Just transition for the built environment and construction sector: a discussion paper

Themes for Discussion

This section outlines a number of priority areas for making transformational progress in the sector:

• Procurement as a lever for the transition
• Building a skilled labour force
• An innovative, internationally competitive, industry
• Delivering consistent, sustainable standards
• Maximising the manufacturing base in Scotland

Theme 1: Procurement as a lever for the transition

Public sector procurement plays a substantial role in the construction industry in Scotland. In 2021/22 public sector procurement in construction was £3.4 billion (spending in the sector as a whole was circa £7 billion). This underlines the significant influence procurement has on the development of our infrastructure and its capacity to transform the way we design and deliver our buildings. Buying better has the potential to drive positive change throughout the sector and underpin a just transition of our built environment.

Spending Better for Better Outcomes

Providing sight of a clear pipeline of projects is one way of increasing sector confidence and encouraging investment in better practices.

For example, the Learning Estate Infrastructure Programme is an investment programme focused on delivering high quality, low carbon learning environments that support sustainable and inclusive economic growth.^[8] There are various routes to meeting the standards outlined in the programme and, crucially, long term surety of investment. A Pipeline Forecast Tool has also been developed by the Construction Leadership Forum to help give greater clarity about the pipeline of anticipated work across the public sector.^[9]

The role of public sector clients also plays a vital role: they need capacity and the training to implement good procurement practices, to take a long term approach, invest in design and innovation, and have low carbon options de-risked so they are more inclined to commission them. For maximum effectiveness, this capacity should coincide with sufficient industrial capacity to meet demand for low carbon options, which links directly to themes 2, 3 and 5.

Examples from elsewhere show how procurement has driven sustainable practice and can inform how we could consider the most effective use of procurement to meet our outcomes. In France, new legislation came into force last year requiring all new public buildings to be made from at least 50% natural materials which has, in turn, driven domestic supply chains to meet increased demand.^[10] Additionally, Greater London Authority's (GLA) new London Plan, introduced in March 2021, requires all developments over a certain size to submit circular economy statements and whole life carbon assessments.

Discussion points

• How can we ensure that procurement practices are greener and place circular considerations at the front and centre?
• Is the Greater London Authority's example something that we can replicate through our own procurement practices, to ensure public buildings adhere to and are encouraged to adopt best practice?
• Are there elements of this that could go over and above what is already in the Construction Accord?

Relevant Just Transition Outcomes:

• Jobs, Skills and Economic Opportunities
• Communities and Place
• People and Equity
• Environment, Biodiversity and Adaptation

Theme 2: Building a skilled labour force

For a just transition to net zero, it will be vital for the sector to maintain a strong, skilled workforce with sufficient capacity and capability available to deliver anticipated increased demand. Against a backdrop of an existing skills and labour market shortages, the Construction Industry Training Board (CITB) has estimated that an additional 26,250 jobs will be needed in the construction sector by 2025.^[11] Recruitment is expected to be one of the sector's greatest challenges over the next five years and the challenge is likely to continue beyond that timeframe. Meeting this scale of change will require a multi-faceted approach aimed at both attracting new, diverse talent into the sector and upskilling and reskilling the existing workforce. We also need to ensure there is adequate access to a skilled workforce for consumers throughout Scotland, including remote rural areas and islands.

Upskilling existing workforce

The existing workforce will play a critical role in delivering future net zero ambitions as well as ensuring that the benefits of retrofit and sustainable building options are communicated to consumers to increase up-take. It is important, therefore, that they are given access to the right training, at the right time, to help maximise their skills and experience. To ensure a just transition, all workers need to be able to access what they need to upskill or reskill and be given every opportunity to play their part in the new opportunities that the transition will bring.

The sector is characterised by fragmented, complex supply chains with a reliance on sub-contractors. There were over 47,000 businesses operating in the construction sector in 2022, of which 99% were small enterprises of 49 employees or less. This underlines that Small and Medium Enterprises (SMEs) and micro businesses will be the key enablers to delivering the transition.

This backdrop can present obstacles for workers to access the training they need. Undertaking training often means time away from the site or office that is costly and often hits smaller organisations hardest, particularly given high levels of self-employment in the sector. Upskilling will also be required across the sector from site workers to those involved in the design, planning and management of buildings.

We know that there is support available currently. A skills portal for the construction sector launched last year. The Built Environment Workforce Development Portal provides a breakdown of reskilling and upskilling courses by theme, occupation and region to allow users to search for training in emerging built environment approaches within Scotland. Built Environment – Smarter Transformation (BE-ST) is also currently running training programmes on retrofit skills to individuals currently out of work or facing redundancy. However, this offering needs to expand and become more accessible to all. We need to explore ways of making the upskilling and reskilling offerings attractive to workers, cost effective for employers and, importantly, that we consider supply chain issues to ensure that the pipeline of work which requires these new skills is visible and available at the right time and at the right scale.

Discussion points

• How do we develop accessible, affordable and attractive skills pathways for the existing workforce (at all levels, management and business-planning as well as technical/site based) that recognises the often short-term, project-based and temporary nature of their working lives?
• How do we support employers to enable them to release staff to undertake training opportunities?
• How can Scottish Government best use the levers available to it – either through policy development, regulation or influence – in order to ensure that sufficient training opportunities are available across the workforce to support upskilling and reskilling?
• What kind of support do education and skills providers need to make sure they can provide the required courses and qualifications?

Attracting new, diverse talent into the sector

We know that the construction sector consists predominantly of men, with low representation from those within recognised protected groups. We also know that the construction sector has, in the past, benefitted from the flow of workers from the European Union (EU).^[12] To ensure a just transition of the sectors, and to help support the creation of a sufficient pipeline of workers, there will need to be a concerted effort to attract new, diverse talent into the system.

It is vital the industry operates in a way that makes it open, accessible and inviting in order to attract a diversity of workers.

We must also work with partners to explore ways in which we can increase the attractiveness of the sector for new entrants, and existing workers to remain. The Energy Skills Partnership is the Scottish college sector organisation that works with industry and government to ensure that the energy and construction sector's skills needs are met. The development of new and/or improved curricular offerings, linked clearly to business outcomes and requirements, will be key to ensure the attractiveness of the sector as a career choice. It will also be critical that these offerings are developed and delivered in a timeframe that ensures that labour supply is in line with labour demand. The development of a clear pathway, with a visible and transparent route from education through to employment, could play a key role in attracting the workforce of the future.

Discussion points

• What barriers exist, if any, to industry and education/skills providers working together to develop new, targeted skills offerings?
• How can we ensure that skills/education/reskilling offerings are attractive to a diverse range of workers of all ages?
• What timeframes do we need to adhere to ensure apprentices join the workforce at the right time in order to meet the anticipated scale of demand?
• What are the particular challenges faced by remote rural areas and island communities in relation to the workforce that will need to be addressed?

A Fair and Equitable Sector

Ensuring that the built environment and construction sectors are viewed as fair, equitable sectors in which to work will also be key to attracting new and retaining existing talent. Findings of the Fair Work Construction Inquiry Report cited wellbeing and working practices as longstanding issues in attracting and retaining a more diverse workforce.^[13] Research has also raised the need for a broader conceptualisation of the skills required for a greener construction future and the capacity of this to broaden the workforce.^[14] There is also a need for greener construction and businesses practices to be communicated to help dispel negative perceptions of the industry.^[15] Other research has highlighted the need for options to train and work flexibly to make jobs in the sector more attractive to a wider range of people.^[16]

The National Construction Equity and Inclusion Plan (NCEIP) was developed by the Construction Leadership Forum in 2022.^[17] Its purpose is to drive towards greater inclusivity and equality in the sector in line with Scottish Government's National Strategy for Economic Transformation (NSET). It is important that all levers available are used in order to improve and dispel negative perceptions of working within the sector if we are to ensure that we can deliver a just transition.

Discussion points

• Is there more we need to do to implement the recommendations of the Fair Work Inquiry within the timescales they propose?
• How do we effectively support the National Construction Equity and Inclusion Plan to deliver maximum impact?
• What options are there for the sectors to offer more flexible working conditions, therefore potentially making the sector more attractive to a wider range of people?

Relevant Just Transition Outcomes:

Jobs, Skills and Economic Opportunities

People and Equity

Theme 3: An Innovative, internationally competitive, Industry

The Construction Accord highlights the need for action on Modern Methods of Construction and increased take up of digital technology in the sector. This requires joining up industries and institutions across Scotland to create the necessary conditions for an innovative sector to flourish, as well as optimising opportunities for export internationally. Industry groups will play an important role here. For instance, Built Environment Changemakers, a group of professionals from across the industry, are already working to enhance skills development across the sector to enhance sustainability and resilience in the workforce.

This applies to existing buildings as much as it does to those we are yet to build. There are approximately 2.5 million occupied dwellings in Scotland, and we expect the vast majority of them still to be occupied in 2045. This means both adapting existing buildings and constructing new ones in a responsible and sustainable way.

Again, it is the scale of what is required that presents opportunity. Nearly all of our built environment will require some form of retrofit activity. We need to capture the huge economic opportunities that the transition offers in a way that drives growth in Scotland.

Supporting innovation to drive growth

It is imperative that we create the right conditions to enable innovative products, approaches and services to scale up. There are already examples of innovation and pioneering practice in the construction sector in Scotland. For example, the K-Briq developed by Kenoteq, which is the world's first brick to be made from 90% recycled materials.^[18] The development of this was also driven by the collaboration of academia and industry, including Built Environment – Smarter Transformation (BE-ST) which connects 80,000 businesses, organisations and individuals in the sector.

Developing and expanding networks between industry, academia and the third sector to stimulate innovation will be critical. This will require supporting existing networks, fostering further (and broader) collaborations across sectors and attracting suitable investment to enable growth.

Promoting innovative planning and design can help to ensure that we are extracting the greatest potential from the resources that we have and the investment we make, helping to maximise outcomes across a wide range of issues.

Discussion points

• How do we ensure innovative technologies and construction methods developed in Scotland are able to scale up and get to market?
• How do we de-risk the use of innovative products, and change existing supply chains in favour of low carbon alternatives, recognising that products in the construction industry are typically expected to last for over fifty years?
• Consistent and timely investment will be a considerable factor here. How can we effectively crowd in private investment alongside public funding to provide the interventions in the market that we need?

Delivering climate ready and sustainable buildings and places

The construction sector needs to move to more sustainable methods that prioritise circular economy considerations at the design stage and throughout the life of buildings. This includes taking a 'fabric first' approach, in which the thermal performance of materials that make up a building (i.e. roofs, walls, floors, doors and windows) are maximised and attention is paid to the ways in which heat can escape, for example, through draughts and cold bridging.

Added to this, our climate is changing and our building stock will need to adapt to ensure we are able to live and work in comfort. Adaptation measures need to be embedded in the design of buildings and places to equip them to deal with wetter, warmer conditions. This should include opportunities for enhancing biodiversity.

In the UK, the construction sector has the largest material footprint of any sector. It is estimated the sector uses nearly 100Mt of materials in new infrastructure each year, 82% of which are virgin resources, predominantly concrete.^[19] Scottish Government has announced the intent to legislate for 'a Scottish equivalent to Passivhaus' for all new-build homes at the end of 2024. We have also committed to increasing the annual volume of Scottish timber going into construction from 2.09 million cubic metres (2020) to 2.8 million cubic metres in 2026/2027. The Climate Change Committee have advised that using wood for construction is the best use of limited biomass resources as long as it is underwritten by strong forestry management.^[20] The commitments we have made signal the direction of travel to a more sustainable built environment that makes greater use of natural materials.

Examples from elsewhere could help to inform our approach building on these commitments. The Netherlands is cited as a leading example in developing a circular construction industry along three main pillars: i) using materials appropriately at every stage of construction, ii) using as many 'infinite' materials as possible, and iii) using finite sources efficiently.^[21]

This ambition is underpinned with regulation and financial incentives. Research also suggests that circular construction business models can also increase profitability.^[22]

The way we build, as well as what we build with, also has the potential to deliver better results. For instance, modern methods of construction, which often involve offsite manufacturing can increase productivity and reduce costs.^[23]

We know that investing in more sustainable materials at the design phase leads to savings across the lifespan of buildings. Initial costs may be higher, although taking a longer term view of the operational lifecycle of buildings through smarter design and better maintenance of buildings improves performance. Stakeholders have highlighted the need for Building Information Modelling (BIM) to be used more comprehensively in the design of buildings as an enabling technology (e.g. asset tagging and digital twinning) to support better delivery of buildings along with appropriate maintenance programmes. Currently, there is little incentive to invest in such sophisticated modelling technology at the design stage.

There are other co-benefits that need to be communicated. Building better and retrofitting existing structures adequately will deliver warmer, dryer buildings and better indoor air quality, improving health and wellbeing outcomes for residents. Taking a collaborative and place-based approach to the design and planning of the external environment can also deliver significant co-benefits, allowing issues such as flooding, biodiversity, greenspace, active travel infrastructure, and energy generation to be considered and integrated.

Discussion points

• Given the scale of retrofit activity required, how can we ensure this activity focuses on more resource-efficient construction?
• How can we effectively communicate and drive uptake of the changes that will be needed within the sector?
• Are there financial mechanisms that could be explored to incentivise businesses to invest in net zero that unlocks wider benefit for local communities?

Relevant Just Transition Outcomes:

Jobs, Skills and Economic Opportunities

People and Equity

Environment, Biodiversity and Adaptation

Theme 4: Delivering consistent, sustainable standards

The Construction Accord already provides an outline of what is needed in the sector and the Construction Leadership Forum network has been established to work with industry stakeholders to drive transformational change across the sector. We need to deliver this in a way that enhances standards across the board and results in buildings that are both energy efficient and equipped to deal with a changing climate. The public sector stands to play a major part not only in decarbonising the built environment but in leading the way in enhancing standards for others to follow.

Enhancing Practice in Design and Planning

The promotion and enforcement of better design and implementation at a local level will be critical here. Better building choices need to be the easiest option. Existing frameworks and tools already provide the direction necessary to design better (e.g., National Planning Framework (NPF4), Place Principle), however there can be barriers to applying them. The Net Zero Energy and Transport Committee at the Scottish Parliament highlighted the additional resources and skills, particularly within local authorities, which are required to deal with the additional demands on the planning system to deliver on net-zero.^[24]

The delivery of better infrastructure locally has the potential to drive progress for a just transition in other areas. For example, ensuring developments have access to local services would help reduce car usage, enabling more sustainable lifestyles, reducing costs and improving safety. Good design processes can ensure that future investment in climate mitigation and adaptation provides additional benefits, taking a multifunctional approach to how we design spaces and utilise resources. Harnessing the power for design to support a just and equitable transition is an imperative.

Cost is another barrier. It is often cheaper to build a new building than it is to refurbish an existing one. However, we know that investment in good design processes up-front can provide significant savings over the lifetime of a building as well as ensuring that positive environmental, social and economic outcomes are prioritised.

Green Alliance suggested pre-demolition assessments should be conducted before planning consent is granted to replace existing buildings, to make a clear case for demolition in relation to carbon emissions and material use. The UK Parliament's Environmental Audit Committee have also made several recommendations to the UK Government to incentivise retrofit over demolition.^[25]

Discussion points

• How do we ensure the implementation of better design processes and principles?
• What other levers can Scottish Government use to encourage retrofit and refurbishment over demolition and rebuild?

Accounting for Embodied Carbon

The UK Green Building Council reports that operational and embodied carbon from construction currently accounts for around 6% of the UK's annual emissions. Adopting a whole life carbon approach, considering both embodied and operational carbon and associated impacts at every stage of a structure's life will be key to a greener built environment. The Climate Change Committee and other industry stakeholders have highlighted the need to link any future review of building standards with an understanding of the effect that design and specification choices can have on the overall impact of new development.^[26]

As part of our response to Scotland's Climate Assembly recommendations in 2021, we committed to investigate opportunities for whole life emission reporting, through building regulations or by other means. We have been working with Zero Waste Scotland and some of the UK's leading experts on the topic, including recognition of the pilot work already underway through voluntary programmes such as the Net Zero Public Sector Buildings Standard.^[27] Scottish Government's Sustainability in Construction Guidance already recommends the standard as part of a wider suite of considerations to enhance the sustainability of publicly procured buildings.

Discussion points

• What are the key enablers to drive adoption of embodied carbon accounting more widely in the industry?
• Where can government most effectively play a role in supporting the uptake of carbon accounting?

Relevant Just Transition Outcomes:

Jobs, Skills and Economic Opportunities

Communities and Place

Environment, Biodiversity and Adaptation

Theme 5: Maximising the manufacturing base in Scotland

The scale of what is required here presents huge opportunities for the industrial base in Scotland. We are already taking action to revitalise manufacturing with the development of Michelin Dundee Innovation Park and the National Manufacturing Institute Scotland signalling our intent around industry-led delivery of net zero. The transition of our buildings offers the opportunity for this to expand even further; identifying the correct interventions and getting the sequencing of these right to establish markets and drive demand will be key. For instance, a recent study commissioned by the Centre for Local Economic Strategies explores the potential of registered social landlords to develop the retrofit supply chain in the south of Scotland.^[28]

This will also be about anticipating future demand and ensuring there is an adequate industrial base domestically to meet this. For example, the extent of retrofitting required to bring our built environment up to standard is likely to generate substantial demand for insulation materials. The Scottish National Investment Bank has invested in IndiNature, a company making natural fibre insulation to help them scale up production.^[29] There is opportunity for further growth in this industry, particularly in the development of insulation products made from natural resources and recycled waste materials.

Sequenced Supply Chains

We will need to make sure the necessary skills and materials come to market at the right time, making use of domestic resources and localised supply chains as much as possible. Supply chain mapping exercises have been carried out in the sector and it will be necessary to collate this existing evidence to avoid duplication and effectively identify opportunities.

There are existing models we could potentially build upon. Scottish Futures Trust support a network of five local hubs. Operating across five geographical areas, the public sector bodies in each of the five areas have come together and appointed a private sector development partner to form a joint venture company, known as a hubCo to deliver new community facilities.^[30]

Discussion points

• Where does Scotland have truly internationally significant clusters, innovation assets or businesses?
• What mechanisms could be used to stimulate additional investment in supply chains?
• How do we make sure the correct products and services come to market at right time and to correct scale to create a pipeline of demand for the transition e.g., insulation material to meet anticipated demand?
• What opportunities are there to shorten supply chains and enhance resilience with a focus on using locally sourced, natural and sustainable materials?
• How can Scottish Government ensure the behavioural insights provided by public participation can effectively inform the sequencing of interventions?

Relevant Just Transition Outcomes:

Jobs, Skills and Economic Opportunities