Finding Building Product Categories With Sustainability Growth Potential

With more consumers prioritizing energy-efficient solutions for their homes, sustainability has become a watchword in the building and construction industry. But which categories of building products and materials are most effective in reducing emissions? 

The answer depends on what you’re trying to achieve and how much difference the product would make. To get a clearer picture of the market for sustainable building products, we surveyed builders, general contractors and architects about the impact they’re seeing and where they think the market could go. Here are the highlights. 

What drives sustainability?

Different factors drive product sustainability. Industry professionals say the three that will go furthest in reducing greenhouse gas emissions are the use of sustainable materials, the recyclability of materials and energy efficiency (see Figure 1).

According to our survey respondents, HVAC (heating, ventilating and air conditioning) products have the biggest impact on sustainability. Insulation and concrete take second and third place, respectively (see Figure 2). 

New and unmet opportunities

But the sustainability picture isn’t static. Industry professionals say they expect to adopt more of some categories of sustainable products — including HVAC, insulation and concrete — than others. Satisfaction also varies by product category. On average, professionals are most satisfied with the number of options for sustainable lighting and least satisfied with the sustainable offerings in concrete (see Figure 3). 

In the world of sustainable building products, lighting, windows, doors, flooring and insulation are high-growth categories (despite being at the more mature end of the market) because they have an obvious energy efficiency benefit. Concrete, roofing and siding are underserved markets that also offer high growth, albeit at a greater level of investment. 

This brings us to the question of pricing. We asked survey respondents how much they thought their customers (i.e., property owners) were willing to pay for different categories of sustainable building products. Not surprisingly, the products most likely to command a premium are the ones believed to pack the biggest sustainability punch given the available options on the market (see Figure 4). 

Lack of options isn’t the only thing holding back the market for sustainable building products. Building professionals identify a number of barriers to adoption. The most important are cost and limited awareness of what’s available (see Figure 5). 

Implications for market participants

What can manufacturers and distributors do to break down the barriers and encourage adoption of sustainable building products? Consider the following actions: 

• Promote product offerings available in the market, with an eye to boosting awareness

• Demonstrate the impact products have on sustainability and other benefits (e.g., payback) in order to educate customers and investors 

• Innovate cost-competitive products that sell property owners on the benefits of sustainability 

• Expand the number and range of sustainable product offerings to cater to different customer subsegments, bearing in mind that even for categories like drywall, a desire for more sustainable offerings exists (see Figure 6) 

• Influence government policy, directly or indirectly, to support sustainable product options and change perceptions of key decision-makers (such as architects) 

For their part, investors seeking a presence in sustainability need to evaluate where they want to play: in a high-growth category, a more-or-less-accepted sustainability offering, or some other part of the market. 

• Underserved, high-growth product categories: Concrete, roofing and siding
• High-growth categories where current sustainable offerings meet property owner needs: Windows/doors, HVAC and insulation 
• More well-established and mature markets: Lighting, windows/doors, flooring and insulation

Hence, a consideration is whether to invest in categories with a relatively strong sustainability profile versus categories that have significant opportunities for improvement. Indeed, the need to improve a category/subcategory’s sustainability performance and/or the sustainability performance of companies within the category might be viewed as an opportunity rather than a risk management area to be avoided. Factors such as the energy intensity per dollar of revenue or per unit of production, the emissions profile, the degree of exposure to regulation and/or customers, and the company’s lack of adoption of sustainability actions (e.g., operations initiatives, new product development) are factors that indicate potential opportunity for sustainability and business improvement. Investors can develop frameworks to evaluate where an opportunity to improve the sustainability profile exists and combine them with traditional growth selection criteria such as size of market or growth rate to identify subcategories and the companies within them. 

The value in building green

Sustainability is a nuanced challenge in building and construction. The approaches that are most effective according to science and measurement may not be practical from the perspective of an industry professional. In our survey, builders, general contractors and architects reveal that satisfaction and the pace of adoption vary not just across, but within, product categories. Those gaps spell opportunity for those looking to invest in the future of building products and materials.