The Future of the Built Environment: A Data-Driven Analysis

The built environment is responsible for almost 40 percent of global energy-related CO₂ emissions and produces about one-third of the world’s waste, figures that continue to rise with new waves of construction and retrofitting. Over one-quarter of global CO₂ emissions come from building operations alone. But while the concept of circularity—essentially recycle and reuse writ large—gains traction across various industries, real estate has yet to adopt these practices at scale. Only 1 percent of materials from building demolitions are reused. The rest of the concrete, steel, and other valuable materials become waste, even while new supplies of these same materials are generated for use in other buildings. Circular principles could abate 13 percent of the built environment’s embodied carbon emissions in 2030 and nearly 75 percent in 2050.

The built environment encompasses one of the largest global industries, with a total value of $14 trillion (13 percent of global GDP), of which real estate composes almost $4 trillion. It accounts for 12 percent of global employment. The sector is experiencing substantial volume growth driven by rapid urbanization, setting global construction on a path to $22 trillion in total value by 2040. But as a whole, the built environment generates more global emissions than any other sector, a problem at the heart of one of the world’s most crucial industries that demands solutions.

Circularity: Economic and environmental benefits, as well as obstacles

When assessing the case for circularity, stakeholders can take a holistic view, examining the benefits of and the obstacles to an industry paradigm shift. They will also need to balance embodied carbon benefits with operational carbon trade-offs, as well as the costs and benefits of building new versus reutilizing.

Using the circular approach yields several primary benefits:

• Economic and social benefits. Circular approaches in the built environment can lower costs and reduce asset downtime by localizing supply chains, reusing existing structures, and salvaging materials. The embodied carbon in new or existing buildings can be reduced, lowering carbon-offset commitments. Additionally, circularity can create local job opportunities in asset maintenance, on-site material recovery and sorting, and refurbishment. Broad global adoption of circularity in the sector could create 45 million waste management jobs by 2030, stimulating local economies.
• More resilience and flexibility. Resource recirculation and utilization enhance the resilience of buildings by making them adaptable to future needs. Designing for disassembly and modularity ensures that buildings can be easily updated, modified, or repurposed, extending their lifespans and reducing the need for new construction. Flexibility is particularly valuable in urban areas, where space is limited and many buildings have cultural and historical value.
• Less environmental impact. New construction often requires demolishing existing structures, leading to mixed-material waste. While this waste is often simply discarded, there’s substantial potential for stakeholders pursuing circular strategies to invest the capital and time required to sort it. With advanced planning and careful demolition processes, components from a building envelope (such as aluminum and glass) can be individually removed, simplifying the sorting process and reducing the environmental impact of demolition.
• Regulatory and market incentives. Regulatory mechanisms (such as carbon-pricing schemes, decarbonization subsidies, and tax exemptions) can support circularity’s economic viability. For example, the European Union has considered a separate emissions-trading system for buildings and road transport in 2027 that could bolster the business case for circular approaches. Economies of scale and technological advancements can lower the costs of reuse and recycling, and rising landfill costs can create more financial incentives for circularity.

Primary Obstacles to Circularity in the Built Environment

• Value chain rewiring. Integrating circular principles requires a fundamental shift—one that recognizes long-term cost efficiencies, risk mitigation, and value creation beyond short-term gains. The transformation involves a complete rewiring of the value chain because closing the material loop disrupts traditional material flows and creates new business opportunities. The traditional, linear value chain is highly commoditized and fragmented, which makes cohesive circular decision-making challenging.
• Need for clear business cases. Business cases for circularity in the built environment are emerging but not yet widespread, making end-to-end thinking difficult. Currently, stakeholders aren’t fully incentivized to embrace circularity, but individual players risk falling behind if others move first, particularly if those players are customers that pivot away from noncircular products or services.
• Geopolitical landscape. The evolving geopolitical landscape has considerable influence on the stability of material availability, regulatory frameworks, and supply chains. Circular strategies can enhance resilience by reducing dependence on volatile resources and fostering more localized, self-sustaining ecosystems.
• Technology and data. Successful implementation of circularity requires greater data transparency and tracking of material provenance than traditional models. Such elements may not be readily available or affordable for all companies and aren’t currently rolled out at scale. Additionally, separating, processing, and recycling mixed-material products remains a challenge.
• Stakeholder engagement. The adoption of circular practices requires alignment and collaboration across the entire value chain. Stakeholders—including architects and designers, contractors, distributors, end users, materials manufacturers, operators, and owners and investors—must work together and embrace circular principles to ensure a cohesive and effective transition.

New Buildings: Material Recirculation at the Center

Substituting virgin materials with recycled construction and demolition waste is crucial to circularity in the built environment. To effectively scale this new approach, stakeholders can consider region-specific strategies, such as sourcing from local existing building stock, pursuing new methods of production that rely on recycled materials, and designing to accommodate repurposed materials.

FAQ

What is circularity in the context of the built environment?

Circularity in the built environment refers to the practice of recycling and reusing building materials to minimize waste, reduce carbon emissions, and create a more sustainable construction industry.

How can stakeholders in the built environment benefit from implementing circular practices?

Stakeholders can benefit from circular practices by lowering costs, reducing carbon emissions, creating local job opportunities, enhancing building resilience, and complying with regulatory requirements.

Conclusion

Circularity offers a transformative approach to making the built environment more sustainable and economically resilient. By embracing circular practices, the industry can create substantial economic value, enhance resource efficiency, and drastically reduce the environmental impacts associated with the built environment. To accelerate the circular transition, stakeholders can collaborate, leverage technology, and plan for circularity from the earliest stages of developing buildings. Integration, partnerships, and standardized circular materials, along with strong business models, are essential to support long-term sustainability. Large-scale adoption of circularity will ultimately require a sea change in mindsets, collaboration across the sector, and bold, creative thinking about new business models and possibilities by all stakeholders in the built environment. Accelerating this new future can begin immediately, with each individual step in a circular direction.