Sustainable construction: roadmap to enhance your business’s sustainability in 2024

|Apr 30, 2024

Construction is one of the largest industries in the world and promises substantial growth in the coming years. Research from market analyst, Technavio suggests the EU construction equipment industry will grow at a CAGR of 4.4% to 2027, with a projected market valuation of approximately €8.36bn. However, construction machines account for around 1.1% of global CO2 emissions while the building and construction industry as a whole accounts for 38%. As more businesses become aware of this, driving more sustainable construction practices is not only a trend, but a necessity, which is leading equipment manufacturers and dealerships to also commit to long term sustainability goals.

Sustainable construction means a move towards low emission electric construction machinery. However, such technology means more initial costs in manufacturing and increased upfront costs for dealerships and the end users. Although sustainable construction is being highly encouraged with government subsidies and loans providing interim finance to help businesses navigate the transition, state funding is a temporary measure as the boundaries are constantly shifting. Construction equipment manufacturer and dealerships are therefore seeking alternative, cost-effective financial solutions to manage the upfront costs of introducing sustainable equipment.

In this context, an answer for manufacturers and dealers lies in partnering with financial solutions providers that not only help manufacturers launch bespoke equipment faster, but also helps dealerships move them to end users with attractive loans and lease options.

Know the top five benefits of offering financing and how it can help your business grow in our latest blog post.

What does sustainable construction mean?

Sustainable construction refers to the general practices of aligning with environmentally friendly equipment, processes and practices that limit emissions and environmental harm. It also encompasses practices that increase machinery lifespan and prevents them from ending up in landfills. The construction industry currently accounts for 36% of global energy consumption while building and construction works also account for up to 40% of solid waste generation. Introducing sustainable construction practices will help reduce the industry’s environmental footprint and lead to long-term financial benefits through reduced operational costs.

For the construction industry, this means using recyclable and renewable materials, a shift towards electric construction machinery, minimizing energy consumption and waste production, expanding machinery lifespan and promoting used machinery.

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Top 3 ways to increase sustainable construction

Shift to electric equipment: With sustainability regulations driving change, businesses are increasingly exploring electric construction machinery to reduce emissions. Transition to electric power is evident, particularly in sectors like materials handling, where large fleets now commonly utilize lead-acid and lithium-ion batteries. In anticipation of regulations restricting diesel equipment in urban construction sites, the industry faces the expensive but essential task of fleet replacement.

In this context, financial partners play a crucial role in empowering dealerships with solutions that can enable end users to easily own or lease electric assets, including vehicles and charging infrastructure.

Equipment refurbishment: Supply chain disruptions and the high costs associated with acquiring new machinery can pose significant challenges for businesses. Consequently, refurbishing existing heavy equipment often emerges as a practical solution. Additionally, stringent workplace safety regulations in many countries may necessitate refurbishments to ensure compliance.

Refurbishing used machinery not only enhances safety but also promotes energy efficiency and environmental sustainability. Some forward-thinking end-users are even investing in facilities to refurbish their own equipment, underscoring the importance of prolonging the life of viable machinery. However, the costs involved can be substantial, often reaching several millions depending on the extent of work required, thereby impacting cash flow for businesses.

In such scenarios, dealerships enabling access to financial partners that specialize in tailored financing for refurbishments can provide invaluable support to end users.

Resale of used machinery: Closely associated with refurbishment of machinery, is the concept of resale of used machinery. As the construction industry contends with prolonged delivery times for new equipment, businesses are exploring alternative solutions to meet their needs promptly. These delays have prompted companies to extend contracts on existing equipment rather than wait for new machinery, a practice that not only ensures continued operations but also aligns with sustainability objectives.

Moreover, legislation also plays a part in this aspect. For example, the demand for used equipment (2-4 years old) has grown in the UK over the last few years due to factors like environmental legislation and this trend is expected to grow.

Manufacturers and dealerships offering certified used equipment provide immediate solutions, helping businesses overcome delays while reducing their environmental footprint and meeting sustainability goals.

Discover the top three trends shaping today's construction industry by exploring our blog post!

Sustainable construction: Barriers to watch out for

  • Significant investments: Adoption of electric equipment and sustainable construction practices entail significant investment and change at every touchpoint in the supply chain. For manufacturers it includes higher initial upfront capital expenditure for investing into new technology, for dealerships an increased upfront cost for sustainable equipment stock and for end users also higher costs of purchase compared to diesel-operated equipment. Moreover, the need for investment in additional infrastructure for charging and maintaining batteries and equipment results in added costs.
  • Total Cost of Ownership (TCO): TCO is crucial for evaluating the viability of electric construction equipment. This involves comparing the short and long-term costs between diesel and electric machinery. Daily duty cycle requirements, charging needs, and time required for charging are essential factors to consider. Additionally, it's important to assess the power grid load and energy source (green vs. non-green) for charging machinery.
  • Technological advancements: Rapid technological advancements can become a barrier to faster adoption of sustainable machinery and construction practices. End users are always in need of access to the best and the latest in the market which makes it difficult for them to commit to what’s available now. Options to upgrade and exchange are often a must in this context and dealerships need to account for such possibilities in their offer.
  • Limitations in the used and refurbished machinery space: As mentioned above, while many manufacturers and dealerships are enabling sale of used and refurbished machinery, finding financing for such equipment can often be a challenge for end users. While banks can extend a line of credit the same way they would offer a loan, there may not be any specific solution made available only for this purpose, making it difficult for businesses to acquire used equipment.

Sustainable construction: Addressing multiple challenges

The construction industry stands at the threshold of significant growth, yet it faces critical challenges, particularly regarding sustainability. With construction equipment contributing to global CO2 emissions and the industry's substantial energy consumption, the imperative for sustainable practices is undeniable. Transitioning to electric machinery and refurbishing existing equipment emerge as viable solutions, albeit with significant investment requirements.

At such a juncture, financial partnerships are essential in facilitating this transition, offering tailored financing solutions to manufacturers, dealerships, and end users alike. Such partners are not only important today, but also crucial for driving desired results in the future. They can help manufacturers, dealers as well as end users address barriers such as upfront costs, TCO evaluations, technological advancements, and limitations in accessing financing for used machinery. Through concerted efforts and strategic partnerships, you can pave the way for a more sustainable future with the ideal #PartnerOfTomorrow.

To embark on the journey of 'Building a Partnership of Tomorrow', reach out to us today. Let’s explore how we can work together towards a more sustainable and prosperous tomorrow!