Circular economy: How ‘lighthouses’ in the built environment can drive value

For the first time in history, COP28 recognized the Circular Economy as a solution to tackle climate change in its global stocktake. Particularly in the built environment, which accounts for about 26% of global CO2 emissions, there is an opportunity to transition from the current linear to a more sustainable circular approach. However, even though a circular built environment could not only reduce greenhouse gas (GHG) emissions, but also unlock substantial business opportunities, the circular transition is missing pace and scale.

The World Economic Forum and McKinsey & Company have led an initiative to to find Circularity Lighthouses. An independent expert panel has awarded the first three of these lighthouses, which are industry-leading solutions to enable the shift towards circularity and serve as aspirational models that can inspire others to follow suit.

“Our analysis shows that circularity in the built environment is a critical pathway towards reducing carbon emissions and creating value,” says Fernando Gomez, Head, Resource Systems and Resilience, at the World Economic Forum and co-author of the recent white paper on Circularity in the Built Environment.

The white paper shows that circularity could abate 75% of embodied emissions from the built environment while creating significant economic value focusing on the six key building materials: cement and concrete, steel, aluminium, plastics, glass and gypsum. Circular loops have the potential to abate up to 4 gigatons of CO2 in 2050. In addition, circularity presents substantial economic advantages, with the potential to yield an annual net profit gain of approximately $235-360 billion by 2050. "To seize this opportunity, organizations will need to completely reinvent their business models and create new forms of partnerships," says Fleming Voetmann, Vice-President, External Relations and Sustainability at Velux and member of the circularity lighthouse expert panel.

To enable this transition, circularity loops are based on the aspects of recirculation of materials and minerals, renewable and recovered energy, and reducing emissions through carbon capture and storage (CCS) and carbon capture and utilization (CCU). To operationalize and scale this approach, a circular built environment employs resource loops, the flow of resources throughout the value chain, across three key dimensions: resource recirculation, resource efficiency and resource utilization.

The new designation of “Circularity Lighthouses in the Built Environment” recognizes pioneering solutions which demonstrate a novel, distinctive circularity approach, proven substantial impact and value, and the maturity of scaling significantly beyond pilots. Three Circularity Lighthouses emerged from an initial list of some 200 candidates and were selected by an independent panel of experts from industry, academia and public life.

i. The end-to-end circularity solution headed by Schneider Electric, a digital automation and energy management company, serves as an inspiration of how operations can be set up in a circular approach end-to-end. Deploying circularity across the board, through eco-design, waste-to-resources sites and a global network of refurbishment centers, the solution has avoided approximately 513 million tons of CO2 to customers since 2018 and uses 27% green material content across products. Peter Herweck, CEO at Schneider Electric, believes that best practice sharing of circularity pioneers is essential to speed up the circularity transformation. “There are compelling sustainability and commercial benefits to developing circular business models, but many don’t know where to start or the best path forward – the network provides a platform to learn and to share what we’ve learnt and accelerate action.”

ii. A global recycling platform launched and operated by buildings solutions provider Holcim, demonstrates how construction and demolition materials can be reintegrated into construction. This circular approach allows for these materials to be recycled or upcycled into the likes of cement, concrete and aggregates. Enabling the recycling and upcycling of up to 100% of construction and demolition materials (CDM), the platform recycled some 7 million tons of CDM in 2022 (approx. 1-2% of the total volume of CDM in Europe). As a result, this solution enables novel product offerings such as 100%-recycled content clinker or low-carbon cement with 30-100% less CO2. On receiving the lighthouse award, Jan Jenisch, the CEO and Chairman of Holcim, said: “We are excited to be part of the Circularity Lighthouse initiative. With our world’s growing population and urbanization, the deployment of circular construction solutions is essential and there is significant potential to accelerate collaboration among circularity thought leaders to scale up our impact.”

iii. A circular supply chain for the global production of carpet tiles by Interface demonstrates how an increasingly circular approach can be implemented at scale in a commodity market. Interface, a global manufacturer of commercial flooring, the company behind the solution, assembled cross-industry partnerships for circular raw materials and a take-back system, reaching an industry-leading >65% recycled content across the portfolio combined with halving the CO2 impact per square metres against an industry benchmark. Laurel Hurd, CEO and President of Interface, is excited to join the Lighthouse community: “The Lighthouse network provides Interface with an ideal platform for continuing our contributions to the circular economy movement. By sharing the learnings from our decades-long sustainability journey, we aim to inspire others to join our pursuit of a more circular built environment!”

Guy Grainger, Head of Sustainability Services and ESG at JLL and member of the expert panel, reflects on Holcim’s solution: “Cement has one of the biggest carbon impacts so if we can create a marketplace for reused and recycled cement, then this would be a gamechanger for development everywhere.”

On the lighthouse initiative specifically, another member of the expert panel, Sean Quinn, Principal and Global Regenerative Design Director at HOK, added: “We need more lighthouse solutions which demonstrate improvements in circularity offerings across broader ecosystems achieving nature positive impact. We seek solutions that creatively eliminate waste, innovate beyond typical virgin material use, as well as methodologies that are based on biologically based systems.”

To promote industry-wide changes toward more circularity, the community around the first Circularity Lighthouses will continue to build a network of industry-shaping solutions. This initiative will broaden insights from the industry and unlock learning opportunities for the successful transformation towards a circular economy.

In conclusion, Sebastian Reiter, a Partner at McKinsey and co-author of the circularity study, says: “Our analysis of the construction sector shows an extraordinary potential for circularity. Nevertheless, there are very few solutions in the market that address this issue at scale yet, making it all the more essential that the industry comes together to make scalable solutions visible, and ensure the required funding and collaborative ecosystem to enable their adoption and growth. Only in this way can we accelerate the circular transition in the built environment and inspire companies to proactively drive change.”

Join us now on the path to accelerating circularity in the built environment!