an access clause, as a matter of course, in all leases and lease renewals. A campaign promoting the benefits of the circular economy to an owner’s tenants could also be leveraged to introduce additional clauses for access into the current lease contracts.
Additionally, if the owner had a copy of the Tenant’s fitout drawings, specifications and/or Operations and Maintenance (O&M) manuals (see point 3 below), this issue could have been discovered early enough to trial different removal techniques. Finally, creating a tenant fitout and base build guideline and specifications requiring “design for disassembly”, would promote best practice which would facilitate deconstruction in future projects.
Contractualisation of deconstruction specifications and clear roles and responsibilities during the project are key. The challenge is that in today’s market, most demolition companies prefer recycling and disposal over reuse, as these are much easier practices to integrate into the traditional ways of working and do not require skilled labour or special machines. The materials can be torn out and pulled down without regard to their integrity and roughly sorted. Upskilling of the work force and new methods of deconstruction need to be developed for reuse to function and that requires investment. This will only come if it is required by the contractor’s client.
As the Circotrade’s model sets out and facilitates for the building owner, the deconstruction works should be clearly specified by the client’s team in the RFP and put to the market in a competitive tender process to ensure that this requirement is baked into the works programme and costs upfront. There is nothing worse for a project budget and programme than having to add on deconstruction works mid-way through the process.
Known technical specification of materials, as well as the remediation and recertification of reused materials are required to enable them to be specified and designed into recipient projects at an early stage.
This, along with forward planning, are the essential conditions for reused materials to be adopted at scale. Known technical specification is also the condition to facilitate takeback schemes with the original manufacturers. The challenge is to obtain the technical specification of existing materials via as built drawings and O&M manuals, to complement what is visible on site. Unfortunately, these are not often available. Especially when stripping out a tenant’s CAT A and CAT B fitout. As was the case for this project, the building owner rarely has copies of these documents. In the future, our suggestion is for the owner to systematically require these documents when a tenant applies for a “licence to alter” the premises, and to pre-empt the need for these documents by requiring them at lease renewal.
One of Circotrade’s unique selling points is that we not only provide deconstruction specifications to include in the building owner’s demolition RFP’s but we also provide access to our network of remediation/remanufacturing partners and proactively engage them early on in the process. In this way, the building owner obtains optimal value when selling materials and products onwards and ensures that their product will be reused, creating environmental value for both the seller and the buyer.
You may be wondering why a building owner would jump through so many hoops to facilitate the reuse of their materials by others. The answer is in the business case.
When a material or product is put on the market at the time of demolition and in an “as is” condition, it oftentimes has difficulty finding a taker, especially at scale. To understand why, let’s look at the case of a large batch of lighting fixtures. Without any warrantees or known specification, the fixtures cannot be used by large commercial or residential projects. This would be too risky. The labour costs for installation are incompressible so it would be wasted money if the fixtures were to be installed and then fail in the short to medium term. The fixtures would also pose insurance risks, given their lack of appropriate compliance and resistance testing. Finally, the buyer/development team would have to store the light fixtures until they were ready to install them. The timeline between design and construction can range from several months to several years. No one wants to store items for that long!
Circotrade’s solution: at inventory stage, our lighting remanufacturer partner identifies which light fixtures are technically and financially feasible to remanufacture and provides a quotation for the deconstruction and remanufacturing work including a new 5-year warrantee and a few months of interim storage. The price for this scope of works is provided to the building owner.
A building owner would not want to invest in remanufacturing a large batch of lighting fixtures, only to have them sit in a warehouse until an alternative use or buyer is found. This is where “futures trading” comes in. With Circotrade, the seller signs a futures contract, agreeing the price and quantities ahead of time with the buyer. This allows the owner/seller to derisk their investment in deconstruction and remediation, with the certainty of their financial outcome at term. At the same time, the buyer is able to source the fixtures at design phase and to receive them when they are ready to install them, at a price fixed ahead of time.
With the quality, specification and warrantee of the remanufactured unit being the same or better than a factory issue fixture, and with additional sustainability credentials – being both low carbon and a reused product - the remanufactured fixture can command a price equivalent to or higher than a new fixture.
This pricing premium for reused products has already been seen on the market when it comes to reused and recertified structural steel sections and raised access flooring. As recertification and remanufacturing business models emerge, we will see more value-added activity in reused materials and the resale pricing for these products will grow alongside the rise in demand.
Don’t forget that with Net Zero targets needing to be met by many corporations, and increasing environmental regulation and guidance on the market in favour of the circular economy and decarbonisation, reuse will soon become the only viable option. This will increase the value of reused products and materials, as long as they have known technical specifications, are gainfully remediated, and warranted or recertified when appropriate.
The outcomes of this project in terms of carbon benefits, avoidance of waste and social benefits support the rationale of the circular economy being a force for good in more ways than one.
This office refurbishment project serves as a powerful case study, demonstrating the art of the possible in material reuse. The lessons learnt stated in this blog have the ability to support the growth and uptake of reuse and deconstruction practices for the industry at large.
If you are a building owner looking to unlock the value of your building’s materials or a developer or contractor wanting to leverage the reuse of building materials and products in your projects, take action now and reach out to us at Circotrade.com to see how we can help!
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