A recent report by McKinsey in collaboration with the World Economic Forum sheds light on the substantial benefits of circular retrofitting in the built environment, aiming to unlock a global market valued at approximately $3.9 trillion. The report titled “Circularity in the Built Environment: Unlocking Opportunities in Retrofits” points out the vital role that retrofitting plays in both conserving natural resources and achieving decarbonisation targets.
According to the analysis, the built environment is responsible for nearly 40% of global energy-related carbon emissions, underlining the urgency for effective measures in this sector. The retrofit market is currently valued at $500 billion, and in order to meet net-zero targets, this figure must grow significantly to about $3.9 trillion by 2050. Achieving this ambitious target will necessitate an estimated 40 billion tonnes of materials, including essential components such as glass, steel, aluminium, and insulation materials like fiberglass and mineral wool.
The report further highlights the importance of adopting circular practices in retrofitting activities. Without these practices, there is a risk of unsustainable levels of raw material consumption and increased waste during this anticipated growth in retrofitting activity. By integrating circular retrofitting, it is projected that an average of 50% of materials removed during retrofitting projects can be recirculated between now and 2050. This could lead to a significant reduction in carbon emissions, with a potential decrease of 500 million metric tons annually by 2050, along with diverting materials worth around $600 billion from landfills.
Choosing retrofitting over new construction can economically benefit stakeholders, as this method is believed to reduce emissions by 75% and lower costs by 77% compared to constructing new buildings. To fully realise these benefits, the report calls for scaling retrofit rates globally, indicating a need for these rates to increase from less than 1% in 2024 to 3% annually by 2030 and further to 4% by 2050. This scaling is vital to addressing immediate gaps in energy efficiency as urbanisation continues to rise.
Jukka Maksimainen, a senior partner at McKinsey, articulated the significance of these findings, stating: “Circularity is no longer optional — it’s the key to transforming the sector. By adopting circular retrofitting practices, we can create a win-win scenario: cutting emissions while opening new avenues for economic value and sustainable innovation.”
In agreement, Fernando Gómez, the Head of Resource Systems and Resilience and a member of the Executive Committee at the World Economic Forum, remarked: “A more effective deployment of circular economy principles to retrofitting buildings opens new opportunities for collaboration across governments, industry leaders, and innovators. Accelerating its adoption across geographies is critical not only to achieving global decarbonisation targets but also to ensuring long-term resource efficiency and sustainable growth.”
The report encourages a collaborative approach across various sectors, stressing that enhancing circular practices in the built environment is essential for accelerating the transition to circular retrofitting. The full report can be accessed via the World Economic Forum’s website for those interested in further exploration of this topic.
