Reducing the carbon and environmental footprint in construction is increasingly demanded by EU legislation and by market participants who care about their reputation.
KPMG’s expertise will help you appreciate the dynamic legal and market environment and exploit the opportunities offered by the green transition of the economy.
What is decarbonisation of the construction industry and why is it so important?
Buildings today account for 36% of greenhouse gas emissions and 40% of energy consumption in the European Union. In the face of climate challenges, risks associated with fossil fuel imports or negative phenomena such as fuel poverty, decarbonising the sector will be an important part of building a climate-neutral, competitive and sustainable economy.
Challenges for companies in decarbonization of the construction industry
Legislative environment
Growing expectations for the sector
The construction industry must take into account the rising expectations in terms of energy consumption standards for buildings and the environmental impact, including carbon footprint, of construction materials and entire development projects.
The elements of the European Green Deal include the Renovation Wave, which should help improve energy efficiency and reduce building emissions, and the revised Energy Performance of Buildings Directive (EPBD), requiring calculation of the carbon footprint of buildings across their life cycle. The market will also be affected by the plans for the EU ETS 2 system covering for example residential buildings, which will stimulate study of the emissions of fuels used for heating and impact the operating costs of building and individual units.
These solutions will join a number of strategies and regulations that have already been adopted or implemented, such as the amended Construction Products Regulation requiring declaration of environmental impact factors for construction products, national renovation strategies, and the EU Taxonomy, which should redirect financial flows towards sustainable projects. In this context we should also mention the EU Level(s) scheme for assessing the sustainability of buildings, taking into account issues such as greenhouse gas emissions, life cycle, and efficient use of materials and water resources.
Financial incentives
Cash flows and new financial solutions
Market research finds a growing share of usable area of buildings covered by voluntary environmental certification, such as BREEAM, LEED or WELL. This is driven by the desire by businesses and residents to use spaces built in line with sustainability principles. Similar interest is also seen in the creation and use of financial solutions (e.g. green bonds), as well as local policies in areas such as revitalization, new housing starts, and advanced strategic planning (e.g. the Warsaw Green Building Standard and circular economy strategies for Kraków, Gdańsk and Lublin).
These trends are often accompanied by changes in financial flows stimulating practical implementation (e.g. the EU’s multiannual financial framework, and green public procurement).
Market trends
Growing awareness of environmental impact
Growing awareness of the environmental impact of the construction sector is already visible in the heightened expectations for buildings and infrastructure. Many years of debate on air quality in Poland has raised expectations for energy efficiency and heat sources. Projects are increasingly carried out using local raw materials with a smaller environmental footprint. Global market leaders are implementing innovations to reduce the emissions tied to cement and steel, for example. In urban areas, solutions involving green and blue infrastructure are being followed, along with mixed-use development in the spirit of the 15-minute city.
With the next stages of the green transition, the expectations of customers, investors and regulators will increase. More and more attention is paid to the environmental footprint of a product or project throughout its life cycle. In addition to energy efficiency, the efficient use of raw materials will also play an increasing role. According to estimates published by Statista, the global green building materials market was worth USD 280.5 billion in 2021, and by 2027 is expected to reach USD 523.7 billion.
What will you gain from an active approach to decarbonizing construction?
Companies deciding to implement sustainability in their business models will better respond to the expectations of customers and the business environment, also in periods of economic slowdown. For example, one Polish bank decided to stop offering mortgage loans to new customers during the recent cycle of interest rate increases—unless borrowers were interested in taking out green credit.
Similar products and services will grow, along with the development of voluntary business commitments and mandatory legal requirements. Preparing for the green transition will help avoid risks of incurring costs of changes at an inconvenient time for the company, while reducing risks to reputation and risks arising from customers’ and suppliers’ increasing ESG demands.
KPMG’s support for decarbonization of the construction industry
Our team offers comprehensive support in planning, implementing and executing strategies for decarbonizing services and products, and raising the energy and raw material efficiency of products and projects. We offer activities and services tailored to the needs of all participants of the construction market.
Building material manufacturers
- Support in the development of Type III Environmental Product Declarations (EPDs).
Głowne kroki:
- determining the range of construction products to be declared;
- inventory of production processes;
- inventory of supply chains;
- conducting a life cycle assessment (LCA);
- drafting the LCA report and EPDs;
- representing organizations before EPD programme operators (e.g. the Building Research Institute (ITB))
- Calculation of the carbon footprint of products according to the GHG Protocol and ISO 14067.
- Calculation of the organization’s carbon footprint in Scope 1, 2 and 3 according to the GHG Protocol and ISO 14064-1.
- Analysis of potential carbon offsets.
- Training in calculation and reporting of the environmental footprint of organizations and products.
- Support in non-financial ESG reporting (compliance with the CSRD and ESRS).
Developers
- Calculation of the carbon footprint of buildings over their life cycle (e.g. for the EU Taxonomy).
- Net-zero carbon analyses for planned projects.
- Life cycle assessment of projects’ carbon footprint.
- Calculation of the organization’s carbon footprint in Scope 1, 2 and 3 according to the GHG Protocol and ISO 14064-1.
- Developing a strategy for decarbonizing the organization throughout the value chain and supporting implementation.
- Analysis of climate risks.
- Support in non-financial ESG reporting (compliance with the CSRD and ESRS).
Contractors
Services
- Calculation of the carbon footprint of projects over their life cycle (e.g. for the EU Taxonomy).
- Net-zero carbon analyses for planned projects
- Life cycle assessment of projects’ carbon footprint
- Calculation of the organization’s carbon footprint in Scope 1, 2 and 3 according to the GHG Protocol and ISO 14064-1.
- Developing a strategy for decarbonizing the organization throughout the value chain and supporting implementation.
- Analysis of climate risks.
- Support in non-financial ESG reporting (compliance with the CSRD and ESRS).
Financing institutions
Services
- Analysis of the investment portfolio for compliance with the requirements of the EU Taxonomy.
- Calculation of the carbon footprint of construction-related financial instruments according to the GHG Protocol and Partnership for Carbon Accounting Financials (PCAF) standards.
- Calculation of the carbon footprint of funded projects (GHG Protocol and ISO 14067).
- Calculating the organization’s carbon footprint (GHG Protocol and ISO 14064-1).
- Strategy for decarbonization of the organization.
- Analysis of climate risks.
- Support in non-financial ESG reporting (compliance with the CSRD and ESRS).
About us
At KPMG, we focus on innovative solutions, tailored to the specifics and needs of the client. Drawing on the experience of KPMG’s global network of experts, we effectively adapt innovative ideas and implementations to Polish conditions.
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