Opportunity and Responsibility
We are on the cusp of the largest spend on infrastructure, energy and buildings that humanity has ever seen. While it has been accelerated by recent events such as supply chain disruption, a desire to reshore manufacturing, and regain control over energy security, the key motivation is more dire: Climate Change. Carbon dioxide atmospheric concentrations are now double that of pre-industrialization(1).The focus on climate change and decarbonization strategies has triggered carbon-reduction objectives in infrastructure, power, and buildings. The willingness to supply capital will be influenced by carbon reduction metrics as leaders recognize their fiduciary role in affecting decarbonization.
The scope of opportunity is beyond imagining: McKinsey recently pegged the global project funding commitments by companies and institutions aiming at net-zero to reach $130 trillion dollars by 2027(2). This scale of capital and the potential for the momentum it will create will affect tens of thousands of businesses. But this is also a time for responsibility.
Since the upcoming surge of global investment will be aimed at net-zero projects, the focus on low carbon solutions will be directly tied to access to capital. Businesses will need to disclose and report the carbon footprint of their proposed projects – this requires being able to accurately predict emissions vs sequestration.
As we move into this time of both opportunity and responsibility, are we ready?
Reporting
The International Sustainability Standards Board has already set the framework for world-wide comparative emissions reporting by International Financial Reporting Standards (IFRS)(3). The GreenHouse Gas (GHG) Corporate Protocol(4) is being developed and it will likely become the standard for the accounting and reporting of seven greenhouse gasses covered by the World Resources Institute (WRI) and the World Business Council for Sustainable Development(4) (WBCSD). The emissions from a corporation’s asset base and supply-chain are key to categorization and reporting.
Scope 1 through Scope 3 emissions reporting, which are soon to become the industry standard within Environmental, Social and Governmental (ESG) reporting have been defined via the GHG Protocol as:
Scope 1 - Direct emissions from your corporate operation
Scope 2 - Emissions from the power that you buy
Scope 3 - Emissions that are either upstream or downstream from you in the value chain. (i.e. your suppliers or customers emit Scope 3 emissions)
Scope 3 is considered the category creating the largest contribution of a firm’s carbon footprint, so companies are setting their targets on Scope 3 in trying to decarbonize their supply chain. The need to improve ESG scores (namely the Environmental (E) pillar) will drive the implementation of new technologies and the decarbonization of supply chains. Asset owners will be the likely change makers most motivated to improve their forecasted ESG scores. Capital will likely not be allocated without the relevant data proving thresholds in asset energy performance.
Tracking decarbonization success towards carbon neutrality requires forecasting and reconciling energy use. By assigning energy performance metrics to materials and deploying generative design tools, technology exists today – but is underutilized – that can accurately anticipate the carbon footprint over the life-cycle of a given asset.
The Transparency of the Digital Twin
A digital twin is the virtual model of a project and is associated to a database. From an asset perspective, it is the Building Information Modeling (BIM) model. It contains everything– all aspects of the project from site preparation, design plans, logistics/sequencing, materials and sourcing. By providing a complete model of both the process and the product prior to putting shovel-to-ground, one can explore impacts of substitutions, changes in schedule, re-alignment around unexpected events, and track progress against plan. The model also includes real time information about the status of energy performance at each stage of a process so long as the model is accurately conditioned and coded. Digital project delivery (DPD) technology is a collection of systems and processes that allow collaboration, communication, and analytics based on that database in addition to dashboarding alongside graphical representation, generative design and simulations. The opportunities to quantify and measure spend can originate from the digital twin and DPD.
The Creators of Data
The future of schedule, quality, cost, safety and carbon output is driven by data. However, field experience will play a critical role with accurate model development and useful data structures. The digital twin needs to be modeled to mirror how a project would be constructed in the real world.
Architects today typically have the bulk of Building Information Model (BIM) modelers within their business domain. Given the upcoming spend, a larger cohort has to be trained and become accessible. An ideal BIM engineer would be someone with a background of many years in the field, boots on site, before becoming a 3D BIM modeler. In truth they are so much more than a modeler– they are computational project developers (CPDs) [*Note: non-industry term]. CPD Teams will need to be multi-disciplined, span across organizations and matrices, have working knowledge of physical products, building codes and construction techniques. They need to be able to write scripts and work with Artificial Intelligence (AI) and Machine Learning (ML) as the software intelligence grows by learning from field data and advances in deploying their platforms. Software and construction companies will need to collaborate to create this new class of digital design and/or engineering specialist.
Today, Owners do not control the data analytics associated with their assets, mainly due to not directly managing and controlling digital twins. But as capital deployment needs increase along with GHG disclosure requirements, so will the need for energy performance data and ownership of the data and processes. These will lead a push for innovation surrounding digital twins, tools, process and data management, digital project delivery and associated digital threads. The decision tree will be top-down.
Asset portfolio owners will want tighter controls in regards to the asset build. The long-term risk of exceeding forecasted GHG thresholds could have devastating financial impacts to the business growth and future liquidity of the asset portfolio owner. We could very well be at an inflection point in how owners approach the traditional project development and construction contracting model. Owners will take a more vested interest in ensuring efficiency and decarbonization metrics are achieved. A larger and more proficient user base of digital project delivery technology will hasten adoption.
Owners need to assure the industry (and perhaps themselves) of the benefits. Enterprise-thinking needs to evolve with owners to change their perspective regarding asset development. Instead of a one-time cost and initiative that feels disconnected from the core business, low-carbon asset planning, construction and life-cycle maintenance needs to be acknowledged as fundamental to the business. Owners will gain consistency, assurance of delivery, compression of schedules and fewer conflicts. Trade contractors will gain the ability to forecast revenue, and everyone will benefit from greater trust in relationships.
Deliberate cohesion of workflow is needed within the platforms that are marketed as cloud-based construction ecospheres. Owners will need to revisit risk distribution strategies and acknowledge long term business benefits of their assets. Time, quality, captured carbon and optimized energy expenditures will drive value creating a direct benefit to keeping a supply-chain partner’s pipeline full, robust and profitable. The supply-chain will have to be more cohesive for effective use of technology. Consolidation of the supply-chain will offer a more positive experience and greater savings with regards to both final cost and energy efficiency. It appears that these market incentives will be the catalyst for DPD to become interdependent with business models.
Data enables communication across fully integrated platforms. Interconnected devices and hardware can bring data to workers and send data back to update the model. Interoperability is key. Without a common data structure across platforms, communication and forecasting will make reporting costly and time consuming.
Personnel in the field will always remain the builders of the project. As more is invested up front in data fluency, the more cohesive and integrated the teams will become, communication will be more effective and efficient, and the projects more successful. Half measures, however, do not and will not work. It’s an all or nothing circumstance, and certainly there will always remain a subset of projects where digital project delivery will not make sense financially nor from a forecasted life-cycle carbon evaluation perspective.
The warming of our planet is undeniable. Decarbonization is the catalyst we needed to finally get real about digital project delivery’s place within the construction project life-cycle. While it is a necessary move driven by crisis, it is also a chance to bring a common language of mutual gain into an industry that lost cohesion to hyper-competition and a tendency to push responsibility down the supply-chain. The goal of carbon neutrality provides a rallying point around which even the most staid and stolid construction company and asset owner must now bend. As collaborators, we can rise to this challenge, by deploying tools and delivery systems that lead to projects that we can proudly pass onto the next generations. The potential for commercial alignment through shared responsibility equals a tremendous opportunity for ethics-accelerated knowledge development and technology deployment. The market incentives must be in place for DPD to succeed. With finance leaders re-positioning the rules around liquidity, and taking carbon footprints into account, the story will continue to unfold.
(1) Associated Press (Borenstein, Jun 3, 2022): “Sky high: Carbon dioxide levels in air spike past milestone [article link]
(2) McKinsey (Fuchs et al., Apr 7, 2022): “Capital investment is about to surge: Are your operations ready?” [article link]
(4) https://www.wri.org/initiatives/greenhouse-gas-protocol, https://ghgprotocol.org/