“Establish the principles at an early stage”

Round table discussion moderated by Dieter Aigner, Managing Director of Raiffeisen KAG and the experts

• Marc Guido Höhne, Managing Director, Delta Projektconsult Wien

• Johann Marchner, Managing Director, Wienerberger Österreich

• Karin Stieldorf, Technical University of Vienna, Institute for Building Construction

• Alexander Toth, Raiffeisen KAG

For many decades, speed, profit, and efficiency were the key factors in the construction industry. Is the focus now shifting more towards ESG?

Marc Höhne: The topic on everyone’s minds right now is energy, obviously also as a result of the war and the related energy crisis. In particular, the goal is to reduce primary energy consumption, amongst other things by using more renewable energy. Naturally, in relation to this, it is also important to achieve much higher energy efficiency for buildings, because otherwise it doesn’t do any good. With modern buildings, this is not the major challenge and there are solutions, but there are significant difficulties with older buildings. And when we talk about energy production, we mean using geothermal and solar. In this regard, however, the options are very, very limited when inner-city areas are involved, where the rooftops and lots are very small.

So, what can one do? What we see is that a lot of our customers think that all they need to do is check off 5 points on a list of 10 checkpoints and then they’re done. If it was that easy, we wouldn’t all be constantly working on this topic. In our experience, it’s ultimately a combination of different measures that leads to success. And for every project, it might be a similar solution, but it’s really never exactly the same one. So, a lot of time and energy has to be invested in every project to really find the right solutions, with the right cost-benefit ratio.

Are your customers open to more sustainability in their construction projects?

Marc Höhne: Unfortunately, I have to say that many of them simply don’t understand why it is so difficult. And now, with energy prices lower again, the question arises as to whether the measures taken are the right solution from a long-term perspective. In particular, when I am working with industrial customers and we have a depreciation period of more than four years, then the topic is irrelevant anyway. There is no further discussion about it. And even though properties in the industrial sector play a major role, the emphasis is often on the core business, while the property itself is a secondary consideration.

Of course, very different approaches are taken by property owners. The big institutional players have had this topic on their radar for the last three or four years. They are well prepared and have at least a rough idea of what they want to achieve, and that’s important. On the other hand, I still run into plenty of public sector housing developers who are just getting started and have not formulated any strategy at all about how they want to approach this topic. They are still in the dark. In our opinion, it is currently extremely important to raise awareness about this topic, in order to point out the criteria and the ways they can move towards more sustainability. Sometimes they are simply overwhelmed by the variety of options. Unfortunately, when they don’t have a strategy it’s often the case that they immediately focus on what they think has the biggest impact on the climate. Instead of doing exactly the opposite: looking at what is easiest to implement. And where they can achieve the biggest impact with small, focused measures. To some degree, there is a lack of orientation about how to handle the subject of sustainability and how to expand the horizon.

Ms Stieldorf, you’re head of the programme “Sustainable Building” at the Technical University of Vienna. What is your experience of this paradigm change, if it is indeed one, and where do you still see deficits?

Karin Stieldorf: Our programme provides a very good overview of this subject. We’ve recently seen a shift that is very exciting. In the past, participants were mainly interested in supplementing their existing knowledge of the subject. Now, we have a lot of young academics and architects who want to expand their knowledge and work together more confidently with property developers. They don’t want to get bogged down in discussions; they want to be able to present solid arguments. In principle, I think this is a great basis.

In my opinion, I think it is really important to reach a consensus on the criteria for sustainable construction, so we don’t end up saying, “Well, I have my focus, and you have yours”. That was pretty typical in the past. An architect designed a building and then said, “OK, I’ll pass this on to the structural engineer now, and this on to the construction engineer, and this on to the building physics engineer, and they can figure out if the building works or not.” This is just not the way it works anymore. Even at the planning stage, I have to know that the project is moving in the right direction and won’t have to be scrapped in the end.

Networked thinking has become a very important goal. And because construction is a highly diverse field, this ranges from regional planning and urban planning all the way to details such as considering what construction materials to use. Ultimately, however, the first decision at the start of the planning process is whether I want to build using wood, concrete, straw, other regenerative materials, or out of bricks. Every construction material is justified, if it is used correctly in the right location and is the best solution there. Networked thinking, from very large to very small dimensions, is important. But the location is also crucial for finding the right solution, in regional, topographical and geographical terms.

Will wood, loam, and straw play a bigger role in the future?

Karin Stieldorf: One of the things we focus on is the construction and renovation of historical loam structures. But things change, and loam will have to be used differently in the future on order to be economically successful. For this to happen, a new approach is needed in terms of production. This may also include how the connection with insulation looks. The traditional insulation material in loam construction was straw, but I can’t really imagine the mix of straw and loam being used in new buildings in the future. However, you can use straw mats, which work well as an insulation material.

A lot of research remains to be done for loam construction to be economically and ecologically successful, so that it is also finally accepted. There also needs to be some development in terms of design. And of course, people’s awareness and understanding needs to be enhanced, so that they accept buildings that are made of loam.

Mr Marchner, as managing director of the world’s leading brick manufacturer Wienerberger – what do you think about buildings made out of loam?

Johann Marchner: I’d like to emphasise that we already have everything we need for sustainable construction: there is no need to really invent anything new. We simply have to define our requirements for the buildings and their utilisation. If we decide to go with loam construction, then we just have to accept that certain applications and requirements are not possible. For instance, with a normal wall thickness, you just won’t be able to hang kitchen cupboards on the wall. We have to be clear about our expectations for each individual structural unit. The only reason for this is that we always try to plan each building individually, from the ground up. If you look at the automotive industry though, you can see that it uses platforms. And then it builds variants based on these platforms, thousands of variants on an individual platform. But we are always trying to invent each building new every time. This results in more work and higher costs.

What strategies are you pursuing to make your products more suitable for a sustainable construction industry?

Johann Marchner: Sustainability is a highly motivating topic for us. And two big parts of this issue are energy and CO2. At the same time, I have to say that up to now we have not faced any supply problems or any problems with energy costs, because we have long-term contracts and thus we are not impacted by the fluctuations. But it is clear that manufacturing bricks still results in carbon dioxide emissions, because on the one hand we use natural gas and on the other hand as a raw material clay contains dolomite or carbonate, for example.

Of course, if I take a look at the Ringstraße in Vienna, it’s clear that masonry buildings last 100, 150 or even 200 years, and so they are sustainable simply based on their lifespan. And if you compare the energy data for an old brick building with an identical structure built with modern construction techniques, you often find that the old building substantially outperforms the new one in terms of energy efficiency. If we do not attempt to distort things that are dictated by building physics, then we have everything we need to be able to build sustainably. And of course, it’s a question of transparency as well. While people are happy to say that wood is an environmentally-friendly building material, they don’t ask where the wood comes from. It’s really important to get the whole story.

How are you working to make brick an environmentally-sound building material?

Johann Marchner: We are building the world’s first-ever carbon-free brick factory in Uttendorf right now, which doesn’t use fossil gas; it only uses green electricity. The plant is already under construction. This means that in the future there will be a brick that essentially has no carbon footprint from production. I can only underline what Ms Stieldorf said: the point is to work together, frankly, so that we can achieve results together and not make our plans without people. First of all, we all have the responsibility to be transparent with the figures, data, and facts, and secondly we have to make the lifecycle of the building the centre of attention.

For us, sustainability is something that we are putting in practice. For decades now we have only used green electricity for our production. We are rehabilitating our quarries and our clay mines. Not just because of the legal regulations, but because biodiversity is a key topic for us. And of course, we are working to conserve the raw materials as much as possible and to fire them with the highest possible level of energy efficiency. For several years now, many of our companies have been using construction rubble as a valuable source of material. We are also producing locally; our value chain is rooted locally, and the transport routes are short. And if we are also able to decarbonise our production process, then I think that bricks can beat practically any other construction material in terms of the ecological footprint.

What is the investor perspective on this topic?

Alexander Toth: If one looks at the global carbon footprint of the construction sector, cement accounts for around 8% of it (read Construction industry in transition). That is very high. Of course, we are interested in identifying which innovations can help to reduce this ratio, and what technical options there to press forward with the transformation of this sector. And there are a large number of very small components involved. Technology plays a major role. As for the materials themselves, a lot of work has already been done in the field of producing cement and clinker. Production has already become a lot more sustainable and some of it can be substituted. But when we are talking about substitution, we quickly arrive at the issue of the regulatory framework, which only allows certain qualities for specific applications. And if I have to take delivery of different batches of concrete and pre-mixed concrete, it quickly become difficult if not impossible to get any work done.

What innovative developments play a role in this regard?

Alexander Toth: The big solution that is currently a topic aims at net zero by 2050. This means that unavoidable carbon emissions will have to be used elsewhere or extracted from the air. Carbon capture may then become a major issue, and there is already a lot of capital flowing into this area. It would be great if cement were only used where it is necessary, for certain construction projects such as hydroelectric power plants or other special applications. Possible future alternatives to cement are naturally also interesting for investors. And the topic of energy is very interesting. Because in Europe a large amount of energy resources are pumped into buildings, and this could be significantly lowered, for example with recuperation. Water consumption could also be lowered. From an investment perspective, building engineering is also a major area of interest. Along with smart cities: How is it possible to shorten transport routes? How can resources be used more optimally?

Everywhere you look, development and innovation are driving forces. And our focus is always on things that can be measured. In this regard, not everything can be measured in quantitative terms; you also need qualitative assessments from experts within the field. For orientation, we use the data that the companies provide to use, and the answers that we get directly from the companies in dialogue as part of our shareholder engagement activities.

Is it true that renovation beats new construction when it comes to sustainability?

Marc Höhne: There is always going to be new construction. I am sure of that. What’s more important is that we really need to significantly increase the renovation rate from the current level of 1%. We have to get to 3–4%. Otherwise, we won’t come even close to achieving the EU’s climate targets, because too much of our existing stock of buildings is just too energy-inefficient. As for new construction, careful use of resources is the key point, in particular that we prioritise the selection of building sites completely differently than we have in the past. It’s simply the case that far too much is done backwards when it comes to zoning. For instance, I think it is sad that the city of Vienna is rezoning really excellent agricultural land in Rothneusiedl for construction purposes. The use of other brownfield sites in Vienna and the vicinity would be a better alternative. What’s really important for me, and this brings me to the investor perspective is that brownfield investment should always be preferred over greenfield investment. Greenfield sites should only be an option if certain conditions are met, for example unproductive soils that can no longer be used. Every single square metre of land that is sealed is just one too many.

What role does the circular economy play in the construction industry?

Marc Höhne: I’ve been studying the subject of the circular economy for more than eight years now. Unfortunately, we are still really just at the very beginning in this field. Out of a 100-km race, we’ve maybe run five. If that much. The main reason for this is that the stakeholders in the construction industry are not yet cooperating with each other strongly when it comes to manufacturing their materials and components. Many of them are too focused on their own little market niches. There needs to be a lot more communication with each other.

After all, what is the circular economy about? We want to reuse materials, but not in a downcycling process, for example that I crush concrete after demolition and then use it as foundation layer for infrastructure construction. The idea is to reuse the component, i.e. the material, in a kind of upcycling, in the condition it was before. And right now there is simply not enough of this. There are good approaches, but I think there is too little sharing among the parties; for instance, when we ask our clients to consider standardised, modularised technologies, a lot of them are not willing to pay the additional costs in the planning phase and/or to do the development work as first movers.

How would it be possible to improve or initiate communication?

Marc Höhne: There just have to be forums where the various stakeholders can exchange ideas. And the legislator also needs to be involved. Because a lot of the aspects of the circular economy are well-intentioned, but they can’t be implemented due to legal regulations. For instance, if I want to reuse an insulation board from an existing building, sometimes I am not allowed to do that. I am forced to dispose of it. The stakeholders involved have to talk to each other and there has to be an understanding that things have to change. This extends deep into the regulatory framework. If we apply some of the current standards and interpretations, then some of our buildings are just simply overdimensioned, in terms of the technical aspects. We clearly have to move in the opposite direction. When it comes to designing technical facilities, sometimes we only need 40–50% compared to the standard, in order to be able to operate economically. So, there’s a very wide range of factors at play, and they all have to be addressed in parallel.

Ms Stieldorf, I guess you agree?

Karin Stieldorf: Yes. But for me, what’s missing from this is the climate. When we look at which building materials are being used where, we can see that a lot more wood is used in western Austria. This makes sense too, because the higher up I am, the fewer problems I have with summer conditions. In the eastern part of Austria, wood does not have such a strong tradition in building, and I just need more mass to make buildings fit for summer. We have done a lot of research on this issue and developed some solutions.

One example, which I really like for multi-floor residential buildings, is so-called “space-frame” construction. This is essentially a framework with concrete floors, that can have quite large spans and can also be activated. This is a big advantage. I could also use recycled concrete for this. It results in a load-bearing structure which has a long lifespan and can be adapted all around, inside and out, to the needs of the local climate or the local building characteristics. Between the load-bearing elements, I can use wood, I can build it myself, or of course I can also use brick masonry. Ultimately, I have a long-lasting load-bearing structure, which is surrounded by more flexible, replaceable components. This is really a sustainable approach.

„In terms of the circular economy, we will have to pay much more attention to the choice and management of building materials."

What role does the circular economy play at Wienerberger?

Johann Marchner: For a long time, construction just consisted of putting one stone on top of the other. But nowadays we have five plants manufacturing prefab brick components in Austria to make it easier for people on construction sites and to save time. But aside from bricks, there is no construction material that works completely on its own, and I think I pretty much know them all.

Wienerberger is currently building the project Wildgarten at the Rosenhügel, which has eight stories. It’s monolithic construction, using only brick masonry. It can be completely dismantled at the end of the lifecycle. The principle, a well-known, large property developer, is building it like this, because it will retain ownership. And it knows what it is doing, because this building will have significantly lower maintenance costs, at least for the walls. It’s this kind of thing that demonstrates that we don’t need to invent anything new. What we need to do is bring all of the stakeholders together to make more progress with sustainable building.

In Vienna’s Seestadt district, we are erecting a structure based on a 10-year old idea from the architects Baumschlager Eberle, called ROBIN. The buildings essentially do not have heating or cooling. It has dual-layer, massive walls, using 2 x 38cm bricks. But after many years of experience, I can tell you: it works. What makes this approach so successful? It exploits normal building physics effects, such as deep window recess, which leads to natural shading, and it also utilises the natural thermal mass of the brick.

What opportunities does the circular economy offer on the capital markets?

Alexander Toth: Circular economy means that at the end of their lifecycles, buildings can be dismantled into their component parts without generating any toxic waste and that these parts can then be reused for new construction again. From an investment perspective, there’s a lot of complicated topics to unpack here. For example, the bricks: for regulatory reasons, I am not allowed to reuse bricks. Or components like the ceiling elements, which are poured and cannot be separated. Legacy pollutants are also a major topic. One need only think of the insulation materials used before 1996, before the regulations. These old materials are nothing at all like the insulation that is used nowadays, which is integrated directly into the bricks.

Some companies have made a lot of progress in this field. Our standpoint is to use old buildings as long as possible, when it is technically feasible. Because even if I gut a building and have to reconstruct it, say because I have an office building and I want to make it into residential space, this is still far better in terms of the emissions and ecological footprint, and ideally it’s combined with the installation of modern technology for heat recovery and ventilation. Of course, we are also interested in the most effective possible use of resources.

Do you have any final requests, interests or remarks?

Johann Marchner: I have a request directed at the legislators. Please get rid of the excessive subsidies for specific construction materials based on ideological considerations. If we are supposed to use wood, then let’s use Austrian wood, from sustainable forestry. And that has to be transparent and demonstrated with certification of origin.

Karin Stieldorf: With regard to the circular economy, we will have to pay a lot more attention to the selection and management of construction materials. This is a new element in the planning process, which is linked to the other parameters of sustainability. This means that which materials one selects, which characteristics these materials have, and what their lifecycle looks like will become increasingly important. This may even result in a new design look, which is not just possible but also very desirable.

In any case, we will have to work with building materials differently in the future, and more consciously. I think that Building Information Modelling offers great opportunities, because the individual materials can be included in the planning process, together with their specific properties. This may result in better cooperation going forward and a higher degree of digital networking as well. I think that new forms of production will emerge, maybe not in brick production, but in other areas. And so I see opportunities for loam, straw, and other regenerative materials in specific projects.

Marc Höhne: People often think that sustainability and architecture are inseparably linked with each other, but this really isn’t the case. But the situation is improving and especially the young generation of architects is very keen on the topic of sustainability. That said, they are often totally frustrated, because in 90% of the projects that happen, sustainability is often the first thing to be sacrificed to economic considerations. In order for this not to happen, sustainability has to be anchored in corporate strategy and working on that basis it has to be developed at the project level, so that it can ultimately be implemented in all of the key processes. What this also means is that one has to establish the principles at an early stage, which can only be changed with great difficulty later on.