Circularity in the Built Environment 2024

Foreword The transition to a sustainable built environment is essential for conserving natural ecosystems, reducing emissions in line with the Paris Agreement and mitigating the effects of climate change. Rapid urbanization intensifies environmental and climate pressures, with the United Nations reporting that the world constructs the equivalent of a city the size of Paris every week.1 As global society strives to create a sustainable and resilient built environment, the necessity of retrofitting existing structures has become increasingly evident. Ageing buildings, often energy inefficient and resource intensive, present both a challenge and an opportunity. Retrofitting can conserve resources, reduce carbon emissions and enhance the quality of life for residents. Retrofits can use readily available technologies and solutions and often achieve net-zero emissions in a financially neutral or positive way.2 Given that the built environment is responsible for almost 40% of global energy-related carbon dioxide (CO2) emissions, with over 25% coming from building operations,3 retrofitting is a critical step towards decarbonizing the building and construction sector. And given the scale of the built environment, the cost-effectiveness of decarbonizing existing buildings may even surpass that of the broader energy transition. Retrofitting is relevant to a wide range of stakeholders, including real-estate owners, designers, manufacturers and renovators. However, the industry has yet to determine how to sustainably source the materials required for the increasing number of retrofits. Promising circular approaches to retrofitting – which involve retaining, reusing and recycling materials to minimize the extraction of virgin resources – promote efficient resource reuse and reduce CO2 emissions. A previous white paper published by the World Economic Forum in collaboration with McKinsey & Company explored the potential for circularity in the built environment to simultaneously create business value and reduce CO2 emissions with regard to six crucial materials.4 This paper examines circularity in retrofitting as a vital submarket and outlines potential actions for stakeholders. We thank all community members and Forum initiative leaders for their valuable contributions. We hope this report will guide and inspire public- and private-sector leaders to adopt circular practices in the expanding building retrofit market.Fernando Gomez Head, Resource Systems and Resilience, Centre for Nature and Climate; Member of the Executive Committee, World Economic Forum Sebastian Reiter Partner, McKinsey & CompanyJukka Maksimainen Senior Partner, McKinsey & Company Jörgen Sandström Head, Transforming Industrial Ecosystems, Centre for Energy and Materials, World Economic Forum Circularity in the Built Environment: Unlocking Opportunities in Retrofits January 2025 Circularity in the Built Environment: Unlocking Opportunities in Retrofits 3