Nick Turner: Circular economy approach could reduce cost and carbon footprint of claims

What are the principles of the circular economy and what research has been done to prove its benefits?

Circularity is a practice that focuses on reducing waste and recycling unavoidable waste, as much as is possible.

The aim of a circular economy is to reduce waste of new materials and reuse or recycle old materials in order to reduce both the energy we use and carbon dioxide (CO2) emissions.

To eliminate material waste in building repairs, processes need to be designed that minimise manufacturing more materials than required.

Keeping materials in use must also be considered. The most common method here is recycling, but this can also include reusing, repurposing and composting.

The aim is to have a system where materials never become waste and nature is regenerated.

The UK could reduce global CO2 emissions from building materials by 38% in 2050 by reducing the demand for building materials such as metals, concrete, glass, plasterboard, plastic, timber, ceramics, insulation and packaging.

Why is it important to apply these principles to property repairs? How big is the problem of waste in construction?

It’s a big problem. The Department for Environment, Food and Rural Affairs (Defra) reported in February 2018 that in 2014, the UK generated 202.8 million tonnes of waste. Construction, demolition and excavation (CDE) was responsible for 59% of this waste, equating to around 119 million tonnes.

In fact, the construction industry accounts for approximately 55% of material consumption, with buildings contributing 50% to the UK’s total carbon dioxide equivalent (CO2e) emissions.

Around half of extracted raw materials go into the world’s built environment, with construction accounting for a third of the world’s overall waste and at least 40% of the world’s carbon dioxide emissions.

Globally, as much as 30% of the total weight of building materials delivered to a building site is wasted. Furthermore, 75% of construction waste that could be recycled or repurposed is not due to the lack of integrated waste management frameworks.

Hasn’t the property insurance industry already got enough of a challenge in controlling claims costs?

While new research from YouGov stated that 60% of UK businesses believe the circular economy is important, more than a third (36%) of respondents cited perceived cost as the biggest barrier to being more sustainable.

It is of some concern to insurance providers that building claim costs continue to increase and escape of water costs have been a hot topic for some years now.

The reality is that building repair costs as a whole have increased dramatically since 2020 due to a number of different factors. It is understandable that insurance providers may not want to pay more for sustainable materials instead of cheaper, well established building materials.

Adopting circular practices in property repairs and controlling claims costs are not mutually exclusive, however.

While cost is currently the main driver when considering repair and rebuild options, one solution would be to try and align sustainability with lower costs so that sustainability becomes the most attractive and viable option.

What specific building materials are causing the biggest issues in terms of adhering to a circular economy?

Disposing of waste plasterboard is one of the building industry’s biggest issues due to over ordering, poor storage and transport methods, lack of care when installing and a general lack of consideration – mainly because it is considered a cheap material.

Plasterboard and other waste gypsum products are now deemed hazardous waste and can no longer be put into landfill sites with biodegradable waste. So, the incentive must be to reduce waste and increase the amount of plasterboard available for recycling.

What steps could property insurers take to introduce circular economy principles into the property repair process?

Recycling new waste and materials removed for repair could be encouraged, along with the use of more recycled materials.

While recycling is labour intensive and does incur some additional cost, it would be a more sustainable approach to reduce the 75% of building construction waste that currently goes to landfill.

As insurance professionals, we can nudge builders and clients in the direction of greater circularity. Moreover, some simple yet effective changes that can enable more recycling include keeping records to prevent over ordering or providing dedicated areas for recyclable materials.

There is no silver bullet to reducing the carbon footprint of insurance claims, but perhaps driving dialogue and awareness about the ways in which building practices could change to support the circular economy might help.

What benefits can a circular economy approach bring to the property repair market?

• Resource efficiency – by adopting methods such as refurbishment, reuse and recycling in building repairs, insurers can reduce the need for new materials, thus cutting costs and minimising environmental impact.
• Long-term cost reduction – while initial investments in circular economy practices may be higher, they can lead to significant cost savings over the long term.
• Risk mitigation as recycled or reclaimed materials may offer more resilience against future damage, reducing the likelihood and severity of future claims.
• Enhanced sustainability.
• Market differentiation.