House of Commons - Business and Enterprise

Select Committee on Business and Enterprise Ninth Report

6 Achieving environmental sustainability

220. A sustainable construction industry is one that seeks to minimise the impact on the environment of both the construction process and the end-product itself. As the third part of the sustainability 'triple bottom line', there is now growing recognition that construction has a major role to play in tackling climate change. The Government and industry's joint Strategy for Sustainable Construction has set the agenda for industry improvement over the coming years. As part of this, the sector has set itself some challenging targets to reduce its environmental impact. One of the six pillars of the Construction Commitments deals specifically with sustainability. One of the biggest difficulties the industry now faces is in creating a culture where environmental concerns are viewed as an integral part of the construction process and delivery of the end-product, and not as a costly added extra.

The construction process

221. In recent years, the industry has made significant progress in reducing the environmental consequences of the construction process, largely because it has had a clear economic incentive to do so. In this section we look at the ways in which the construction process has improved, first by considering what has been done to reduce the amount it wastes. Then we look at how the sector is decreasing its energy and water consumption, and current efforts to reduce the social cost of construction work caused through disruption to local communities.

CUTTING WASTE

222. Construction and demolition accounts for almost a third of all waste generated in the UK each year.[365] This would be even greater were it not for the comparatively high level of recycling. Out of the 120 million tonnes of construction waste produced every year, 65 million tonnes are recycled, mainly as aggregates. A further 35 million tonnes (mainly inert excavation waste) are used for landfill engineering or quarry restoration. The remaining 20 million tonnes go to landfill.[366] This figure has fallen significantly in recent years because the Government has increased the cost of landfill through taxation. As part of its Strategy for Sustainable Construction the Government has set a target for 2012 to reduce the amount of construction, demolition and excavation waste to landfill by 50% on 2008 levels—a reduction of 10 million tonnes per year. This will need to be achieved through a combination of reduced wastage, more recycling, and greater use of recovered materials.

223. In 1996 the then government introduced the Landfill Tax Levy. This was initially set at a standard rate of £7 per tonne for active waste (which either decays or contaminates land) and £2 per tonne for inert material, such as rocks and soil. Over the years the standard rate has increased to its current level of £32 per tonne. From April 2008 to at least 2010, the Government has stated its intention to further increase the standard rate by £8 each year to £48 for the 2010/11 tax year. Landfill operators are liable for the tax. Under the Landfill Tax Credit Scheme, they can contribute up to 6.6% of their tax liability to environmental bodies, and reclaim 90% of this as a tax credit. To date landfill operators have given almost £1 billion to around 2,300 organisations for a variety of local environmental projects.

224. The construction industry was generally supportive of the Landfill Tax Levy and saw it as providing an important economic incentive to reduce the amount of waste that goes into landfill, and invest more in recycling facilities. This is particularly the case for larger companies and frequent construction clients, who need a systematic approach to waste management. The Construction Products Association said that it had been a "successful tax", and also praised the fact that the Government has clearly stated its intention to ramp up the Levy rate over the coming years, thus giving the industry time to invest in its ability to reduce the amount it sends to landfill still further.[367] However, the Federation of Master Builders, which represents smaller construction customers, was critical of the Government for not providing sufficient recycling facilities to allow firms to avoid the cost of landfill.[368] Additionally, local authorities in England reported that they had dealt with more than 2.6 million incidents of fly-tipping in 2006/07—up 5% on 2005/06.[369] It is widely believed that much of this is the result of tipping by smaller builders seeking to avoid the rising cost of landfill disposal.

225. In 2002 the Government also introduced the Aggregates Levy. This is a tax on the commercial exploitation of aggregates, such as sand, gravel and rock, to take account of the environmental costs of quarrying, for example through loss of biodiversity as well as resultant noise and disruption. The aim of the Levy is also to encourage greater levels of recycling. It is broadly revenue neutral, as many of the monies raised are returned to business through a 0.1% cut in employers' National Insurance Contributions. However, a proportion goes towards the Aggregates Levy Sustainability Fund. This supports projects that, among others, promote environmentally-friendly aggregates extraction and address the impacts of past extraction. In its first four years the Fund has distributed almost £70 million to almost 1,200 projects.[370] However, the Quarry Products Association was sceptical of the impact of the Aggregates Levy on the supply of recycled and secondary materials, suggesting that any effect had been modest.[371]

226. Meeting the target for 2012 to reduce the amount of construction, demolition and excavation waste to landfill by 50% on 2008 levels will require a step-change in the industry's current approach to managing waste. The Quarry Products Association told us, however, that for aggregates the potential for greater use of recycled and secondary materials is constrained by the fact that most available materials are already in the market. These aggregates constitute a quarter of the market—much higher than the European average of 7%.[372] Future waste reductions are more likely to come from improvements in manufacturing processes that reduce the amount of unnecessary material delivered to site in the first place.[373] Furthermore, clients too will have a vital role to play in providing clarity about what it is they want, therefore reducing waste from having to undo work on site that has already been done. The setting up of an integrated project team is key to achieving this. As CABE told us, waste is "never going to be eliminated just by shouting at the industry to do better".[374]

WATER AND ENERGY CONSUMPTION

227. The Strategy for Sustainable Construction has set targets for energy and water consumption, which also form part of the industry's new Accelerating Change targets for 2012. These are to reduce carbon dioxide emissions arising from construction processes and associated transport by 15% over 2008 levels, and over the same period to reduce water consumption in the manufacturing and construction phase by 20%. The Construction Products Association told us suppliers and manufacturers had already made considerable progress in reducing their energy use, driven primarily by increased fuel costs in recent years.[375] Constructing Excellence collects data on the sector's water and energy consumption. It shows that since 2004 the average energy use in terms of kilograms of carbon dioxide per £100,000 of project value, has fallen from 322 to 273—a 15% reduction. Similarly, average water consumption measured in cubic metres per £100,000 of project value has fallen from 9.7 to 8.2—also a 15% reduction.[376] On past performance, this suggests the industry's new targets for energy and water use are achievable, especially for energy, given fuel costs are now expected to remain high for the foreseeable future.

THE SOCIAL COST OF CONSTRUCTION WORK

228. The majority of construction work takes place adjacent or near to existing buildings. The resultant noise, dust and traffic disruption generated on site can impact significantly on the surrounding community, and have a negative effect on people's perceptions of the sector. The City of London Corporation told us about its work to address this concern through the Considerate Contractor Scheme, which it introduced over 20 years ago to encourage good practice on construction sites in the Square Mile. It has a voluntary code, which aims to ensure contractors conduct their operations in a safe and considerate manner, and with due regard for passing pedestrians and road users.[377]

229. The success of the initiative has led to the wider adoption of the principles of considerate construction. In the late 1990s the Construction Umbrella Bodies established a nationwide version, known as the Considerate Constructors Scheme. The Code of Considerate Practice for this states that all work should be carried out "with positive consideration for the needs of traders and businesses, site personnel and visitors, and the general public". It also requires that contractors should be aware of the environmental impact of their site and minimise the effects of noise, light and air pollution.[378] All registered sites are monitored to assess compliance with the Code, with the role of inspection being to encourage a site operator to want to improve their performance. Over 27,000 sites have registered with the scheme since its introduction, and nearly 36,000 inspections have taken place.[379] The Office of Government Commerce's Common Minimum Standards state that all public sector clients should include contract clauses for contractors to be members of the scheme or a local equivalent, and to comply with its code of practice. The new Minister responsible for construction has also publicly given her encouragement for all construction companies to sign up to the scheme. However, there are no measures of the extent to which public sector clients currently insist upon this.

230. Reducing the environmental impact of the construction process is a key part of Government and industry's Strategy for Sustainable Construction. We support new targets for reducing waste, and for cutting energy and water consumption. Achievement of these is likely to stem mainly from economic incentives, as well as higher fuel costs. Any increase in taxation must be accompanied by greater enforcement activity against fly-tipping. The public sector as client also has an important role to play in improving the construction process. Integrated team delivery can reduce the waste arising from construction projects through early planning and engagement with the supply chain. We saw examples of this in our visits to the Royal London Hospital and the 2012 Olympic site in Stratford. Rigorous enforcement of the Common Minimum Standards by the Office of Government Commerce should also include requiring that all public sector projects are registered for the Considerate Constructors Scheme, or some equivalent. This will demonstrate best practice to the private sector, and help improve the public image of the industry.

The end-product

231. Reducing the impact of the industry's output on the environment is also an integral part of the creation of a sustainable construction sector. In this section we look at government's role as client in embedding environmental sustainability in construction procurement. We then consider actions it can take as regulator to influence the private housing sector.

THE PUBLIC SECTOR AS CLIENT

232. There are enormous opportunities for central Government and the wider public sector to set a strong lead through the sustainable design, procurement, maintenance and operation of its built assets, and in so doing bring costs down for the rest of the market.[380] In 2006, the Government launched a range of targets for sustainable operations on the government estate, including to achieve carbon neutrality across its office estate by 2012; for departments to increase their energy efficiency per m² by 15% over 1999/00 levels by 2010; and for water consumption to average 3m³ per person per year for all new office build and major refurbishments. These have been incorporated in the Strategy for Sustainable Construction.

233. Consideration of whole-life value is key to the investment case for environmentally sustainable buildings. However, clients' decisions can be skewed by their tendency to focus on initial costs. As the Government's own Sustainable Procurement Task Force put it: "Incentive systems neither reward sustainable procurement nor do they punish failure to comply with existing policies in this area".[381] Various witnesses told us government needed to break out of this mind-set.[382]

234. In reality, sustainable buildings need not be significantly more expensive than traditional ones. Constructing Excellence cited evidence from its demonstration projects, which suggests increasing the sustainability of new buildings can be achieved at little or no additional capital cost (although this is not the case for the refurbishment of existing buildings, which can be more complex).[383] Rather, the additional cost is in part the result of perception and process. Contractors do not yet routinely deliver sustainable projects, and so increase their cost estimates because they perceive greater risk and uncertainty in such ventures.[384] If the design process treats sustainability as an 'add-on' at the end, that too is likely to lead to a more expensive solution than if sustainability is key to the design premise from the outset.[385]

235. The Government is beginning to embed environmental concerns in departments' investment decisions by requiring procurers to take account of the cost of carbon in their appraisal of projects. In 2007, the Department for Environment, Food and Rural Affairs (DEFRA) published supplementary guidance to HM Treasury's Green Book setting out how departments' investment appraisals should quantify the amount of carbon dioxide new projects will generate, and the resultant cost. The guidance provides a 'shadow price' of carbon, which rises by 2% each year to reflect inflation, and by a further 2% per year to reflect the rising damage costs from higher concentrations of greenhouse gases in the atmosphere. In 2008 the shadow price is £26.50 per tonne of carbon dioxide. At 2008 prices, this will rise to £33.60 by 2020 and £60.80 by 2050. CABE believe the adoption of such 'carbon accounting' could have "a fundamental effect on the decisions we make about buildings".[386] However, the Minister responsible for construction said "we are still in very early days for carbon accounting".[387]

236. Carbon accounting depends on the availability of information demonstrating the carbon-saving potential of different technologies and building designs. This is where post-occupancy evaluation is important.[388] Assessing the environmental outcomes of a project in the years after its completion will provide more robust data to inform future project appraisals. The Office of Government Commerce is introducing mandatory performance benchmarking of office buildings on the Government's Civil Estate. We hope this will provide the kind of information that will be able to inform future project appraisals, but the OGC will need to extend the scheme to cover all parts of the public sector, if it is to gather evidence on a range of different buildings, and not just offices.

237. In addition to carbon accounting, the Government promotes the procurement of sustainable buildings by requiring public sector new build to meet a certain standard over and above that defined by the Building Regulations. The Building Research Establishment Environmental Assessment Method (BREEAM) is widely used to assess the performance of new projects. This marks buildings' operation against a range of categories, including pollution, water use, land use, materials, energy use and health. The credits awarded in each area produce an overall score on which the BRE awards a rating of 'Pass', 'Good', 'Very Good' or 'Excellent'.

238. Since 2002, all public sector new build projects have been required to achieve a rating of 'Excellent' and all major refurbishment projects a rating of 'Very Good' or better, as set out in the OGC's Common Minimum Standards. Yet, in a damning report last year the National Audit Office (NAO) found many departments were consistently failing to conduct such assessments, and that very few of the projects which were assessed actually met the required standard.[389] Just 14 out of 106 new build projects considered by the NAO achieved an 'Excellent' rating, and only 27 out of 335 refurbishment projects were rated as 'Very Good'. In response, the Minister said: "There is certainly a long way to go".[390] The NAO also concluded that, on its own, the BREEAM standard is not sufficient to ensure all new projects and refurbishments contribute to the Government's targets for improving the sustainability of its operations. Rather, departments should set more output-focused targets for construction procurement, such as for reduced water and energy use, and lower carbon emissions.

239. The joint Government and industry Strategy for Sustainable Construction includes a range of challenging targets for improving the environmental performance of the buildings it procures. If the Government is to meet these, a whole-life approach to project design will be key. HM Treasury must mandate the use of carbon accounting for the appraisal of all public sector construction projects. The Office of Government Commerce should also rigorously monitor progress against the BREEAM requirements for all new build to be rated 'Excellent' and all refurbishments 'Very Good'. However, the BREEAM standard should not be used in isolation to assess projects—it should be complementary to more specific output-focused targets for environmental performance.

THE HOUSING SECTOR

240. Although the public sector is client to around a third of the construction industry's output, it does not have the client role for most new housing. Consumers do not attach increased value to the sustainability of homes, although rising energy prices may change this view in the future.[391] In the absence of sufficient market drivers the role of government is to regulate for better quality homes. Successive changes to the Building Regulations in recent years have created large improvements in the carbon performance of buildings. The Institution of Civil Engineers noted that new projects today are 40% more energy efficient than in 2002, and 70% better than in 1990.[392]

241. The Government has set a target for all new homes to be carbon neutral by 2016. To this end, in April 2007, the Department for Communities and Local Government (CLG) launched its Code for Sustainable Homes. This sets a national standard for the homebuilding sector in the design and construction of sustainable homes. It places certain requirements on new build for energy use, carbon emissions, waste, materials, pollution and water use. Under the Code, new homes are given a rating of one to six, the lowest of which is above the current Building Regulations requirements, and the highest is for carbon neutral developments. The Code is at present voluntary for the private sector, but Level 3 as a minimum is mandatory for all publicly funded new housing.[393] The Government plans to use a similar approach for the non-domestic sector, where its ambition is to achieve carbon neutrality by 2019.

242. Although the long lead time for the target should give the industry opportunity to develop technologies, and trial new methods and materials, it will not be easy to introduce zero carbon homes.[394] Moreover, there is widespread concern that the Code and the Government's target focus on new build rather than the existing housing stock.[395] Housing is responsible for over a quarter of carbon emissions in the UK. The replacement rate of the existing stock is just 0.1% per annum, and new build adds only 1-2% each year. This means that by 2050, pre-2007 homes will still constitute more than 70% of all housing. The relative cost-effectiveness of promoting energy efficiency in new as opposed to existing homes is also important. The Construction Products Association told us for every pound spent achieving beyond Level 3 of the Code for Sustainable Homes in new homes, it was possible to get a return 50 times greater in terms of carbon savings by investing that money in the existing housing stock.[396]

243. Government needs to provide the incentives for homeowners to invest in making their homes more environmentally sustainable. In the current climate of rising energy costs, there is an increasing willingness amongst homeowners to make such changes, though some witnesses felt existing tax breaks were not sufficiently attractive.[397] In our Report on local energy in the 2006-07 Session we noted how tax incentives to install microgeneration systems in particular were ad hoc and inconsistent with those faced by larger commercial energy producers. We called then for "a comprehensive review of the way in which local energy is treated within the fiscal system, both at a national and local authority level".[398] We believe this conclusion still stands.

244. What the Government cannot influence through its purchasing power it must achieve through regulation. Changes to the Building Regulations have led to significant improvements in the energy efficiency of new buildings. We support the Government's target for all new build homes to be carbon neutral by 2016, and the role of the Code for Sustainable Homes in achieving this, but we recognise the extremely ambitious nature of this target. The existing housing stock also needs to be made more sustainable. To this end, we continue to believe the Government should conduct a comprehensive review of the incentives for homeowners to improve the environmental sustainability of their dwellings.

245. Overall, we welcome the Government and industry's joint Strategy for Sustainable Construction and hope that it will set the agenda for improving the long-term environmental performance of the sector. However, policy responsibility for sustainable construction is particularly fragmented across government. The Strategy itself is the product of six different departments. It sets out which bodies are responsible for particular targets, but no individual has overarching responsibility for its delivery. A Chief Construction Officer would make an important contribution to co-ordinating policy delivery across departments and promoting sustainable construction.

365 Ev 278, para 10.3 (Institution of Civil Engineers) Back

366 www.wrap.org.uk Back

367 Qq 64 and 79 (Construction Products Association) Back

368 Ev 257 (Federation of Master Builders) Back

369 Campaign to Protect Rural England "Stop the Drop" campaign website Back

370 Department for Environment, Food and Rural Affairs, Aggregates Levy Sustainability Fund in England 2002-2007, February 2006 Back

371 Ev 310, para 13 (Quarry Products Association) Back

372 Ibid. Back

373 Ev 227, para 42 (Constructing Excellence) Back

374 Q 230 (Commission for Architecture and the Built Environment) Back

375 Q 64 (Construction Products Association) Back

376 Constructing Excellence and BERR, Industry Performance Report 2007, September 2007 Back