IncollaborationwithMcKinsey&CompanyCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunitiesWHITEPAPERDECEMBER2023Images:GettyImages,UnsplashContentsForeword3Executivesummary4Introduction51Transformingtheresourceloopsinthebuiltenvironment61.1Resourcerecirculation81.2Resourceefficiencies91.3Resourceutilization92Buildingwithcircularmaterials102.1Concreteandcement132.2Constructionsteel152.3Constructionaluminium172.4Constructionplastics192.5Flatglass212.6Gypsum23Conclusion:Drivingthecircularitytransitioninthebuiltenvironment25Appendix:Modellingassumptionsandresultscalculation26Contributors27Endnotes28DisclaimerThisdocumentispublishedbytheWorldEconomicForumasacontributiontoaproject,insightareaorinteraction.Thefindings,interpretationsandconclusionsexpressedhereinarearesultofacollaborativeprocessfacilitatedandendorsedbytheWorldEconomicForumbutwhoseresultsdonotnecessarilyrepresenttheviewsoftheWorldEconomicForum,northeentiretyofitsMembers,Partnersorotherstakeholders.©2023WorldEconomicForum.Allrightsreserved.Nopartofthispublicationmaybereproducedortransmittedinanyformorbyanymeans,includingphotocopyingandrecording,orbyanyinformationstorageandretrievalsystem.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities2December2023CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunitiesForewordJukkaMaksimainenSeniorPartner,FernandoGomezMcKinsey&CompanyHead,ResourceSystemsandResilience-CentreforNatureandClimate,MemberoftheExecutiveCommittee,WorldEconomicForumSebastianReiterJörgenSandströmPartner,Head,TransformingIndustrialMcKinsey&CompanyEcosystems-CentreforEnergyandMaterials,WorldEconomicForumAmultitudeofcomplexglobalchallenges,McKinsey,embarksonacomprehensiveexplorationincludinghealthcrises,geopoliticalconflictsandofcircularity’spotentialtorevolutionizethebuilteconomicdifficulties,haveinspiredthenarrativeenvironmentandcreateasustainableandresilientthattheworldhasentereda“newnormal”,wherefuture.Throughcarefulanalysisofvaluepoolsandorganizationsmustdealwithcrisesandfocusabatementpotential,ourresearchservesasacallonresiliencebydefault.Throughoutthisshiftingtoaction,revealingbothenvironmentalgainsandnormality,whathasnotchangedistheurgentsignificanteconomicrewards.Here,weshareapathneedtotackleoneofthemostprevalentissuestowardsamoresustainableindustrythatcanabateofthecentury:combatingclimatechangeanditsCO2emissionswhileunlockingeconomicvalue.profoundimpactontheworld.AstheindustrybeginsthistransformativejourneyThebuiltenvironmentholdsimmensepotentialfortowardsacircularbuiltenvironment,itiscrucialpositivechange.Buildingsandconstructionaccounttorecognizethepivotalroleoflighthouses,forabout26%ofglobalgreenhousegasemissions,whichofferbreakthroughcircularitysolutionsthatprimarilyduetotheirsubstantialconsumptiondemonstrateenvironmentalimpact,scalabilityandofenergyandmaterials.However,thereisanfinancialviability.Thesepioneersbringtogetheropportunitytotransitionfromcurrentconsumptionindustryleaderstoactivelydriveandacceleratetheandproductionpatternstoamoresustainabletransitiontowardscircularity,servingasbeaconscircularapproach.Byreimaginingdesignprocesses,ofinspirationandshowcasingproactiveadoptionembracingcutting-edgetechnologiesandexploringofcircularpractices.Byembracingcircularity,innovativebusinessmodels,industryplayerscantheynotonlysafeguardtheplanetbutalsounlockunlockgreatervaluefromexistingassets,conservesustainableprosperity.crucialresourcesandreducewaste.TheurgencyofmakingthisshifttowardsgreatercircularitycannotWethankallcommunitymembersandForumbeoverstated;eachpassingdaywithoutactioninitiativeleadersfortheirdedicationandinvaluableexacerbatesthechallengeshumanityfaces.inputtowardsthisreport.WetrustitwilloffervaluableguidanceandperspectivestoleadersThiswhitepaperbytheWorldEconomicForum’sinboththepublicandprivatesectorsasweCentreforNatureandClimateandtheCentrecollaborativelychartthecourseforthebuiltforEnergyandMaterials,incollaborationwithenvironment’sfuture.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities3ExecutivesummaryCircularitycouldabate75%ofembodiedemissionsfromthebuiltenvironmentwhilecreatingsignificanteconomicvalue.Thiswhitepaperquantifiesthepotentialforcarbon2.Constructionsteel:Steelisalreadyhighlydioxide(CO2)abatementandpotentialnetvaluerecyclable,andthetransitiontoelectricarcgainacrossninecircularityloopsforsixkeybuildingfurnace(EAF)steelproductionandincreasedmaterials:cementandconcrete,steel,aluminium,scrapcollectionholdpromise.Thesemeasuresplastics,glassandgypsum.Thecircularityloopsarecanavoidupto60%oftotalCO2emissionsassessedthroughthreedimensions:recirculationoffromsteelby2050.materialsandminerals,renewableandrecoveredenergyandreducingemissionsthroughcarbon3.Constructionaluminium:Opportunitiesforcaptureandstorage(CCS)andcarboncapturecircularitylieindesigningforreuse,increasingandutilization(CCU).recycledmaterialuseandadoptingalternativefuels.ThesemeasurescanleadtoareductionTheresultsshowthatcircularloopscouldabateinaluminium-relatedCO2emissionsofupto0.5to0.8gigatonnesofCO2(GtCO2)in2030and89%by2050.between3.4and4.0GtCO2in2050.Thisaccountsfor13%ofthebuiltenvironment’sembodiedcarbon4.Constructionplastics:Introducingcircularityemissionsin2030butapproaches75%in2050.levers,suchasdesigningforreuseandIn2030,recirculationofmaterialsandmineralsandmodularity,increasingregrindplastics,andCCS/CCUareeachexpectedtocontributearoundusingalternativefuels,candecreaseCO240%oftotalabatement,withCCS/CCUincreasingemissionsfromplasticsbyupto62%by2050.itscontributiontomorethan50%by2050.Circularitymorebroadlyalsopresentssubstantialeconomic5.Flatglass:Practicessuchasdesigningforadvantages,withthepotentialtoyieldanannualnetreuseandmodularityandincreasingculletuseprofitgainof$31-46billionby2030and$234-360canabateupto41%ofCO2emissionsfrombillionby2050.Therecirculationofmaterialsandglassby2050.mineralsmakesupthegreatmajorityofpotentialnetvaluegainbothfor2030and2050.6.Gypsumwallboards:Recycling,downcyclingandusingrenewableenergyintheproductionEachbuildingmaterialinvestigatedcanbemadeprocesscanyieldsignificantvaluegainsandmorecircularthroughspecificstrategies:CO2emissionabatementfromgypsumofupto31%by2050.1.Concreteandcement:Concreteandcementcontribute30%ofbuildingmaterials-relatedInthistransformativejourney,lighthouseswillplayCO2emissions.Circularstrategiessuchasapivotalrole.Lighthousescatalysecollaboration,mineralizationtechnologiesandsmartcrushedadvancecircularthinkinganddisseminatedigitalaggregatesoffersubstantialvaluegains,aswelltechnologies.Theirindustry-leadingsolutionsinasthepotentialtoabate96%ofembodiedCO2thebuiltenvironmentareactivelypropellingtheemissionsfromcementby2050.shifttowardscircularityandsettingtheexampleforothers.Thebuiltenvironmentmusttakeaction,inpartbyrecognizingandhighlightingtheseleadinglighthousestothewiderecosystem.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities4IntroductionAcircularbuiltenvironmentrespondstoanurgentneedandcreateswide-rangingopportunityforindustryplayers.ThebuiltenvironmentisacrucialcomponentofdailybusinessvalueandreduceCO2emissions.Whilelife,providingessentialservicesthatimpacteverythisindustryhassignificantenvironmentalimpactsaspectofexistence,fromhousingtotransport.Inacrossvariousdimensionssuchaspollution,landfact,90%ofindividuals’timeisspentinsidebuildings,usechangeorbiodiversityloss,thiswhitepaperinfrastructureandurbanecosystems.1Thisecosystemspecificallyaddressesthepotentialforemissionsaccountsfor13%oftheworld’sgrossdomesticabatementtoensureathoroughquantitativeandproduct(GDP)andemploys7%oftheworking-agequalitativeanalysis.Theoverallpurposeisthreefold:population.2Atthesametime,thebuiltenvironmentfirst,toillustratehowcircularitycancontributetotheisasignificantcontributortothetransgressionofdecarbonizationofthesector;second,toquantifyplanetaryboundaries,thresholdsforkeyenvironmentalboththeabatementpotentialandbusinessvalueindicatorssuchasclimatechangeandlandsystempoolsacrosskeymaterials;third,todescribewhatchange.Thebuiltenvironmentcontributesone-thirdisneededtocapturethispotential.Thiswhitepaperofmaterialconsumptionandwastegeneration3andisalsoacalltoactiontoidentifylighthousesforapproximately37%offuel-relatedcarbondioxidecircularityinthebuiltenvironmentasamethodto(CO2)emissionsfromhumans.4Aroundone-thirdofdemonstrateenvironmentalimpact,financialviabilityemissionsfromnewbuildingscomefromembodiedandscalability.sources,meaningfrommaterialproductionandconstruction,andtwo-thirdsfromoperationalsources.5ThequantificationofvaluepoolsandabatementAsthepopulationgrowsandurbanizationaccelerates,potentialisperformedacrossninecircularityloops30billionsquaremetresofnewbuildingswillneedforsixbuildingmaterials,whichlargelycontributetobeconstructedinthenext40years,6equivalenttothebuiltenvironment’sresourceconsumptiontoaddingabuildingthesizeofNewYorkCityeveryandcarbonemissions:cementandconcrete,steel,40days.Mostofthisgrowthwilloccurinresidentialaluminium,plastics,glassandgypsum.Thecircularityconstructioninemergingmarkets,includingAfrica,theloopsareincorporatedintoaframeworkexploringMiddleEastandEastandSouthAsia.7Overall,75%circularityacrossthreelevers:resourcerecirculation,oftheinfrastructureneededby2050stillneedstoberesourceefficiencyandresourceutilization,andbuilt.8Thus,creatingasustainableandresilientbuiltconsideringtheimpactdimensionsofmaterialsenvironmentiscrucialforpeople’swell-beingandtoandminerals,renewableandrecoveredenergyandstaywithinsafeplanetarylimits.reducingemissionsthroughcarboncapture.TheimpactshavebeenquantifiedthroughagranularTransitioningfromalineartoacirculareconomyaimsmodellingapproach,exploringglobalmaterialflowstodecoupleeconomicgrowthfromenvironmentalandtheimplementationofcircularloopsatthedepletion.Inacircularecosystem,virgin-resourcerespectivebuildingmateriallevelandacrossdifferentinputsandend-of-lifewasteareminimized,andvaluestagesofthebuildingandconstructionvaluechain.iscreatedwithoutexhaustinglimitedresources.Acrossallindustries,newsourcesofeconomicgrowthareWithinthiswhitepaper,“thebuiltenvironmentestimatedat$4.5trillioninadditionalglobaleconomicecosystem”referstorealestateandinfrastructure.outputby2030.9Simultaneously,circularleversIttouchesallaspectsofhumanlife,fromhomescontributesignificantlytoreducingCO2emissions.andofficestofactoriesandhighways.Itsvaluechainencompassesavarietyofstakeholders,Thiswhitepapershowcasesthepotentialforcircularityrangingfromdevelopersandinvestorstowaste-inthebuiltenvironmenttosimultaneouslycreatehandlingcompanies.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities51TransformingtheresourceloopsinthebuiltenvironmentTruecircularitycapturesnewpotentialvalueacrossavarietyofflowsandresources.TransitioningfromlineartocircularsystemsVariouscircularityloopsenablethosethreerevealsnewopportunitiestocreatevalue,drivendimensions(seeFigure1).Increasedmaterialbycostimprovementsthroughefficientresourcerecirculationcomprisesthereuseorremanufacturinguseandnewbusinessmodels.Acircularbuiltofbuildingcomponentsorhigh-valuerecyclingenvironmentemploysresourceloops,theflowofofmaterialinthesameoradjacentvaluechains.resourcesthroughoutthevaluechain,acrossthreeToenhanceresourceefficiency,wasteiseliminatedkeydimensions:resourcerecirculation,resourcebyvalorizingitasasecondaryrawmaterial,asefficiency,andresourceutilization.Theaimistowellasbyoptimizingresourceconsumptiontomaximizetherecirculationofresourcesattheirmanufactureabuildingmaterialorreduceproducthighestvaluetoeliminatewaste,increaseefficiencyuseperbuilding.Toprolongaresource’susefullifeandreducetheneedfornewbuildings.andmaximizeitsuse,spacesandexistingbuildingscanbeshared,reusedorevenrepurposed,renovatedorrefurbishedtoextendtheirlifespan.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities6FIGURE1NinecircularityloopsacrossthreedimensionsinthebuiltenvironmentOthervaluechainsRemovecarbonRenewableand2aDesigningandplanning1eReduceandsubstituteRecyclesecondaryrawmaterials3bwithCCSrecoveredenergyuseofvirginmaterial1dfromotherindustriesConstructionmaterials3aRecyclecarbonwithCCUandpartsmanufacturingRecyclepre-consumerCarboncuringandenhancedsecondaryrawmaterialfromrecarbonation/mineralization1bmaterialmanufacturingprocessesNaturalrecarbonationConstructing1cOperatingandusingRecycleUpgradingDeconstructionIncreaseuseofbuildingpost-consumerandinfrastructure1asecondaryraw1fmaterialRepairandextendingbuildinglifetimeRemanufacturemodulesorcomponents1a1fReuseorrepurposewholemodulesandcomponentsWastehandlingRecycletootherbuilding1dcomponentsorothervaluechains(downcycle)MaterialsandmineralsEnergyCO2Source:McKinseySustainabilityPractice,EllenMacArthurFoundationCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities71.1ResourcerecirculationAcrossconstructionmaterials,therearemanyandmainlyimportantinareaswithhighavailabilityoptionstouserecycledconstructionanddemolitionofwastematerialandbiomasssupply,suchaswaste(CDW)asasubstituteforvirginrawmaterialsheatedanddriedsugar,energycaneorpyrolysedduringproduction.CrushedCDWcanalsobeeucalyptus.Thislevercouldunlockavaluepoolofdirectlyreusedinconstruction,eitherascrushed$6-7billionby2030andapproximately$43billionbyconcreteforroadconstructionorasarawmaterialin2050whileenablingtheabatementofapproximatelyothervaluechains,suchaslower-qualityglasscullet0.1-0.2GtCO2by2030and0.4GtCO2by2050.intheproductionofcontainerglassandfibreglass.TherecirculationofCO2fromtheprocessingandFigure2displaysanoverviewofpotentialnetvalueproductionofconstructionmaterialspertainstogainandCO2emissionsavingsalongthethreecapturingCO2emissionsandreintroducingthemdifferentdimensionsby2030and2050.Overall,backintothevaluechainwithcarboncapturetheannualnetvalueimpactofrecirculatingmaterialsandutilization(CCU),includingcarboncuringandandmineralsisestimatedat$31-48billionandenhancedre-carbonation,mineralizationand$184-310billionby2030and2050.Thenetimpactnaturalre-carbonation.Itcanalsorefertoremovingofreusingandremanufacturingisestimatedatemissionsfromthevaluechainaltogetherviacarbon$6-13billionand$45-96billion(2030,2050),captureandstorage(CCS).CO2-offtaketechnologieswhereasthatofrecyclingmaterialsandmineralswilllikelybeimplementedfirstinregionswithrapid(includingdowncycling)isestimatedatahighervaluegrowthincarbonpricingmechanisms,suchasof$25-35billionand$138-214billion,respectively,inEuropeorNorthAmericaandwithinCCUhubs,2030and2050.Theabatementpotentialforthesewherehigh-emittingindustriessuchassteelleversamountsto0.02-0.04and0.1-0.2gigatonnesandcementareclustered.RemovingemissionsofCO2(GtCO2)forreuseandremanufacturingandwithCCSorrecyclingemissionswithCCUwouldapproximately0.2and1-1.3GtCO2forrecycling,abatearound1.9-2.1GtCO2in2050whilealsoin2030and2050,respectively.generating$7billionintermsofvaluegain.By2030,thesewouldhavealreadycontributedtotheEnergyfromrecirculatedresourcescomprisesabatementof0.2-0.3GtCO2.However,duetothetheuseofalternativefuelsfromwastematerialsinitialinvestmentandupfrontcosts,aninitiallossofandbiomass.Thisleverisregionallydependent$6-9billionwouldbeincurredin2030.FIGURE2Netvaluegainandcarbonabatementpotentialofcircularleversfortherecirculationofmaterialsandminerals,energyandembodiedemission(CO2)(2030,2050)Netcarbonabatementpotential,Netvaluegain,inGtCO2in$billionsRecirculation~0.2-0.3~1.1-1.5~31-48~184-310ofmaterialsandmineralsRecirculation~0.1-0.2~0.4~6-7~43ofenergyRecirculation~0.2-0.3~1.9-2.0~-6--9~7ofCO2Total~0.5-0.8~3.4-4.0~31-46~~223344--3366002030potential2050potentialSource:McKinseyanalysisandcalculationsbasedonexpertassessmentandpressresearch/technologyreportsCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities81.2ResourceefficienciesEfficiencyaimsatdoingmorewithfewerresources,performoptimallywithminimalinput.Thisnotonlywhichultimatelyreduceswastethroughouttheentireleadstoasubstantialreductionintheenvironmentalprocess.Thisinvolvesreusingmaterialsstrategicallyfootprintassociatedwithconstructionbutalsoandlimitingtheneedfornewresources.Furthermore,contributestoamoreefficientuseofresourcesinbyfine-tuningresourceconsumptionintheproductionthelongterm.process,theoverallvolumeofmaterialrequiredperbuildingcanbesignificantlyreduced.10Theintegrationofsuchefficiency-enhancingpracticesintotheconstructionindustryalignsAprimeexampleofthisprincipleistheoptimizationwiththeprinciplesoutlinedinthecirculareconomyofbuildingmodules.Throughdesignandengineering,framework.Itencouragesaparadigmshiftfromitbecomespossibletousefewerresourceswhilealinear,“take-make-dispose”modeltoacircularmaintainingorevenenhancingstructuralintegrity.one,whereresourcesareconservedandperpetuallyThisisachievedthroughapproachesthatmaximizecycledthroughthesystem.theinherentstrengthofmaterials,ensuringthatthey1.3ResourceutilizationTheutilizationdimensionaimstoincreasetheleasingarrangementsandproductdistribution“asanumberoftimesordurationagivenproductorservice”intensifytheuseofbuildingsorcomponents.modulecanbeused.Thereby,theusedvalueofThesemodelspromoteefficiencyinresourcearesourcecanbeimproved,anditsfootprintcanallocationandutilization,contributingsignificantlytobereduced.Toprolongaresource’susefullifeandthereductionofenvironmentalburdensassociatedmaximizeitsuse,spacescanbeshared,enabledbywithconstructionactivities.adaptableandinterchangeablebuildingcomponents.ProactivemaintenancestrategiesarecrucialinEmbracingthisparadigmshiftinconstructionpracticesprolongingtheusefullifeofbuildingcomponents.11.bringsavarietyofbenefits.ItextendsthelifespanofRepairandrefurbishmentinterventionsmitigateresources,maximizingtheirpotentialandreducingtheprematuredisposalofmaterialsandproducts,needforcontinuousreplacementorreplication.reinforcingthecircularityoftheconstructionprocess.Throughsuchmeasures,theindustryInnovativebusinessmodelsfurtheraugmentthecansignificantlydiminishtheenvironmentalimpactoftheutilizationdimension.Resourcesharing,impactassociatedwithconstruction.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities92BuildingwithcircularmaterialsInthebuiltenvironmentvaluechain,differentmaterialswillrequiredifferentcircularityloopsandlevers.Thevalueandabatementpotentialofimplementing(2030)orrelativelylownetvaluegains(2050)duetocircularityacrossthethreedimensionsforthesixthesignificantinvestmentsrequired,theycontributeabuildingmaterialsareoutlinedinFigure3.Itdisplaysvastamountofabatementpotentialin2030andthethemodellednetvaluegainontheleftsideandmajorityoftotalabatementin2050.Inthefollowingtheabatementpotentialontheright.Forbothsection,adetailedanalysisisconductedonallsixdimensions,thepotentialsfor2030and2050arematerialsdisplayedinthefigure.Itcoversrelevantdisplayedontheupperandlowerpartofthefigure,circularloops,correspondingvaluepoolsandrespectively.Fornetvaluegain,leversconcerningabatementpotentialsfor2030and2050,aswellastherecirculationofmineralsandmaterials,especiallyexemplarycasestudiesforselectedmaterialsthatrecycling,contributethelargestvaluesbothin2030illustratestrategicoptionsavailabletoplayersintheand2050.WhileCCUandCCSleversyieldnegativefieldtocapturethosepotentials.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities10FIGURE3OverviewofnetCO2abatementpotentialandnetvaluegainofcircularityleversperdimension,inMtCO2,in2030and2050Overviewnetvaluegainofcircularityleversperdimension,$billionsLeversCementSteelAluminiumPlasticGlassGypsumTotalandconcrete~4~6-17~0-1~3-10~1-6~6-36~0-1~3-6~6-13~45-96Recirculation1aReuseand~1~27~24-34~135-211ofmaterialsremanufacture~1~4-3andminerals~5~43-44Recycle(pre-~9~61~5~27-36~4-6~16-31~4-12~21-65~2-1~7-14~0-1~3-4~-1~71b-candpost-~-6--8~0consumer)~29-44~234-3611dDowncyle~0~01~4-3~0~0RecirculationRenewable~2~27~0~1-0~1~2~11~0~2~0~1-2ofenergy2aandrecovered~0~0RecirculationenergyofCO23aCCU~-1~73bCCS~-1~0~-5--7~0~0~0~0~0~0Total~10~122~4-2~34-53~5-8~20-42~7-20~38-112~3~16-25~0-1~4-62030potential2050potentialSource:McKinseyanalysisandcalculationsbasedonexpertassessmentandpressresearch/technologyreportsSource:McKinseyanalysisandcalculationsbasedonexpertassessmentandpressresearch/technologyreportsCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities11FIGURE3OverviewofnetCO2abatementpotentialandnetvaluegainofcircularityleversperdimension,inMtCO2,in2030and2050(continued)OverviewnetCO2abatementpotentialofcircularityleversperdimension,MtCO2LeversCementSteelAluminiumPlasticGlassGypsumTotalandconcrete~20~30-80~1-2~6-9~20-40~100-220Recirculation1aReuseand~40~0-10~20-60~2-7~6-33ofmaterialsremanufactureandmineralsRecycle(pre-~30~560~120-130~320-440~50-70~90-160~5-12~34-83~2-1~8-23~2-3~4-5~210-250~1,020-1,2701b-candpost-consumer)1dDowncyle~0~0~0~0-2~8--1~0~0~0-2~10-0RecirculationRenewable~30~240~10~10-0~50-100~110~5~17~4~16~3-6~9-17~100-160~380-400ofenergy2aandrecovered~2~9-5RecirculationenergyofCO23aCCU~80~660~80~6603bCCS~20~940~103-160~240-450~1~4-0~4~16~130-190~1,200-1,400Total~160~2440~250-320~600-970~2~01-0402-180~220-330~16-28~73-149~9-11~47-52~5-9~143-6-22~540-720~3,400-4,0002030potential2050potentialSource:McKinseyanalysisandcalculationsbasedonexpertassessmentandpressresearch/technologyreportsSource:McKinseyanalysisandcalculationsbasedonexpertassessmentandpressresearch/technologyreportsCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities122.1ConcreteandcementCircularityCementisthelargestemitterinthebuiltenvironment,includetheenhancedrecarbonationofconnectingincementhascontributing30%ofbuildingmaterials-relateddevicesandworkspacesandthemineralizationofthepotentialtoand7%ofglobalCO2emissions.12Thissectorisaggregatesfromconcretewasteorotherwastecreatethehighestparticularlydifficulttodecarbonizeduetothehighmaterials.CCSandofftakeopportunitiesoffervaluepoolacrossamountofenergyrequiredforcementproductionadditionalabatementpotential.Retrofittingcementmaterials,withanandthehighlevelsofCO2emittedduringextraction,plantswithCCUandCCStechnologieswillleadestimatednetvalueprocessingandmanufacturing.Itfacesseveraltoatotalabatementpotentialof0.08and0.02Gtgainof$10billionexternalities,suchascarbonprices13andlandfilltaxes,CO2,respectively,in2030,furtherincreasingto0.66in2030and$122whichwilllikelyincreaseinthefuture.Circularityinand0.9GtCO2by2050.Whiletheannualnetvaluebillionin2050.cementhasthepotentialtocreatethehighestvalueimpactofrecirculatingcarboninthecementandpoolacrossmaterials,withanestimatednetvalueconcretevaluechainisestimatedatalossof$1.5gainof$10billionin2030and$122billionin2050.billionin2030,givenhighupfrontcosts,apositiveTheserepresent2%and28%oftheestimatedgainof$7billionwouldbeachievedby2050.marketsize,respectively.14TheprimaryvaluegainforcircularityincementandconcretewillbethroughRecirculatingenergydisplaysapotentialtocreateamineralizationtechnologiesandsmartcrushednetvaluegainofapproximately$2billionby2030,aggregates,withapotentialgainofmorethan$68reaching$27billionby2050.Thiswouldcontributebillion.Concretewastecanalsoberecycledandtotheabatementof0.03and0.2GtCO2in2030usedasanaggregateinconcreteproduction,asaand2050,respectively.Consideringthegenerationreplacementforclinkerasarawmaterial.ofenergybasedonalternativefuelsfromwasteandbiomass,itisimportanttonotethatthereareTheselectedcircularityloopsoverallcanabateregionaldifferences,andtheprocessisdependent0.2and2.4GtCO2emissionsby2030and2050,onareaswithsufficientsupplyofwastematerials,representinganabatementopportunityof6%andsuchasinLatinAmericaandRussia.15Eachof96%oftotalemissions,respectively.Carboncuring,thesetechnologiesareatdifferentlevelsofmaturityenhancedrecarbonationandmineralizationcanandsubsequentlyhaveadifferentimpactpotential.significantlyhelprecirculateCO2.KeytechnologiesCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities13FIGURE4CircularityloopsalongthecementandconcretevaluechainRecoveredenergyfromOthervaluechainsRawClinkersubstitutesAlternativebinderswaste/alternativefuelsRawmaterialsmaterial,(SCM)fromwaste,(e.g.cementbasedClinkerproductione.g.frome.g.blastfurnaceonmagnesium)RenewablemineralslagandflyashenergywasteandRecycledaggregatesCarbonuseforgrowingashesoffromotherindustriesofalgaeasbiomassEnergyfossilfuels(e.g.bricks,ceramics)efficiencyWaterCCUSandCementproductioncarbonoff-takeforRecycledotherrawpurposes/industriesmaterialsConcretecuringConcreteproductionConstructionofbuildingsRecycledClinkersandandsubstituteUsephaseReduce,reuse,Reuseofaggregatesfromrepurposemodules(crushedrecycling,concrete)e.g.recycledconcretepaste(RCP)andfinesfromcrushingEnhancedBackfillLandfillDemolitionofbuildingsrecarbonationandcollectionRecarbonationRecyclingofconstructionanddemolitionwaste(CDW)MaterialsandmineralsEnergyCO2Recycledasphaltshingles(RAS),e.g.forroadbasisSource:McKinsey&Company,Thecircularcementvaluechain:Sustainableandprofitable,2023,https://www.mckinsey.com/industries/engineering-construction-and-building-materials/our-insights/the-circular-cement-value-chain-sustainable-and-profitable.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities14Toshowhowindustryplayersarestartingtocasestudiesusingpubliclyavailableinformationcaptureabatementpotentialandvaluepools,shorthavebeencreatedforselectedmaterials.CASESTUDY1ConcreteandcementAplayerintheconstructionmaterialsindustrythesematerials,offeringanend-to-endcircularhasstartedtoharnessthepotentialofcircularityeconomysolutionencompassingwasteincement,concreteandaggregatesthroughcollection,transport,processingandtheitstechnologyplatform.Byestablishingrobustproductionanddistributionofrecycledmaterials.operationalproceduresandaccompanyingTheventureboastsawidearrayofapplicationstechnologyforthelarge-scalerecyclingandforreusingwastematerials,resultingin10-repurposingofconstructionanddemolition100%recycledcontentincement,concretewaste,thecompanyhasstrategicallypositionedandaggregates,alongwiththerecyclingitselfasaproviderofcircularmaterialswithintheofapproximately6-8milliontonnes(Mt)ofsector.Thiswaspossiblethroughadedicatedconstructionanddemolitionmaterialsannually.setupforprocessing,grindingandrecycling2.2ConstructionsteelSteelisalreadyhighlycircular,especiallyindevelopedSomeleversthatarealreadywidelyimplementedcountries,where70-80%ofscrapfromconstructioncanbeintensified.EnergycanberecirculatedinsteelproductsisrecycledandreusedinsteelsteelmanufacturingthroughEAFsteelplantswithproduction.16Additionalpotentialcanbecapturedviarenewableorgreenhydrogenenergysourcesviatransitioningsteelproductiontoelectricarcfurnacedirectreducediron(DRI).Steelscrapcanalsobe(EAF)andincreasedcollectionanduseofscrap.recycledandremeltedasrawmaterialtoproduceOverall,increasedcircularitycanavoidanadditionalconstructionEAFsteelproducts.Increasingthe0.2-0.3GtCO2by2030,or18-22%oftotalCO2collectionandupgradingofsteelscraptoenableemissions.Thispotentialincreasesto0.6-1GtCO2byEAFsteelproductionisthemostsignificantleverto2050,representing37-60%oftotalCO2emissions.17increasecircularity.Recyclingbeyondbusiness-as-Circularityleversforsteelcancreateanadditionalusual(BAU)hasthepotentialtogenerate$27-36valuegainof$2-4billionby2030(1%ofthetotalbillionby2050,whilecontributingtotheabatementestimatedmarket),increasingto$34-53billionbyof0.3-0.4GtCO2emissions.Strategicallysecuring2050(9%ofthecurrentmarketsize18).accesstomoreandbetterscrap,whetherbyverticalintegrationofsteelproducersandrecyclersorclosed-Reusingorrepurposingwholeconstructionsteellooppartnershipsbetweensteelproducersandsteelcomponentsiscurrentlyonlydoneatasmallscaleconsumers,willbecomeincreasinglyimportant.Usingbuthasthepotentialtobeexpanded.Designforalternativeenergysourcesorfuels,likebiomass,modularityanddisassemblyarecrucialtoenableinthefuelmixwillalsocontributetoapproximatelyreuse.Steelbeamscaneitherbedirectlyreused$0.1-0.5billionvaluegainandarelativelylowerinneworrefurbishedbuildingsorcutintorequiredabatementataround0.01GtCO2by2050.lengthsandrerolledintoothersteelproducts.TheselevershavethepotentialtogenerateFinally,therecirculationofCO2viaCCStechnologies$6-17billionby2050whileabating0.03-0.08GtisespeciallyrelevantforthedecarbonizationofsteelCO2.Increasedstandardizationofconstructionsteelproduction,withanabatementpotentialofaround0.2-products,carefuldemolition,directsortingofsteel0.5GtCO2by2050.Thiscouldrepresentonaveragewasteanduseofmaterialpassportsforbuildings21%oftotalindustryCO2emissionsbasedonaBAUcouldfurtherincreasethepotentialofreusingscenario.Accordingtothisanalysis,anintegratedandrepurposingsteel.blastfurnacesteelplantretrofittedwithaCCSunitcanreduceCO2emissionsbyasmuchas80%.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities15FIGURE5CircularityloopsalongthesteelvaluechainCCSandReuseOthervaluechainsRenewablecarbonblastenergyoff-takeforfurnaceReusesteelRecyclesteelscrapotherslaginslagforroadRecoveredfromotherindustriespurposes/cementconstructionenergyfrom(post-consumer)industriesproduction/aggregateswaste/alternativefuelsIronCoal/Steel(low-carbonfuels)orenaturalgasscrapRecyclesteelscrapfromCDWBlastfurnanceEAFsteelmakingsteelmakingProductmanufacturingRecycleandprocessingpromptsteelscrapConstructionRepurposeUsephaseofwholesteelcomponentsReduce,reuse,repurposeDemolitionofbuildingsandcollectionLandfillRecyclingofCDWRebars,pipes/tubes,Structuralsheetproductsframes/beamsSource:McKinseyanalysis,presssearchandexpertinterviewsMaterialsandmineralsEnergyCO2CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities16CASESTUDY2ConstructionsteelAsteelmanufacturerhasdemonstratedthepotentialofandcollaborationinscrapflowmanagementacrossindustries.circularitythroughacomprehensiveoverhaulofsupplyWithintensiveR&Dinzero-carbonsteelandeffectivechains,theoptimizationofproductiontechniquesandtheintegrationofvaluechains,ithasachievedanapproximatereplacementoftraditionalrawmaterialswithorganiccoke7-9%reductionintheglobalsteelcarbonfootprint,maintainingforferro-chromeproduction,effectivelyminimizingwaste.a100%recycledcontentforthenewproduct.Additionally,itlaunchedaninitiativetoenhancetransparency2.3ConstructionaluminiumIncreasingToday,thealuminiumchainisalreadypartiallyandemissionsfromprocuringvirginmaterial,couldrecycledmaterialcircular,withrecyclingratesofaround30%.resultinanannualnetCO2decreaseof0.02-0.06Gtsharefrom13%However,inconstruction,theshareofsecondaryandgenerate$3-10billionnetvaluegainby2050.todaytoupto50%materialissignificantlylower,atonly13%.19EvenIncreasingrecycledmaterialsharefrom13%todayby2050translatesthoughaluminiumoffersvariouscircularityleversduetoupto50%by2050translatestoanannualtoanannualnettoitsinfiniterecyclabilitywithoutanydetrimenttonetCO2decreaseof0.1-0.2GtandaroundCO2decreaseitsmechanicalproperties,thevarietyofalloysand$16-31billionnetvaluegain.Themainchallengeliesof0.1-0.2Gtcurrentscrapsortingtechnologiesmakeincreasinginaluminium’svulnerabilitytocontaminationandtheandaroundrecycledcontentinproductsorothercircularityloopsimpuritiesofvariousgrades,aswellasthedifficultyof$16-31billionchallenging.Currentemissionsfromconstructionproperlymatchingmaterialstodifferentapplications.netvaluegain.aluminiumarearound313MtofCO2equivalentThelargestdriverforaluminiumrecyclingispost-(CO2e)andareexpectedtorisetoaround382Mtconsumerscrap(95%).However,thereisalsoanby2050.Intotal,introducingadditionalcircularimportantleverregardingpre-consumerscrapinaluminiumleverscanhelpabate27-51%(0.1-0.2Gt)production.Increasingrecyclatecollectionwouldand62-89%ofCO2emissions(0.2-0.3Gt)by2030requirecollaborationamongplayersacrossthevalueand2050,respectively.Thesewouldalsocontributechain,suchason-siterecycling,standardizationandtocreating$5-8billionand$20-42billionvalueincreasingtransparencyonmaterialflows.gains,respectively.Thisrepresentsaround4-8%and20-40%ofthetotalmarketsizeforaluminiuminTheuseofalternativefuelscansignificantlyreduceconstructionin2030and2050.CO2emissionsfromcurrentelectricityuse,whichmakeupto67%oftotalproductionemissions.ThemainopportunityfordecarbonizingaluminiumByreplacingfossilfuelswithbiogasorotherliesindesigningforthereuseofaluminiumpartsandalternativefuels,aluminiumproducerscanreducemodules,increasingtheuseofrecycledmaterialandtheircarbonfootprintbyupto30%(0.1GtCO2usingalternativefuels.in2050),dependingontheavailabilityofalternativefuels.CCScanbeameaningfulleverforcapturingDesigningaluminiumforreuseandmodularityisaremainingCO2emissionsfromcarbonatereleases.levertoactonnowwithsignificantimpactintheHowever,duetothesmallshareofprocesslongterm(i.e.buildinglifecycle).Reusingaluminiumemissionsinaluminiumproduction,theimpactpartsandmodules,andtherebyavoidingcostspotentialislimited.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities17FIGURE6CircularityloopsalongthealuminiumvaluechainCCSandRenewableRecoveredenergyOthervaluechainsRecyclealuminiumcarbonoff-takeenergyfromwaste/Bauxiteorescrapfromotherforotheralternativefuelsindustriespurposes/(low-carbonfuels)industriesAluminiumAnode/refining,smeltingpaste1AluminiumcastingRecyclealuminiumscrapfromCDWProductmanufacturingandprocessingRecyclepromptaluminiumscrapConstructionRe-purposeofwholeUsephasealuminiumcomponentsReduce,reuse,repurposeLandfillDemolitionofbuildingsWindowframes,interiorFacadesandroofsandcollectiondesign,buildingevelopesNote:1Notincludedinthecoremodel.Source:McKinseyanalysis,presssearchandexpertinterviewsRecyclingofCDWMaterialsandmineralsEnergyCO2CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities182.4ConstructionplasticsConstructionplasticsspanmanyapplicationsandAccordingtothisanalysis,reuseasacircularitypolymers,suchaspolyvinylchloride(PVC)forlevercouldresultinanannualnetCO2decreaseapplicationslikeflooringandpipes,highdensityof2-7Mtin2030and6-33Mtin2050whilepolyethylene(HDPE)sheetsforcladdingorroofing,generating$1-6and$6-36billion.Increasingandpolyurethane(PU)orpolystyrene(PS)forregrindplastics–fromtoday’s17%recyclingrateinsulation.20Thebuiltenvironmentaccountsfor18%to35%in2030andto61%by2050–translatesofglobalplasticsdemand,21withplasticscurrentlytoanannualnetCO2decreaseof5-12and34-representing3%ofmaterialvolumes(e.g.pipes,83Mtin2030and2050,respectively.Thiswouldbrickswithplastics).Duetoitshighemissionfactor,unlock$4-12and$21-65billioninvalue.Toachieveemissionsduetoplasticsinthebuiltenvironmentthis,itiscrucialtosecureacost-effectivesupplywereestimatedat127MtCO2in2020,withtheofwastetorecoveryfacilities,explorealternativepotentialtoreach288Mtin2050.22Thecurrentbusinessmodelstoretrievematerials,investinconstructionplasticsvaluechainismainlylinear,withenhancedsortingandwastecollectiontechnologyrecyclingratesaslowas17%,dependingontheandoptimizetherecyclabilityofwastebydesigningregion.Thebuiltenvironmentcanserveasamajorforcircularity.Thisshouldcomplementsufficientintakehubforplasticswaste,andthereisafurtherrecyclingcapacityandat-scale(chemical)recyclingopportunitytoincreasetheshareofrecycledplastics.technologiesstandardizedacrossproductsandwastestreams.Themainopportunityfordecarbonizingliesinreusingplasticssheetsandmodules,increasingregrindByreplacingfossilfuelswithbiomethane,plastics(i.e.pelletsorgranules),usingalternativefuelsbio-naphthaorotheralternativefuels,plasticsandimplementingCCS.Respectively,10-17%andmanufacturerscanreducetheircarbonfootprintby30-62%ofcarbondioxideemissionscanbeavoided3%andupto7%oftotalemissionsin2030andby2030and2050.Thisrepresentsadecreaseof16-2050whilemakinggainsof$2billionand$11billion.28MtCO2(2030)and0.1-0.2GtCO2(2050).TheseInaddition,theabatementpotentialofCCSduringleverscancreatenetvaluegainsof$7-20and$38-thecrackingprocessofplasticssuchasPVC,PU,112billionin2030and2050,approximately4-11%PSandHDPEcancontribute3%(2030)and7%ofand12-34%oftheestimatedmarketsize.23totalemissions(2050)oftotalemissionsabatement.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities19FIGURE7CircularityloopsalongtheplasticsvaluechainCCSandcarbonoff-takeOthervaluechainsSecondarymaterialfromforotherpurposesRawmaterialsotherindustries’end-of-lifewaste,e.g.packagingRecoveredProcessingenergyfromRecycledplasticwastewaste/Pelletconverisionwithinprocessingstagealternativefuelsforconstruction1RecyclingofandrenewableplasticwasteinenergyAssemblytheprocessing/UsephaseconstructionstageRecarbonationEnd-of-lifeEnd-of-lifewastetobeReuseofReuseofsheetsrecycledintheprocessing/structuralconstructionstageframesRecyclingofCDWLandfillDowncycling1NotincludedinthecalculationaspotentialduetoinsufficientMaterialsandmineralsEnergyCO2informationregardingthefeasibility.Source:McKinseyanalysis,presssearchandexpertinterviewsCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities202.5FlatglassCurrently,theflatglassvaluechainismostlylinear,translatestoanannualnetCO2decreaseof2Mtwithlowrecyclingratesof0-1%anddowncyclingin2030and16-22Mtby2050.Thisleverwouldratesofapproximately40%.Landfillratesarearoundalsounlockapproximately$2-3billion(2030)and60%,dependingontheregion.Currentemissions$11-17billion(2050)inpotentialvalue.However,fromtheconstructionflatglassareapproximatelyensuringadequatequalityofrecyclatesiskey,asone64MtCO2,whichareexpectedtorisetoasmuchofthemainchallengesliesinthevulnerabilityofculletas130Mtby2050.tocontaminationandimpurities.Moreover,increasingculletcollectionrequirescollaborationamongIntroducingadditionalcircularflatglassleverscouldplayersacrossthevaluechain,especiallyforon-sitehelpabateapproximately10-11%(around0.01Gt)recycling.Althoughthecollectionofpre-consumerand36-41%(around0.05Gt)ofenergy-relatedCO2culletneedstobefurtheroptimized,thegreatestemissionsby2030and2050,respectively.Itcanimpactliesinrecoveringpost-consumercullet.createnetvaluegainsofapproximately$3billionToday,almostnoculletisrecycledfromconstructionby2030(3%ofthemarketsize)and$16-25billionanddemolitionwaste.24Byincorporatingcircularby2050(around14-22%ofthetotalestimatedpractices,itwilllikelybeeasiertocollectculletearlymarketsize).andensureahigh-qualitysupplyofrecycledglass.ThemainopportunityfordecarbonizingconstructionUsingalternativefuelscansignificantlyreduceCO2glassliesinreusingglasssheetsandmodules,emissionsfromcombustion,whichconstituteupincreasingculletuseandusingsustainablefuels,to88%oftotalproductionemissions.Byreplacingsuchasbiogas,todecarbonizetheproductionfossilfuelswithbiogasorotheralternativefuelsprocess(especiallytheheatingprocess).Designing(dependingontheavailabilityofalternativefuels),withglassforreuseandmodularitycouldhavealargereplacementshareupto13%and25%in2030andimpactonthelong-termlifecycleofabuilding.In2050,glassmanufacturerscanreducetheircarbonfact,reusingglasssheetsandmodulescouldresultfootprintby4MtCO2in2030(4%oftotalemissions)inanannualnetCO2decreaseof1-1.5and6-9Mtand16MtCO2(13%oftotalemissions)in2050.CO2whilegenerating$0.5-0.7and$3-6billioninnetValuegainsareatapproximately$0.3billionandvaluegainin2030and2050,respectively.Designing$2billionin2030and2050,respectively.forreuseandreusingglasssheetsandmoduleswithcircularprocurementmodels,enabling“glass-as-a-CCScanalsobeameaningfulleverforcapturingservice”andverticalconsolidationofthemarketareremainingCO2emissionsfromcarbonatereleases.keyleverstoincreasethecircularityofglass.Itsabatementpotentialissmaller,amountingto2MtCO2by2030and5-9MtCO2by2050.SupportingMoreover,inacircularscenario,increasingculletmeasures,suchasglassde-specification,canbeusefromtodayaround22%upto60%by2050usedtoabateresidualemissions.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities21FIGURE8CircularityloopsalongtheglassvaluechainCCSandRecoveredenergyfromOthervaluechainsSecondaryrawmaterials,e.g.High-qualitycarbonwaste/alternativefuelsandRawmaterialsoresandfromironproductionculletfromoff-takeforrenewableenergyotherindustries,othere.g.automotivepurposesFlatglassmanufacutreRecyclingofRecyclingofinternalculletpost-consumerGlassprocessinghigh-qualityculletRecyclingofPre-heatingof(includinginsulatedunitpre-consumerculletandbatchmanufacturingifneeded)cullet(glasswithwasteheattrimmings)frommelting/floatConstructionReuseofflatglasssheets/modulesUsephaseEnd-of-lifeLandfillDowncyclingFibreglassRecyclingofconstructionContainerglassanddemolitionwasteAggregateuseforroadconstructionGlassabrasivesforroadpaintMaterialsandmineralsEnergyCO2Source:McKinseyanalysis,presssearchandexpertinterviewsCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities22CASESTUDY3FlatglassAwindowindustryplayerhasdevelopedaThisshiftisenabledbyfactorslikemodularizationtake-backschemeforwindowunits,ensuringanddesignfordisassembly,specializeddismantlingresponsibledisposal.Theseunitsaretransportedtechnology,customer-centriceducation,efficienttospecializeddismantlingfacilitieswhereadvanceddatamanagementandstrategicpartnerships.sortingtechnologyseparatescomponentsforOutcomesincludeanapproximate30%reductionreuse.Thecompany’sapproachextendsto“as-a-inCO2emissionsalongthewindowlifecycle.service”andmodularizedbusinessmodels.2.6GypsumCircularGypsumiseitherfoundnaturallyinsedimentaryrecyclingrateforgypsumboardsisonly1-7%,gypsumoffersanrock,producedsyntheticallyasaby-productbutitisincreasingduetothementionedresourceopportunityof$1ofvariousindustrialprocessesorrecycledfromscarcity,landfillregulationsandcustomerdemandbillioninannualnetconstructionanddemolitionwaste–ataveryforgreenmaterials.valuegainby2030lowsharecurrently.Theglobalgypsummarketand$4-6billioninamountedtoaround350Mtand$33billioninToincreasethecircularityofgypsumboards,they2050,representing2020,25withconstructionbeingthemainconsumercanberecycled,downcycledintosoilamendments1%and3%oftheofgypsum(around96%ofglobaldemand)givenandproducedwithagreatershareofrenewabletotalmarketsize,itsfireresistanceandthermalinsulationproperties.energyinthegypsumdryingprocess.Recyclingofrespectively.Gypsumismainlyusedintheconstructiongypsumcanbemademoreeffectivebyincreasingindustrytoextendthesettingtimeofcementtheuseofpre-consumerscrapfromproduction(49%);indrywall(35%)usedinwalls,ceilingsandpost-consumerscrapfromconstruction,andpartitionsystems;andplaster(12%).Halfrenovationanddemolition,aswellasdowncyclingoftheworld’sgypsumismined,whiletheothergypsumwasteforuseassoilamendment.Overall,halfissyntheticallyproduced,mostlyfromfluecirculargypsumoffersanopportunityof$1billiongasdesulfurization(FGD)gypsum.Ascoal-firedinannualnetvaluegainby2030and$4-6billionpowerplants(producingFGDgypsumasaby-in2050.Thisrepresents1%and3%ofthetotalproduct)arephasedoutandnaturalresourcesinmarketsize,respectively.Thesemeasuresalsosomeregionsaredepleting,alternativeoptionsforhavethepotentialtoabate2-3and4-5MtCO2ingypsumproductionarebeingexplored,suchas2030and2050(3-5%and6-7%oftotalmarketphosphogypsum,gypsumsolubilizedfromnaturalemissions,respectively).seawaterandrecycledgypsum,whichistheonlyalternativeoptionthatistechnicallyviabletoday.Therecirculationofenergyresultsinmoremoderategains,namelyaround$1-2billionin2050(1%oftheRecyclingofgypsumhasgreatpotentialasitismarketsize),buthasthepotentialtoabate3-6andinfinitelyrecyclableandhasalowercarbonfootprint9-17MtCO2by2030and2050.Thiscorrespondsthanprimarygypsum.However,forgypsumtobeto5-10%and13-23%oftotalsectoremissions.extractedfromcement,thatcementneedstobeFinally,inadditiontotheselevers,greeningtransportrecycledfirst.Recyclingofgypsumplasterisalsoinfrastructurewillleadtofurthersavings,asalargechallengingduetootheradditives.Therefore,thispartofgypsumemissionscanbetracedbackanalysisfocusedongypsumboards.Thecurrenttotransport.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities23FIGURE9CircularityloopsalongthegypsumvaluechainRecoveredOthervaluechainsAsaby-productfromenergyfromothervaluechains,e.g.waste/NaturalSyntheticcoal-firedpowerplants,alternativefuelsgypsumgypsumcoalflyash,etc.andrenewableenergyRecycledpaperWallboardprocessingGypsumwasteGypsumwasteandproductionfromconstructionfromproductionRecycledRecycledwallboardgypsumwasteConstructionUsephaseReuseofcomponentsEnd-of-lifeRecyclingofSoilamendmentgypsumwasteproducersLandfillGypsumwastefromrenovationanddemolitionMaterialsandmineralsEnergyCO2Source:McKinseyanalysis,presssearchandexpertinterviewsCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities24Conclusion:DrivingthecircularitytransitioninthebuiltenvironmentKeyelementstoacceleratelifecycle,which,inturn,canpromotematerialthecircularitytransitionexchangeandurbanmining.SuchpracticescanalsoreduceuncertaintyaroundleadtimeorTherearethreeclearactionsindividualplayersdemand-sidepricespikesas“mining”fromcitiesandtheecosystemasawholecaninitiatetodaythemselvesmakesasupplychainmorelocalized.tocapturethedisplayedpotentials:1)promotingMoreover,digitalsolutionscantacklethechallengecollaborationacrossthevaluechain,2)promotingofnavigatingwithinthefragmentedandmulti-circularthinkingandcapabilitydevelopment,and3)levelindustrystructure.Technologicalenablersusingdigitaltechnologies.includedigitalmaterialpassports,digitaltwinsandtechnologytotrackandmanageassets.Digital1.Collaborationandextensivecoordinationarematerialmarketplacescanconsumethisdataforessentialtoaddressthedecentralizednaturematerial,productorsystemresale.Generativeofthevaluechain.Thebuiltenvironmentisdesignalgorithmscanoptimizenewbuildings,characterizedbyahighlyfragmentedlandscapemaximizingreusedmaterialsbasedonwhatiswherevastcoordinationisrequiredacrossahighavailablelocally.Stakeholderscanusethesenumberofsub-scaleplayerstocloseresourcetechnologies,combinedwithat-scalematerialloops.Moreover,manyoftheseactorsdonothavetestingprocesses,toimplementcircularleversrelationshipsfromtraditionallinearsupplychains.earlieronintheplanningandconstructionprocess.Stakeholdersshouldactivelypromoteintegration,partnershipsandstandardizedrequirementsforAcalltoactiontoidentifycircularmaterialsacrossassetsandregionstocircularitylighthousesensuresmoothrecirculation.Forinstance,materialsupplierscancollaboratewithdesignersandThecirculareconomyprovidesapathtocontractorstodevelopreusablematerialsanddecarbonizationbutwillalsoshiftvaluepoolsfrompromoteinterchangeability.Reversesupplychainstheproductsandplayersanchoredinthetraditional,betweenmanufacturersanddeconstructionorlineareconomytotheonesdrivingandacceleratingwastehandlingplayerscanensureasufficientthecircularitytransition.Thiswhitepaperhassupplyofsecondarymaterialtoproducenewdiscussedtheissueofcircularityatamateriallevel,products.Establishedcollaborationmodelshavelookingattargetdatesof2030and2050.However,successfullyfacilitatedthetransitiontoacircularthechangeisalreadystartingtohappen,andtheeconomyinotherindustries,suchasconsumerindustryecosystemneedstopositionitselftodaytoorautomotive,hintingatsignificantvalue-capturecapturetheoutlinedpotentialinthefuture.opportunitiesinthebuiltenvironment.Circularitylighthousesshowcaseleadership,2.Circularthinkingandcapabilitydevelopmentdemonstrateinnovativeapplicationsatscaleandarefundamentaltoanchoringcircularityinbuiltbringindustryactorstogethertocollaborativelyenvironmentorganizations.Despitesomeearlyacceleratethecircularitytransition,inspiringothersadoptersincreasingcircularactivities,thebuilttofollow.Lighthousesembraceadisruptive,environmentisstilllargelyalinearvaluechain.Tocollaborativeagenda,evenamongtraditionaladdressthis,formalizedideasandbestpracticescompetitorsoracrossvaluechains.Theyapproachshouldbedisseminatedandsharedamongpeers.thecirculartransitionproactivelyanddevelopindustry-Particularly,circularmindsetsintheearlystagesleadingsolutionsrapidly.Theyestablishnewcircularofaprojectanddesignarecriticalindeterminingbusinessmodelsbeyondthetraditionalvaluetheenvironmentalimpactofabuiltassetoverarchitectureanddemonstratetheirenvironmentalitslifetime.Bythetimetheconstructionprocessimpact,scalabilityandfinancialviability.Industryplayersbegins,mostdecisionsaffectingtheproject’sdevelopinglighthousesandactingasacceleratorsgreenhousegas(GHG)emissionsarealreadywillhaveanadvantageincapturingthevaluebehindlockedin.Keydesigndecisionshaveanimpactthecirculareconomy,gainingmarketshare,drivingonemissionsfordecadestocome.Whenbuildingthewayforwardandlockinginpartnerships.new,actorsshouldprioritizecirculardesignpracticessuchasdesigningfordisassemblyandAlighthouse-drivenapproachcanbeaboosterusingmodularconstruction.Relativelyeasyreuse,toensurecollaboration,advancecircularthinkingrepairandrecyclingshouldbefactoredinwhenandcapabilitydevelopment,anddisseminateselectingproductsandmaterials.digitaltechnologiesacrossadecentralizedbuiltenvironment.Thebuiltenvironmentiscalledto3.Digitaltechnologiescancreatetransparencyactiontoidentifythoseleadinglighthousesandonsecondarymaterialsandtheoverallmaterialmakethemvisibletotheecosystem.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities25Appendix:ModellingassumptionsandresultscalculationAllnetvaluegainandabatementpotentialvaluesOthercostsusedinthemodels,suchastheprovidedarecalculatedforthecircularscenariocostofcarboncapturetechnologyandcarboncomparedtothebusiness-as-usual(BAU)scenario.storage,fossilfuels,biomassandotheralternativeForthecircularscenariovalues,rangesrepresentfuels(wasteexcludingbiomass),aswellastheirconservativeandambitiouscircularityassumptionsassociatedemissionfactors,arederivedfromexpert(lowerandupperbound).Abatementandnetvalueassessmentbasedonglobalmarketanalysis,gainpotentialasashareoftotalsectoremissionsreportsandpressresearch.GiventhatthemodellingormarketsizearecalculatedconsideringtotalconsiderstheimpactwithintheoverallvaluechainestimatedemissionsandmarketsizeinaBAU(buildinglifecycle),additionaloravoidedemissionsscenariointherespectiveyears(i.e.2030and2050).fromthetransportofproductsandmaterialshavenotbeenassumed.Moreover,thereisuncertaintyinForcostcalculations,includingcarbonpriceandmodellingtheseemissionsatagloballevelgiventhelandfilltax,aCO2priceof$5.50andalandfilltaxofuncertaintyinestimatingactualdistancesrequired,$20.00areassumedin2020.Theseareestimatedasinfrastructureisnotfullyestablishedyetatscale,toriseto$88.00and$120.00,respectively,in2050.and,inacirculareconomy,thesupplychainwouldPricesarefreeofinflation.Itisassumedthatmorebemorelocalized.countrieswillimplementmoderatelandfilltaxesintherangethatcancurrentlybeobservedtoday.Further,Furthermore,assumptionsmadearegeneralizeditisassumedthatthepriceofcarboncreditswillforthemodellingtobeatagloballevel.Inpractice,slowlyequalCO2pricesoverthelongterm.itisacknowledgedtheremightberegionalandlocaldifferencesinthemarket,regulation,technologies,infrastructureandlogistics,henceactualleverspotential.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities26ContributorsWorldEconomicForumMcKinsey&CompanyFernandoGomezMaximilianGebhardtHead,ResourceSystemsandResilience;ConsultantMemberoftheExecutiveCommittee,BetterLiving,CentreforNatureandClimateJaniceKlaiberConsultantAnisNassarLead,ResourceCircularity,BetterLiving,JukkaMaksimainenCentreforNatureandClimateSeniorPartnerJörgenSandströmSebastianReiterHead,TransformingIndustrialEcosystems-EnergyPartnerandMaterialsAcknowledgementsTheauthorswishtothankMcKinsey’sLeopoldBaumgartner,ThomasCzigler,PhilippDürr,StefanFahrni,SarahHeincke,MarkusPley,PatrickRogersandStevenVercammenfortheircontributionstothispaper.ProductionRoseChilversDesigner,StudioMikoLaurenceDenmarkCreativeDirector,StudioMikoMarthaHowlettEditor,StudioMikoCircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities27Endnotes1.UnitedStatesEnvironmentalProtectionAgency(EPA),ReportontheEnvironment(ROE):IndoorAirQuality,2021.2.McKinsey&Company,Reinventingconstruction:aroutetoahigherproductivity,2017.3.McKinsey&Company,Acceleratinggreengrowthinthebuiltenvironment,2022.4.McKinsey&Company,Buildingvaluebydecarbonizingthebuiltenvironment,2023,https://www.mckinsey.com/industries/engineering-construction-and-building-materials/our-insights/building-value-by-decarbonizing-the-built-environment.5.Ibid.6.“Asbuildingsandconstructionsectorgrows,timerunningouttocutenergyuseandmeetParisclimategoals”,UnitedNationsEnvironmentProgramme,13December2017,https://www.unep.org/news-and-stories/story/buildings-and-construction-sector-grows-time-running-out-cut-energy-use-and.7.WorldEconomicForum,MakingAffordableHousingaRealityinCities,2019.8.GlobalInfrastructureBaselFoundation,4thGIBSummitReport,2014.9.Lacy,PeterandJakobRutqvist,Wastetowealth:Thecirculareconomyadvantage,PalgraveMacmillan,2016.10.EllenMacArthurFoundation,CompletingthePicture:HowtheCircularEconomyTacklesClimateChange,2021.11.Cheshire,DaveandMikeBurton,“Thecarbonandbusinesscaseforchoosingrefurbishmentovernewbuild”,AECOM,n.d.,https://aecom.com/without-limits/article/refurbishment-vs-new-build-the-carbon-and-business-case/#:~:text=Figure%201%20shows%20that%20over,of%20the%20newly%2Dbuilt%20replacement.12.Apel,Fabian,JohannaHoyt,FranciscoMarques,SebastianReiteretal.,“Cementingyourlead:Thecementindustryinthenet-zerotransition”,McKinsey&Company,6October2023,https://www.mckinsey.com/industries/engineering-construction-and-building-materials/our-insights/cementing-your-lead-the-cement-industry-in-the-net-zero-transition?utm_medium=DSMN8&utm_source=LinkedIn&utm_user=14419235252747510.13.Carbonpricingreferstoinitiativesthatputapriceongreenhousegasemissionstoaddressclimatechange.14.Thisarticlefollowsupontherecentlypublished“TheCircularCementValueChain:SustainableandProfitable”andprovidesperspectivesonhowcircularityloopsforconstructionmaterialscanbeestablishedinthebuiltenvironment:“Thecircularcementvaluechain:sustainableandprofitable”,McKinsey&Company,6March2023,https://www.mckinsey.com/industries/engineering-construction-and-building-materials/our-insights/the-circular-cement-value-chain-sustainable-and-profitable.15.Hoffman,Christian,MichelVanHoeyandBenediktZeumer,“Decarbonizationchallengeforsteel”,McKinsey&Company,3June2020,https://www.mckinsey.com/industries/metals-and-mining/our-insights/decarbonization-challenge-for-steel.16.McKinsey&Company,Net-zerosteelinconstruction:Thewayforward,2022.17.37%and60%consideringapproximately1.6GtCO2in2050–thesearethebusiness-as-usual(BAU)2030and2050estimatedtotalemissionsinthismodel.18.9%whenconsideringthemarketsizeinbillionsofUSdollarsin2050(BAU)or10%whenreferencingtheBAU2020marketsize.19.Currentemissionsfromconstructionaluminiumarearound313milliontonnesofCO2andareexpectedtorisetoaround382milliontonnesby2050inaBAUscenario.20.Applicationsonlyexemplary.21.“Plastics–theFacts2022”,PlasticsEurope,n.d.,https://plasticseurope.org/knowledge-hub/plastics-the-facts-2022/.22.Calculatedbasedontheemissionfactorofpolyvinylchloride(PVC),highdensitypolyethylene(HDPE),polyurethane(PU)andpolystyrene(PS)andtherespectiveamountusedinthebuiltenvironment.23.EstimatedmarketsizeofplasticsinthebuiltenvironmentinaBAUscenarioin2030and2050.24.Rue,David,CulletSupplyIssuesandTechnologies,GlassManufacturingIndustryCouncil,2018.25.McKinseyteamanalysisbasedonexpertinterviewsandTechNavio,GlobalGypsumBoardMarket2023-2027,2022.CircularityintheBuiltEnvironment:MaximizingCO2AbatementandBusinessOpportunities28TheWorldEconomicForum,committedtoimprovingthestateoftheworld,istheInternationalOrganizationforPublic-PrivateCooperation.TheForumengagestheforemostpolitical,businessandotherleadersofsocietytoshapeglobal,regionalandindustryagendas.WorldEconomicForum91–93routedelaCapiteCH-1223Cologny/GenevaSwitzerlandTel.:+41(0)228691212Fax:+41(0)227862744contact@weforum.orgwww.weforum.org
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