A greener view brings new opportunity to building products

Industry expertise

Matthew Roth is Senior Vice President and Building Products Industry Consultant for Truist. With extensive experience in building products and finance, he offers his assessment of the role that sustainable, environmentally friendly practices will continue to play in the industry.

Environmental concerns have moved from being a major part of social discourse to being a major factor in business. Whether it’s the costs of climate change or the health effects of indoor and outdoor pollutants, citizens, governments, analysts, and investors are scrutinizing entire industries and individual companies through the lens of environmental impact.

Between the turbulence from COVID-19 and longer-term labor, supply chain, and regulatory hurdles, maintaining an environmentally friendly stance while also achieving business goals is no simple matter. Even so, the demonstrated ability of wood products, aggregates, and other building materials to marry progress with a strong business model—one that consistently produces jobs and crucial products, profitably—shows that business success and sustainability can co-exist. Just look at the examples in wood and forestry, aggregates, and roofing—their progress and successes offer inspiration and a potential roadmap for other businesses, looking for advantage in innovation while staying ahead of regulatory requirements.

With an outsized role in global environmental stewardship, building products are still in the initial stages of what could be an era of dramatic change. Pressure to step up stewardship and sustainability efforts will mean intensified focus on natural, renewable, and sustainable inputs, energy-efficient materials and fixtures, recycling, waste minimization, packaging, and emissions throughout the product lifecycle, many requiring significant investment to fund them. It’ll open the door for innovative environmentally friendly products to substitute for legacy materials and gain share rapidly. 

Drivers of change in building products

The pressure to deliver environmentally friendly and sustainable solutions comes from many sources:

Pandemic effects – Disruption from the pandemic has reset priorities and values for individuals and businesses across the globe. For many, environmental sustainability has moved up the list. Research by McKinsey & Company found that 53% of senior construction executives expect an acceleration in sustainable practices due to additional corporate awareness and investor pressure ushered in by COVID-19.Disclosure 1

Regulatory pressures – Meeting baseline EPA requirements is often just the starting point. Regulatory environmental requirements are expected to escalate—particularly with greenhouse gas reduction initiatives—and make their way into federal, state, and local regulations, building codes, and contracting standards.

Corporate values and social responsibility – External pressures aside, many building products companies are looking in the mirror and asking how their sustainability efforts align with their corporate values, ethics, and genuine desire to be good corporate citizens. Employees outside the executive suite are also showing interest and exerting pressure, which is motivating companies to become more attractive to employees as an environmentally responsible business.

Public policy – Evolution in policy will continue to spur green innovation through targeted tax credits and subsidies to manufacturers, builders, and consumers of green building products. Technologies and products that meet specific standards can earn desirable designations, like Energy Star, WaterSense, GREENGUARD, and many others.

LEED (Leadership in Energy and Environmental Design) standards – Now a widely recognized certification, LEED sets design standards for building materials selection and for designs that ensure a healthy indoor environment supporting energy-efficient building operation—the source of 70% of a building’s greenhouse gas emissions over its lifetime.Disclosure 2 As builders aim to achieve LEED certification on more projects and as LEED standards evolve, manufacturers will come under added pressure to innovate and adopt environmentally friendly materials.

Consumer cost concerns – When it comes to construction, cost is always at the forefront of building materials selection decisions. Residential consumers say they want efficient, environmentally friendly homes and products, but to date, far fewer have been willing to pay a premium for that green advantage. That leaves building manufacturers to discern which green choices consumers really want and will pay for, giving the industry a less than clear direction on where to focus its investment on environmentally responsible development.

Efficiency and profitability – Greater margins can mean using less energy in manufacturing, reducing waste, and minimizing inputs, the same actions that make your products greener. In this way, profits can often align with environmental responsibility—good business can be good for the environment and sustainability as well.

 

Marrying environmental and economic progress: spotlight on wood and forestry products

By combining sound environmental and business practices and judicious use of renewable resources, the wood and forestry products industry has evolved to serve as an example of environmental stewardship for other building products sectors. Its sustainability is often underappreciated by environmental groups and the public, despite working with timber—a renewable material that actually consumes greenhouse gases as it grows. Wood and forestry are characterized by:

Natural alignment between environmental principles and business goals – In this industry, the two perspectives naturally reinforce one another. Most players—from loggers to manufacturers to the largest timber producers—recognize that long-term profitability for all hinges on adherence to best practices in forest management, sustainable rates of harvest, and waste minimization.

Continuous innovation – The wood industry may have been around as long as civilization, but it continues to demonstrate untapped innovative capacity as a source of renewable products. For instance, the industry adopted cross-laminated timber (CLT) girders and beams that can be used in construction projects of ten stories or more. This makes all-timber frames possible for larger buildings, increasing the proportion of renewables in a project’s profile. There’s a further environment bonus—the wood in CLT, once considered manufacturing waste, is put to productive use.

The green revolution comes to non-wood building products

Aggregate materials – With its high-energy-use production footprint, the route to environmental responsibility will require more investment for aggregate-based businesses. One climate-focused startup, backed by Jeff Bezos and Bill Gates, is working on breakthrough techniques to capture the carbon dioxide resulting from concrete production to sequester it permanently within the end product.Disclosure 3

Some manufacturers are reducing the amount of binding cement in concrete, using less fossil fuel in production while creating a product that’s stronger and less expensive than conventional concrete.Disclosure 4 Other manufacturers are managing to lower carbon emissions by 95%, eliminating the kiln entirely and tweaking mineral inputs to create a more energy efficient process.

Roofing – Recent breakthroughs in the process of recycling shingles are well on their way to making roofing with significant recycled content a reality. And, GAF Energy just announced a nail-able solar shingle, merging solar technology and traditional roofing processes and materials while removing a barrier to their adoption.Disclosure 5

Building a greener future

This heightened awareness is a significant catalyst for change in many industries, but it’s of particular concern for the building products sector. In greenhouse gases alone, the building sector is estimated to account for 37% of emissions—10% from building products and construction and 27% from ongoing building operations.Disclosure 6 Beyond just emissions, environmental priorities like minimizing water use, implementing safer mining practices, and reducing off-gassing from interior construction materials are directly affected by the industry’s practices.

Government-led climate policy, regulation, and consumer forces will keep the pressure on building products businesses for the delivery of green solutions and advancements. That will unleash a stream of environmentally focused improvements that will transform manufacturing and pave the way for disruptive products touting their green credentials.

You may already be channeling investment to your own breakthrough technology. Or you may be looking for an acquisition that can give you scale to bring environmentally responsible offerings to market. Whichever strategy you’re pursuing, you’ll want to stay vigilant to the green transformation and the possibilities for businesses who embrace the change.

Stay ahead of the shift to green in building products.

Talk with your Truist relationship manager about ways you can make the challenge of going green a gamechanger for your business.