On Thursday, June 17, Companies for Net Zero held an informative and dynamic session on “Sustainable Construction and Tracking Raw Materials” hosted by CNZ Founder and CEO, Scott Donachie and featuring a great roundtable of experts and thought leaders speaking on topics ranging from supply chains to tax benefits.
George Sullivan, Sr. Principal and CEO of Net Zero Analysis, kicked off the event, speaking on “ISO Certification: Why it Matters to Your Supply Chain”. He pointed out that the Global Alliance for Buildings and Construction breaks down energy usage at 22% for residential buildings and 8% for non-residential buildings; buildings and construction account for 41% of global emissions. Net Zero Analysis is currently reviewing requirements for the New Construction and Major Remodeling and deconstruction will be a major piece of it. ISO 14000 Asset-Level Verification is key. ISO standards used in carbon measurement and mitigation are ISO 14024 and 14025 and are the metrics for measuring “Product GHGs through a Life Cycle Assessment.” He said it will be a tough road for the U.S. Tear downs are not happening as fast as they used to be. In North America, the Carbon Leadership Forum has developed the Embodied Carbon in Construction Calculator or L3 Measuring Tool. ISO 14064 and 14065 address greenhouse gas account and verification—building audit for new constriction—and includes choice of material. When measured and offset, this meets the need of Carbon Neutrality. He also talked about Scope 1, 2 and 3 Emissions, where Scope 1 occurs from sources owned or controlled by the entities that own the project, Scope 2 and 3 occur from sources owned or controlled by other entities in the value chain (for example, material suppliers, waste management suppliers, travel suppliers, etc.). Achieving net zero requires a carbon neutral value chain. Putting it all together is called a Data Map which is looking at all of the energy, fuel, water, refrigerant use, etc. the company controls. Sullivan said that performing an ISO audit for Scope 1& 2 Emissions is important. Advantages of an ISO include allowing for flexible boundary setting on company or project audits, audit boundaries are an important part of reporting transparency as they clearly define the scope of the audit, and making your project audit directly comparable to other similar project audits. An acceptable plan should address the entire carbon footprint and environmental impacts. Audit boundaries typically excluded are land use changes, site preparation, demolition, occupant and construction crew commuting, and environmental impact. He pointed out that the value chain must be carbon neutral and that because each company’s operations are unique, models are customized to each company based on the Data Map—facilities and offices have their own Data Map, Carbon Footprint Model and Display. The Deconstruction Materials Market includes salvaging materials from small to non-existent markets (first cost and refurbishing cost play a large part); it is an afterthought in the building design process and usually accent pieces on the exterior or interior, hobby, artist, and custom shops are the largest buyers.
Doug Johnson-Poensgen, CEO of Circulor, spoke next on “Sustainable Construction & Tracking Raw Materials” and decarbonizing construction. He said that the contributing of the supply chain is significant to global carbon emissions. It is the second biggest carbon footprint, emitting 10% of global emissions. Construction is key to contribution of supply chain because of steel and cement. You can capture the CO2 in the cement production process, and it is possible to purchase cement that has had this done, but it is generally not a universal process and there is little evidence that it has happened. In the case of steel, the mining process is intensive, but the process of smelting produces an enormous amount of energy. There is a growing drive toward green steel, especially in the automotive market where they are focusing on making cars with green steel and they are committed to zero waste targets. Johnson-Poensgen said that traceability in the first step toward supply chain decarbonization. Too much of what comes out of the building is not recycled. We are not geared up to reuse materials and systemically we are not properly recycling/reusing materials. Data is so important to the process of circularity. As we construct anything, we need a comprehensive understanding of what materials went into the building so we can answer questions about circularity 20 years from now. Circulor has built a software platform that traces the data of the what went into the materials and the ingredients through the supply chain and the logistics that go with it. Customers get out the complete solution for sustainable chain and circularity. Currently, key themes for the construction industry are data, optimizing for CO2, engaging suppliers, and pushing ecosystems. At Circulor, they believe that data is fundamental to responsible construction and refurbishment and the circular economy.
Jessica Irving Marschall, President and CEO/CFO of The Green Mission, discussed “Taking Advantage of Tax Benefits in the New Normal”. She said as a CPA for 19 years, it is exciting to see changes in the IRS code is when it comes to environmental initiatives, but they don’t always happen. Now in congress we are in standstill with the infrastructure bill, so she is waiting to see what is going to come into play. What are the tax deductions available for deconstructed materials that are incident to deconstructing a residential building or corporate building? Approximately 90% of individuals would not pursue deconstruction without a mandate if tax deduction did not exist, so this very important information to have when it comes to this with the IRS; they need to be done exactly and carefully. Tax deductions taken on the individual form 1040 requires itemizing. Evaluating materials needs to be done very carefully and align with IRS definition of fair market value, so essentially there needs to be an open market, knowledgeable buyer and seller and can be no compulsion. We can maximize our donations if we have many avenues for donation. Important considerations include ensuring the taxpayer has basis in the assets and they have not been full depreciated, ensuring the requisite 1-year holding period to afford capital gain treatment, ensuring the IRS does not consider the individual or the entry dealer vs. investor. Dealers are limited to a deduction in basis, not FMV and the deduction is limited to 50%of Adjusted Gross Income with a 5 year carryforward for individuals and pass-through entities; the deduction is limited to 10% of sort income (with specific add-backs) for corporations with a 5-year carryforward. The appraisal is the critical piece to the deduction; it needs to be IRS certified. Ask for the following information when performing appraisals: education level of appraisers and ensure accredited membership in one of the three personal property appraisal organizations that sponsor The Appraisal Foundation (American Society of Appraisers, Appraisers Association of America, International Society of Appraisers). You must also ensure that the appraiser was not involved in important tax court case law where the appraiser and appraisals were deemed unqualified and/or deductions were disallowed.
Andrew McCue, Sustainability Consultant, Metabolic, covered their model for circular and inclusive cities. He talked about the 7 pillars of materials in the economy are: recycled at continuous high value, all energy is based on renewable sources, water is extracted at a sustainable rate and resource recovery is maximized, biodiversity is structurally supported, human society and culture is preserved, the health and wellbeing of humans and other species is structurally supported, and human activities generate value in measures just beyond financial. He talked about What is a Circular Built Environment? A circular building that is designed from either secondary or renewable materials. Circular materials come from the urban mine existing building or infrastructure. A lot of value is stored in the existing built environment, which our current system almost never leverages. The diversion process ends up with very low value usage of materials like aggregate or widgets. In a circular economy you want to promote reuse above all else and landfill as a last ditch effort. A high value reuse of construction materials is rare because there is no visibility on it. Buildings are not designed for deconstruction at the moment and buildings that are going up right now do not have the design for deconstruction–we don’t have the visibility for what is in each building, where it is going to be (supply and demand), and when it is going to come out of that building. They also don’t have eyes on what the value of salvaging that material. If you are practitioner in the build environment and you are trying to use more secondary materials, you can’t find stable supply of secondary materials, stable quality, and usually can’t plan them into your product. Metabolic’s solution is an in-depth urban mining model that estimates where materials and products are available, how much, etc. The Urban Mining Tool provides insights on material mass, number of products, embodied environmental impacts, value of products. It also enables modeling of 12 different building types, mapping of stocks and flows, potential impact of closing loops, and circular potential—reusability of material and finding recycling materials.
Finally, Nicole Voss, Director of Sustainability, ADS and Srijanani Bhaskar, Industry Vertical Manager at DuPont discussed “ADS & DuPont Partnership in Upcycling Tyvek: The Economic Benefits of a Closed Loop System” and had a lively discussion back and forth about the problem of how do we get more raw material (ADS issue) and how to repurpose/reuse/recycling manufacturing waste (DuPont issue). The solution was an ADS and DuPont Collaboration—from Tyvek manufacturing waste to durable storm water management solutions. The partnership was a quadruple WIN for the #1) Environment—Waste is kept out of landfills, reduced raw material consumption, reduces GHG emissions, positive contribution to circular economy, #2) ADS—recycled content provides a cost-effective raw material stream for ADS, using the recycled content allows ADS to provide a product with a lower carbon footprint, waste is converted to a durable product, #3) DuPont—Tyvek Manufacturing waste is kept out of landfills, recycling reduces cost vs. disposal, consistent with reduce, reuse, recycling, repurpose, and #4) Economics—shared upstream and downstream value, ADS customers get the benefit of virgin grade polymers from a recycled stream. This is a great way example of how two companies are working together to reach both of their goals. Voss and Bhaskar said the goals were to keep increasing the content. They pointed out that we need to figure out how to make plastics recycling a part of circular supply chain. Their collaboration works because there is only one material coming out (HDPE). There is room for improvement in the supply chain systems or figuring out other technologies that could process mixed material waste streams. They are both very proud of this partnership.
At the end of the sessions, Donachie opened up the floor for questions and discussions that any attendee had, which accounted for a great interactive networking opportunity to bounce ideas off of the speakers and talk with them about their experiences and specific challenges that they had in this area of the industry. This was a great event and we look forward to the next one from Companies for Net Zero.
Coming up:
July 22: Supply Chain Problem Solving Workshop
Aug 19: Renewable Energy Infrastructure Financing Workshop
For more information, visit www.companiesfornetzero.com.