Meeting Consumer Demand for Greater Sustainability
Implications for European building materials distributors
L.E.K. Consulting believes that the building and construction sector has a central role to play in developing ambitious sustainability targets, in order to protect natural resources and mitigate the impact of climate change.
To meet growing consumer demand for sustainable products, we propose that building materials distributors across Europe need to develop new product ranges and restructure existing supplier bases, alongside improving logistics and waste management practices.
We believe that companies committing to sustainability will gain a competitive advantage as more European nations commit to net-zero emissions in the coming years.
Embracing more sustainable ways of working can help your business cut costs and improve operational efficiency, thereby creating more value.
How Building and Construction Companies Can Achieve Success in Sustainability
To get a clearer picture of the market for sustainable building products, we surveyed builders and architects about the impact they're seeing and where they think the market could go.
In recent years, climate change and environmental sustainability have emerged as key issues for global businesses to address. Growing consumer awareness of environmental issues has led to greater demand for eco-friendly products. Companies are also increasingly mindful of their environmental footprint when considering their energy use or their production processes. Such trends will only become more pronounced in the coming years, as more European nations move towards net-zero emissions of greenhouse gases. Given the risk that climate change poses to lives and livelihoods around the world, moving towards more sustainable working practices and supply chains is becoming a global priority for all businesses.
In this Executive Insights, we will outline the growing consumer demand for sustainable products and the four different corporate approaches to sustainability identified by L.E.K. Consulting’s Global Corporate Sustainability Survey. We will then outline how European building materials distributors can set sustainability objectives across their business and provide examples of best practices in this area. Lastly, we will provide information on how we can help you embed sustainability within your building materials distribution business and the steps you need to take now to benefit from the commercial opportunities that sustainability will bring.
How sustainability is impacting global construction
The global building and construction sector is one of the biggest users of energy and one of the planet’s biggest producers of waste. Overall, the building and construction sector accounts for 40% of the world’s final energy use. Moreover, the manufacturing of building materials used by the sector (such as cement, glass and steel) means that building and construction also account for 10% of all process-driven carbon dioxide (CO2) emissions globally. Within Europe, the construction sector is also responsible for over 35% of the European Union’s (EU) total waste generation.
Given building and construction’s significant environmental impact, we believe that the sector now has a central role to play in developing ambitious sustainability targets in order to protect natural resources and mitigate the impact of climate change.
This move towards greater sustainability is being driven by consumers. People are looking to increase energy efficiency as part of home renovations, both to help protect the environment and to reduce energy costs. Around 35% of consumers in a recent L.E.K. U.S. Consumer Survey cited sustainability as the primary reason for undertaking energy-efficient home improvements, with some 20% citing cost savings. We believe that consumer demand for more sustainable building products will only strengthen in the coming years.
To meet this consumer-driven demand, other stakeholders across the building and construction value chain are moving towards greater sustainability, as shown in Figure 1. Manufacturers are increasingly willing to produce eco-friendly building materials, with contractors also committed to designing and building sustainable buildings, in order to meet changing consumer requirements.
Climbing the ladder towards greater sustainability
Sustainability and the wider environmental, social and governance (ESG) agenda are seen as a major growth opportunity for organisations and key to addressing changing societal expectations.
L.E.K.’s Global Corporate Sustainability Survey 2022 identifies four types of companies that are pursuing a range of different sustainability strategies. These approaches depend largely on whether a company is taking a defensive (compliance-driven or risk-driven) or proactive (growth-driven or values-driven) approach to sustainability.
The four company types are:
Minimalist: These companies adopt a compliance-driven approach and only dedicate limited resources to sustainability. Subsequently, any sustainability initiatives pursued have only a moderate to low impact.
Pragmatist: These companies implement sustainability measures primarily as a way of mitigating reputational and operational risk. Sustainability is not considered an integral part of the company’s DNA.
Leader: These companies have started to embrace and promote sustainability across their business as a way of boosting their growth. Such companies will adopt systematic reporting and set specific targets for reducing their environmental footprint.
Innovator: These companies are fully committed to sustainability goals and have established a comprehensive set of measures and a clear strategy for the business. Such companies have sustainability values strongly embedded within their corporate culture.
Companies within the minimalist and pragmatist groups are not yet fully aware of the commercial opportunities being presented by sustainability. However, leaders and innovators understand how embedding sustainability into their corporate strategy will help to drive growth and long-term value for their business.
Embracing the sustainable future
From our recent analysis of the sector, we have identified a range of initiatives that European building materials distribution companies can undertake to embed sustainability within their businesses. These encompass a variety of upstream, midstream and downstream processes, from initial design, sourcing and production through to transport, distribution and final construction. These initiatives are outlined in Figure 2 below.
As an initial step, we propose that businesses should assess the life cycle of their current product ranges to understand and then reduce their environmental impact. Such assessments should be followed up with moves towards better informing consumers as to how eco-friendly their products are. This will involve the development of new products and catalogues dedicated to sustainable products and will best position building materials distributors to meet rising consumer demand. At the same time, we recommend restructuring existing supplier bases in order to select suppliers that offer products matching defined sustainability requirements (e.g. FSC standards for wood products).
Product distribution sustainability initiatives can include logistical improvements such as route optimisation and the greater use of electric vehicles within delivery fleets, alongside embracing digital ways of working. Rationalising current power consumption levels can also enhance both sustainability and cost savings (see Figure 3).
Finally, we believe that there are steps companies can take to improve current waste management and recycling practices. These can include offering free recycling for products that are being replaced, reducing packaging waste and recycling wood used in construction.
Across the European building materials distribution sector, the following are best-practice examples of ambitious sustainable objectives and strategies.
A UK-based building supplies company is aiming for a 68% reduction in its direct and indirect emissions of greenhouse gases by 2030. To help achieve this, the company has set ambitious targets to increase the amount of renewables within its energy mix, and it is improving its packaging to make it more eco-friendly. The company is also electrifying its fleet and taking steps to improve its waste management processes. We consider this company a Leader.
A Danish building materials distributor is going further, aiming for net-zero greenhouse gas emissions by 2050. This ambitious target involves the company committing to a range of sustainable goals, such as greater energy efficiency, electrifying its fleet, improving its packaging to reduce its environmental impact, increasing the amount of renewable energy it uses and enhancing its waste management processes. The company is also in discussions with its own suppliers so that its entire supply chain can move to net zero by 2050. We consider this company an Innovator.
The initiatives outlined above provide real-world examples of how European building materials distribution companies can increase the sustainability of their products, supply chains and transportation methods. We also suggest some further day-to-day internal changes your business can make as part of a sustainable transition. These include improving the energy efficiency of your building stock and turning off lights and heating when not required, going paperless within your offices, looking to provide electric cars for your sales fleet, or installing solar PV cells on your buildings to generate renewable energy.
Such initiatives not only have a beneficial effect on the environment, but they can also help your business create more value, cut costs and improve operational efficiency.
How L.E.K. can help your business benefit from sustainability
Embracing sustainability goals can bring tangible benefits to your business. As well as helping to tackle the threat to lives and livelihoods posed by climate change, embracing more sustainable ways of working can help your business cut costs and improve operational efficiency, thereby creating more value. Moreover, companies committing to sustainability will also gain competitive advantage within an area that will only grow in importance over the coming years, as more European nations commit to net-zero emissions in the coming decades and as growing numbers of consumers demand more eco-friendly products.
Many European building materials distributors have already established dedicated sustainability teams within their organisations. Such teams can help to define clear sustainability goals and a road map towards achieving them.
For companies that are just starting on a journey towards greater sustainability, we recommend setting clear and actionable targets, underpinned by clear lines of responsibility and appropriate remuneration. We also recommend training your personnel on sustainability initiatives and keeping them regularly updated on the progress you are making towards meeting your sustainability priorities, which can help to ensure strong levels of support.
L.E.K. Consulting has been at the forefront of advising our clients to increase their commitment to sustainability, and we have extensive experience advising on sustainability issues across a wide range of business sectors. Our project experience spans critical and emerging sustainability themes.