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The government’s legally binding target to achieve net zero carbon emissions by 2050 and the 2015 Paris Agreement limiting global temperature rises to 1.5°C, requiring a 50% cut in emissions by 2030, are driving radical changes in the built environment. Investors perceive climate change as a financial risk, and companies want to occupy net zero buildings to meet their corporate social responsibility obligations. Developers and the construction industry have risen to this challenge to the point that net zero offices are becoming the norm in central London. 

Progress towards net zero for the commercial sector has been impressive, but other sectors have a long way to go because of the additional costs involved and a lack of knowledge and skills. For example, the sustainability performance of new-build housing is almost entirely driven by building regulations. The biggest challenge to resolve is how to improve the performance of existing buildings. Again, housing lags behind as retrofitting the nation’s 28 million existing homes could cost an estimated £250bn. This will have to be largely financed by owner occupiers. 

>> Download the full commission report: The long-term plan for construction

The move towards net zero in the commercial sector has taken place over a very short space of time, which means the industry is still learning what the most effective approaches to net zero are. The challenges include inconsistent approaches to whole-life carbon calculation, although this has recently improved with the publication of the Royal Institution of Chartered Surveyors’ (RICS) new whole-life carbon assessment standard. There is no overarching industry target for whole-life carbon other than those established by industry bodies such as the RICS, the Royal Institute of British Architects (RIBA), the Low Energy Transformation Initiative (LETI) and the UK Green ºÚ¶´ÉçÇø Council. This is likely to change with the development of the Net Zero Carbon ºÚ¶´ÉçÇø Standard, which aims to set carbon targets for different building types. 

There is no overarching industry target for whole-life carbon other than those established by industry bodies […] This is likely to change with the development of the Net Zero Carbon ºÚ¶´ÉçÇø Standard

Other positives include an emphasis on refurbishment rather than redevelopment, which could be given added impetus by the planning system following the decision to deny Marks & Spencer permission to redevelop its Oxford Street store. Organisations are starting to measure scope 3 emissions, which will put pressure on supply chains to reduce their emissions in turn. And the lessons learnt from the pioneering trail blazed by the commercial sector will make decarbonising new buildings in other sectors more straightforward. To assist in this transformation, the ºÚ¶´ÉçÇø the Future Commission recommends the following: 

Develop best practice exemplars and a knowledge hub 

Meeting net zero targets has presented the industry with a big challenge as it requires changes to tried and trusted forms of construction. As an example, using more structural timber could help reduce embodied carbon but concerns about fire and water damage have made obtaining insurance cover difficult. Other challenges include understanding the most cost-effective net zero strategies for different building types, including domestic retrofit. 

• More investment is needed to research, develop and verify low carbon building systems so these can be used with confidence by the wider industry. An industry consortium including Buro Happold, Waugh Thistleton and University College London developed a National House ºÚ¶´ÉçÇø Council warranty and insurance pre-assessment residential timber frame system to make obtaining warranties and insurance easier for timber frame construction. The initiative was funded by a charity, Built by Nature, and is open source and free to use. UK Research & Innovation funding, such as that provided for the Construction Innovation Hub, would provide the resources, support and dissemination channels to develop more cost-effective net zero building systems. 
• The development and promotion of an industry-wide knowledge hub. Funded by Innovate UK and a range of industry organisations, the National Retrofit Hub was set up to help identify housing retrofit best practice knowledge and fill in gaps where these exist. It identified over 100 disparate sources of information. A wider knowledge hub would bring this expertise, which includes sources of funding and how to manage retrofit disruption, together in one place. This approach should be extended to other sectors to help the industry deliver effective net zero buildings more easily. 

Regulate embodied carbon 

The factors that have driven progress in the prime London commercial market towards net zero do not extend to all other sectors. The public sector has a role to play by requiring new buildings to be net zero, but regulation will be necessary for the private sector, and to provide a minimum baseline for all new buildings. 

• The industry has developed a building regulation called Part Z to regulate embodied and whole-life carbon. Supported by many industry bodies, including the RIBA, the RICS and the Chartered Institution of ºÚ¶´ÉçÇø Services Engineers, this proposes mandatory whole-life carbon assessments and upfront embodied carbon calculations for large buildings and housing developments. The industry is also developing the Net Zero Carbon ºÚ¶´ÉçÇøs Standard which will set targets for embodied and operational carbon for different building types based on keeping global temperatures below 1.5°C. The London Plan requires large developments to submit whole-life carbon assessments as part of the planning application. These could be used to set benchmarks for different building types. The government should introduce Part Z nationally as soon as is practically possible as this would raise general industry awareness of embodied carbon, which is the first step towards emissions reduction. A timetable to introduce mandatory targets, based on the Net Zero Carbon ºÚ¶´ÉçÇøs Standard, should be set out. This should include interim targets to give the industry time to adapt. 

The government should introduce Part Z nationally as soon as is practically possible as this would raise general industry awareness of embodied carbon

Develop circular economy principles 

Where refurbishment is not practical, as much as possible of the materials in the building being demolished should be reused. Processes should be put in place to facilitate that reuse. 

• Deconstruction audits should be carried out to catalogue all the materials in a building. These should be retained for use on site or, if this is not possible, reused elsewhere. If materials cannot be reused, they should be recycled. Waste energy recovery or landfill should be a last resort. 
• For new buildings, digital twins and material passports should be used to record the materials used so these can be easily extracted and reused in the future. 

 Reducing operational energy use 

In 2021 the government launched a consultation proposing a performance-based framework for large commercial and industrial buildings in England and Wales. This proposed benchmarking buildings against similar ones. These would be rated annually on a one to six star scale similar to that used for the NABERS environmental rating methodology, which has successfully driven down energy use in Australian buildings by 34% over the past decade. Potentially based on the NABERS methodology, the framework is more sophisticated than the existing display energy certificate system and would apply to a wider range of buildings. In time the government suggests it could introduce a financial incentive and penalty mechanism to drive energy consumption reductions. 

• The consultation included eight different building types. The government proposed that the framework be applied to offices in the first instance and included a sector-specific consultation launched at the same time. The commercial offices consultation proposed a soft launch in 2022-23 with a full launch of the rating system in 2023. The government has yet to publish its response to the consultation, more than two years after it closed. The success of NABERS in reducing operational emissions in Australia demonstrates that the framework should be adopted without delay. The commission calls upon the government to publish the consultation response with the objective of launching a scheme for offices in 2024-25. 

Incentivising retrofit 

Refurbishing rather than redeveloping buildings must be prioritised to control embodied carbon emissions. Commercial refurbishment rather than redevelopment is gathering pace, but with 17% of the UK carbon emissions coming from home heating, retrofitting the existing stock should be incentivised in order to drive change. 

• The Climate Change Committee estimates that retrofitting homes will cost £250bn. While direct grants such as those offered for heat pumps would be welcome, the scale of the costs means owner occupiers will have to bear much of the burden. Mitigating the costs would help incentivise action. Measures to consider include widening the scope of VAT exemptions for retrofit so that they include associated refurbishment work, subject to meeting minimum energy standards. New-builds are currently exempt from VAT whereas refurbishments are liable, which encourages new-build. The two should be aligned. Other incentives could include pay-to-save loans and stamp duty exemptions for retrofitted homes. 
• The simplest retrofit option is to replace services which use fossil fuels with those that use electricity, such as heat pumps. Incentives such as the boiler upgrade scheme which grants £7,500 to replace gas- or oil-fired boilers with heat pumps have an important role here to encourage adoption. As new technologies such as CO₂ heat pumps for heating hot water become more readily available, their adoption should be incentivised too. 

Prioritise early design development 

Prioritising upfront design is a prerequisite for improving productivity, particularly to leverage the advantages of design for manufacture and assembly. It is also crucial for meeting net zero targets. Sufficient time must be spent on the early design stages to ensure that building structures and services are as lean as possible to minimise upfront embodied carbon and deliver predicted building performance. 

• Understanding the contractor’s contribution to upfront embodied carbon and building performance, and embedding minimum standards in contracts, will help incentivise early design development as this will reduce the level of risk pricing added by contractors at tender stage.  

Carbon reporting 

Decarbonising the built environment needs the support of the whole supply chain, including manufacturers.  

• Suppliers should be required to report their own net zero strategies and processes. Manufacturers should provide environmental product declarations or equivalent for all products so that carbon can be considered more easily and accurately reported in the procurement process.

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