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Opportunities Building for Startups in Sustainable Construction
- Georgina Thomas
- Jun 23
- 4 min read
Updated: Jun 24
Kara Thompson, a judge for the Sustainable Times RISE Awards and Director, Head at UK FACTION, a boutique consultancy advisory in the built environment, is well placed to shed light on the evolving landscape and future trajectory of sustainable construction. Thompson works with investors, developers, and end-users on major building projects, including some of London's top Universities, which is heavily focused on decarbonisation.
The Challenges
Thompson highlighted that while there's a growing awareness and desire for sustainability within the construction industry, challenges persist. One of the biggest hurdles is the lack of a "single source of truth" for sustainability measures, she says. Unlike building regulations, which are clearly defined, sustainability guidelines are fragmented across various asset classes, local authorities, legislation, and private entities.
This complexity is further compounded by the long timelines of construction projects. Buildings are often designed and planned years before construction begins, and during that time, regulations and sustainable practices evolve. What was considered sustainable at the design stage may become outdated by the time construction commences.
Another significant challenge is the cost of sustainable development. Thompson pointed out that building or refurbishing sustainably often comes with a higher price tag. In a climate of high debt costs and pressure on yields, this can deter clients from investing in sustainable solutions. Thompson recounted a specific project experience where the cost of achieving a high sustainability certification proved prohibitive for the client.
She explained, "On a project costing around £3 million, an additional £500,000 was required to reach an outstanding level of certification for just one standard. Given this significant added expense, the client ultimately decided to proceed with that particular sustainability certification."
This illustrates the substantial financial issues that can potentially deter even willing clients from investing in top-tier green credentials.
The VAT Dilemma: A Nuance in Sustainable Refurbishment The current situation regarding VAT on refurbishment highlights tensions within the industry. Under current UK policy, the construction of most new dwellings is zero-rated for VAT (0%), meaning builders can charge no VAT on their services and associated materials. In contrast, most renovation and alteration work on existing residential properties is subject to the standard VAT rate of 20%.
While there are exceptions, such as a reduced 5% rate for properties vacant for over two years or for certain conversions, the general disparity creates a financial disincentive for refurbishment, says Thompson. On the surface, this policy seems at odds with sustainability goals, as retaining and upgrading existing structures often significantly reduces embodied carbon compared to new builds. However, the picture is more nuanced, she adds. Older buildings can present considerable challenges in terms of operational carbon, often having poor insulation, inefficient heating systems, and outdated layouts that make them ‘energy sinks’. Achieving modern energy performance standards in these structures can be incredibly difficult and costly, sometimes leading to a higher long-term operational carbon footprint despite the initial embodied carbon savings. This inherent conflict means that while refurbishment is crucial for a sustainable built environment, it's not a universal panacea and requires careful consideration of a building's entire lifecycle impact, not just its initial construction.
Thompson also discussed the conflicts that arise when trying to balance sustainability with heritage preservation and planning regulations. Retaining existing structures is often seen as a sustainable approach due to the embodied carbon, but older buildings may not meet current building regulations or be energy-efficient. Modifying these buildings to improve sustainability can be complex and expensive, especially when dealing with listed buildings.
Areas of Change and Future Evolution
Despite the challenges, Thompson has observed significant progress in the construction industry over the past decade. One notable area is the increased ability and desire to reuse materials. Processes are now in place to certify and warrant used steel and other products, making them a more viable option.
However, the industry still has a long way to go, particularly in waste management. The UK's construction sector remains the largest producer of waste, generating around 62% of the country's total waste each year. While a high percentage of construction and demolition (C&D) waste is "recovered" (often used as aggregate), a substantial amount still ends up in landfill. For specific materials, such as post-consumer polyvinyl chloride (PVC), a common construction plastic, the UK recycling rate is reportedly as low as 3%. In contrast, metals like steel, copper, and aluminium see much higher recycling rates, often exceeding 70%. Efforts are underway to improve these figures, with new Simpler Recycling legislation which came into effect in March 2025 aimed at streamlining recycling for businesses.
Looking ahead, Thompson expects the industry to continue improving its sustainability footprint , driven by factors such as:
Regulation: Stricter and more structured regulations are needed to enforce sustainable practices and create a level playing field. Landfill taxes have also increased, as mentioned in the 2024 Spring budget, aiming to deter reliance on disposal and encourage alternative waste management.
Technological Advancements: New and existing technologies, such as building information modelling (BIM) for sustainability, advanced analytics for energy efficiency, smart materials, and AI-driven sorting systems, will play a crucial role in driving green construction.
Generational Shift: As younger generations, who are typically more environmentally conscious, take on decision-making roles, sustainability will become a more significant factor in investment and development choices.
Opportunities for Startups
Thompson believes that startups have a crucial role to play in driving change within the construction industry. She suggests that startups should focus on developing solutions that are practical, cost-effective, and easy to implement. Some potential areas include:
Waste Management: Developing innovative ways to reduce and recycle construction waste, as only a small percentage of construction waste is currently recycled.
Logistics: Improving the efficiency of construction site logistics to reduce emissions and material waste.
Material Tracking: Solutions that track the origin and lifecycle of building materials to promote transparency and circularity.
Sustainability Assessments: Technologies that quickly and easily assess the sustainability of designs, facilitating faster decision-making.
The construction industry faces significant challenges in its journey towards sustainability. However, with increasing awareness, technological advancements, and a growing emphasis on long-term thinking, there is a clear path forward.
Thompson says: “Startups, in particular, have the potential to be powerful agents of change, driving innovation and helping to create a more sustainable built environment for the future.”
Kara will be judging the RISE Awards, Green Construction category.
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