Smart Cities

Environmental Drivers Take the Wheel in the Smart Buildings Market

“Is this how our story is due to end? A tale of the smartest species doomed by that all too human characteristic of failing to see the bigger picture in pursuit of short-term goals. Perhaps the fact that the people most affected by climate change are no longer some imagined future generation, but young people alive today, perhaps that will give us the impetus we need to rewrite our story, to turn this tragedy into a triumph,” said Sir David Attenborough, during last year’s COP26 climate summit. “We are after all, the greatest problem solvers to have ever existed on Earth. We now understand this problem. We know how to stop the number rising and put it in reverse. We must recapture billions of tons of carbon from the air. We must fix our sights on keeping one and a half degrees within reach. A new industrial revolution, powered by millions of sustainable innovations, is essential, and […]

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“Is this how our story is due to end? A tale of the smartest species doomed by that all too human characteristic of failing to see the bigger picture in pursuit of short-term goals. Perhaps the fact that the people most affected by climate change are no longer some imagined future generation, but young people alive today, perhaps that will give us the impetus we need to rewrite our story, to turn this tragedy into a triumph,” said Sir David Attenborough, during last year’s COP26 climate summit.

“We are after all, the greatest problem solvers to have ever existed on Earth. We now understand this problem. We know how to stop the number rising and put it in reverse. We must recapture billions of tons of carbon from the air. We must fix our sights on keeping one and a half degrees within reach. A new industrial revolution, powered by millions of sustainable innovations, is essential, and is indeed already beginning.

More than ever before, we acknowledge the responsibility the built environment has to reduce its impact on climate change. Buildings are still responsible for 38% of global carbon emissions and consume around 40% of the world’s energy, according to the UN Environment Programme, and this became a focus at COP26. As a result, a new sense of green urgency will be driven into global real estate through the regulations, policies, incentives, and initiatives of politicians reaching for increasingly popular goals.

“I tuned in to COP26 and my main takeaway is this: we are out of time. Real and drastic action is needed, and it’s needed now. Everything, especially buildings, will need to be extremely efficient so that the renewable energy capacity we build can keep up with the energy demand of our planet’s growing population,” says Michal Porter, performance building solutions research engineer at DuPont. “Building smart means building structures that are high-performing and energy-efficient. We must maximize energy efficiency in new and existing construction, decarbonize the energy used to operate buildings, and use low carbon materials in new construction. Building smart also means building to higher standard energy efficiency codes.”

Energy has always been a driver in the smart buildings market. Early offerings were focused on tangible energy efficiency gains that provided a green image of buildings and cut energy costs. Over the past few years, the smart building market has acquired new human-centric business drivers like health, wellbeing, and productivity, bringing new value. Now, the nature of the climate crisis means environmental, social and corporate governance (ESG) will grow as a driver for smart buildings, and environmental drivers will become the major influence.

Green building regulations have generally provided a fair minimum upon which larger facilities with green aspirations could build beyond using smart technology, and we should now expect a big step up in terms of requirements and implementation. There will be more direct government incentives on anything green building-related but we should also expect green policies to impact buildings indirectly as supporting sectors change under their own green pressures. The finance industry, for example, will now generate more funding dedicated to green projects and startups, smart city programs will raise the green bar further for their resident buildings, while ESG will drive the environmental agenda for all executives and their green building-related decisions.

“Responsible investment strategy caught on decades ago, but between corporate greenwashing, convoluted reporting bodies and disparate data, standards on ESG remain murky. One thing is very clear, though: Interest in ESG is heating up, and the real estate industry has the potential to make strides across all areas of ESG,” says Lucas Haldeman, CEO of SmartRent. “While the ESG investment trend progresses, real estate investors may want to consider proptech solutions to not only deliver more equitable, environmentally friendly housing but also hold their investments and partners accountable.”

While investment trends, regulations, and overarching political goals are fundamental drivers of the buildings industry, in the end it all really comes down to the “sustainable innovations” that Attenborough highlighted. Smart buildings, proptech, automation, and systems integration will be the real heroes of the fight against building inefficiency, and they will now have extra support from investors, executives, regulators, and core building stakeholders. Where solar panels and wind turbines once symbolized our green progress, now smart building technologies will become more recognized as representations of environmental progress, giving them even greater ESG value.

“Interventions like the switch to renewable energy take time to yield results,” Signify CEO, Eric Rondolat, said during COP26, while highlighting the “glacial pace” of the intelligent lighting transition. “Adopting energy-saving technologies can instantly relieve many of the urgent energy challenges the world is facing in electricity and fuel shortages and price hikes. We can act today by accelerating the switch to energy-efficient lighting, by doubling the rate of building renovations per year, and by mobilizing consumers to make their own significant impact in the Race to Zero.”

The share of installed LED lighting is only about 30% in Europe, according to Bodil Sonesson, CEO of Swedish lighting company Fagerhult Group. Speaking during her company’s third-quarter financial presentation, Sonesson explained that the adoption of LED is just the start of the energy-efficient journey of lighting and that “connectivity gives an additional 70% efficiency.” The general awareness of LED energy efficiency is long-established, and despite slow adoption of LEDs we must now shift the emphasis to intelligent connected lighting with smart controls and advanced analytics if we are to find the required levels of efficiency soon.

Our industry can longer just pick the low-hanging fruit of energy efficiency in buildings. We have known the importance of buildings to the climate change crisis for decades but have not yet found a way to overcome market barriers, drive mass adoption, or reduce the overall environmental impact of real estate. The rise of the environmental agenda will increase funding for sustainable building innovations, it will require development through regulation, and it will place further pressure on building stakeholders to understand their critical role in this existential crisis. The coming years will provide huge opportunities for the industry to make significant profit and lasting change that will benefit the building users of today, and the generations of tomorrow.

“It comes down to this. The people alive now, the generation to come, will look at this conference and consider one thing. Did that number stop rising and start to drop, as a result of commitments made here?” asked Attenborough during the COP26 climate summit, in a statement that should resonate with everyone, but especially the buildings industry. “There’s every reason to believe that the answer can be yes. If working apart, we are a force powerful enough to destabilize our planet, surely, working together, we are powerful enough to save it.

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