Laying the foundations for cleaner construction

Decarbonising heavy industry is essential to the energy transition. By engaging with building materials companies, we have identified four ways in which the sector can play its part:

Decarbonisation is being embedded into core strategy, capital allocation and operating models. We noted how these are being connected to climate goals, commercial growth and portfolio positioning through governance frameworks, executive accountability and ncentive structures. But integration is uneven, and some firms are still transitioning from target-setting to operational delivery due to the challenges of complex business models, hard-to-abate processes and monetisation of low-carbon products.

Encouragingly, companies are moving beyond "green products" to focus on performance, lifecycle benefits and integrated solutions. These include two approaches: bundling such offerings, and lower-carbon product categories that provide greater durability and efficiency. With a cost premium for low carbon products, their rising demand is primarily driven by regulation, building standards and customer requirements.

Ambition and the ability to execute through change will be differentiators as companies address investor expectations for project-level transition plans supported by robust reporting and capital allocation. This is coinciding with ongoing portfolio optimisation – where M&A, divestments, and business mix changes can materially influence reported emissions. This makes it important to separate real operational decarbonisation from changes driven by corporate actions.

We see the next phase of decarbonisation as structurally more challenging and increasingly shaped by regulation, infrastructure and technology – much of which is outside of companies’ control. While lower cost levers exist in certain areas – eg, efficiency, fuel and material switching – transformative solutions are capital intensive and more exposed to dependencies, effectively creating a two-speed transition.

Moreover, decarbonisation challenges differ across the sector. Process-heavy producers, like cement, require significant investment in fuels, materials, electrification and carbon capture, while facing external constraints eg, permits. These challenges also include grid access, CO2, transport infrastructure and availability of alternative inputs – which differ across regions. Meanwhile, product manufacturers and solutions providers (eg, insulation producers) are focused more on product design, supplier decarbonisation and embodied carbon – defined as the emissions associated with a building before, up to and after its construction.

However, all businesses depend on maturity of policy support, carbon pricing, and public funding, which are critical to large-scale decarbonisation investments.

There is a rising interest in Scope 3 emissions (see chart below), placing them as central to the sector’s decarbonisation strategies. For solution providers use-phase emissions dominate, making efficiency and electrification especially relevant. Across the sector, purchased good represent a material source of upstream emissions, requiring supplier engagement, procurement changes and improved product-level carbon data.

Product-level decarbonisation is a key topic, including redesigned materials, and improved lifecycle performance. Limited value-chain control, uneven data and evolving methodologies remain hurdles, and progress depends heavily on collaboration.

Further lowering emissions in this sector will become more capital-intensive with a focus on product design, lifecycle emissions and integrated solutions, while delivering measurable impacts. We believe it will increasingly be defined by systemic constraints as much as company strategy, and we anticipate uneven near-term progress with ability to execute defining sector leaders while longer-term outcomes hinge on the development of enabling ecosystems.

Firms can continue to drive operational improvements, product innovation, and more disciplined capital allocation, but the pace and scale of transition are ultimately shaped by external dependencies – particularly technology maturity, infrastructure availability, policy support, and value chain coordination.

This reinforces a duality: companies can lead on what is within their control, but full decarbonisation requires coordinated, system-level change.