Introduction: The challenge of the energy transition in the built environment has, in recent years, been exacerbated by rising awareness of the material resource limitations we face on the path towards sustainable development. In this context the concepts of Circular Economy (CE) and Product-Service Systems (PSS) have emerged as potentially complementary industrial and business strategies to overcome the interdependent material resource and clean energy challenges.

Research significance: Research in the field of circular and PSS-based construction frequently centres on the design and engineering of products, mainly through technical strategies such as design for disassembly and adaptability, and the use of the different “R’s” (Reuse, Repair, Remanufacturing, etc.) to extend and/or reset the service lives of building materials and components. Such an approach often ignores the fact that these strategies require changes in the management, financing, and governance aspects of products and therefore buildings, throughout their entire service-lives. This paper will focus on the systemic administrative (i.e. management, financing, and governance) challenges of the circular and servitisation transitions in the building and construction sector, to enable products which are “Circular by Design”, to effectively support regenerative processes.

Research question: The paper asks how traditional building products’ management, financing, and governance processes prevent or delay the implementation of CE and PSS models. It explores the demand side’s perspective (commissioners, building owners and facility managers), taking a systemic view to the search for new practical, strategic, and scalable administrative models.

Methodology: The research method applies the DAS model (De Jonge et al., 2009; Van der Zwart et al., 2009; den Heijer, 2011; den Heijer et al., 2016) to data gathered from focus group discussion and co-design sessions involving multidisciplinary teams of experts from both academy and industry, as well as literature. The research was conducted within the context of the TU Delft Facades-as-a-Service full-scale pilot project.

Results: The research has shown that, while PSS models to enable material circularity can be partially implemented within the current managerial, financial, and governance framework, this implementation is not efficient, effective, or scalable. This is because standard modes of operation in these disciplines are misaligned with that goal. The practical barriers resulting from this misalignment increase the complexity, risk perception, and therefore cost of PSS alternatives, and thus prevent their organic adoption despite increasing market interest. Recommendations are made for policymakers, financiers, suppliers, and building owners to overcome these barriers. ... Read more

Accelerating strategic investment in an energy- and material resource-efficient built environment The de-carbonisation of the built environment hinges on the use of clean, renewable energy and the conservation of materials and components within circular reprocessing loops. The Façades-as-a-Service research concept aims to accelerate the rate and depth of building energy renovations – while safeguarding long-term responsibility over material resources – by creating a new value-chain based on the provision of integrated building envelopes under a performance contract. The built environment is a major contributor to the resource management and sustainable development challenges we currently face on a global scale. The rate at which the building stock is improving, in terms of resource efficiency and greenhouse gas emissions (GHG), is far below what is needed to meet even the most conservative climate change and environmental impact mitigation goals (European Commission, Directorate-General for Energy 2020). The strategic investment of limited resources – energetic, material, and financial – which dictates the development of the built environment, is largely driven by individual decision-makers with particular fields of knowledge, specific interests, and acting within diverse time-scales. Improving the resource-efficiency of the built environment, in terms of the quality of new constructions and the rate and depth of technical building retrofits, is not only a question of technological readiness, but rather of business and economic incentives. Emerging theoretical frameworks, such as the Circular Economy (CE) and Product-Service Systems (PSS), aim to realign or create these incentives by operationalising the value of better individual decision-making processes, internalising soft values and costs, and developing long-term collaborative project execution mechanisms. In line with these frameworks, the research elaborates a multi-perspective analysis for a new performance-based investment model to promote the energy transition through the accelerated implementation of high-performance building envelope technologies. Boundaries for the research scope are established, in both technological and managerial ranges, to enhance the applicability of the model and the scientific relevance of the results. Reference is made to specific case-studies, organisations, and regional characteristics, followed by discussions on the implications of such focus groups for the extrapolation of universally applicable conclusions. Finally, the model is evaluated to determine its rate of success at addressing the resource management and environmental impact challenges previously identified. Results show that, while the implementation of potentially Circular Business Models such as Product-Service Systems is technically possible within the current economic, legal, and managerial landscape, it is by no means a simple or standardised process. Significant systemic changes must take place in order to enable and incentivise the mainstream implementation of performance-based models capable of aligning stakeholder incentives towards more energy-efficient and resource-regenerative building procurement practices. The main bottlenecks towards such innovation are highlighted, and cross-disciplinary recommendations are made regarding the validity, up-scalability, and future development of the proposed methodology. ... Read more

The regulatory drive to accelerate the clean energy and circular economy transitions in the European building stock is currently failing to overcome systemic implementation barriers. These barriers include high initial investment costs, misaligned financial incentives among stakeholders, and the relatively low cost of less sustainable energy and materials. A Product-Service Systems (PSS) approach could successfully overcome many of these barriers by (1) outsourcing capital investment, as well as financial and technical risks, (2) providing shared economic incentives to collaborating stakeholders, and (3) retaining extended producer responsibility and ownership over materials and products. However, PSS is still not seen as a viable business model when compared to both a standard “ownership” contract and a “no-retrofit” scenario. This paper proposes a Total Value of Ownership (TVO) method to evaluate the financial performance of a building energy retrofit in terms of Net Present Value, comparing a matrix of scenarios. Results show that – when accounting for capital and opportunity costs tied to alternative investments, internalising externalities, and monetising soft values such as user productivity and property value – a PSS model can deliver the highest NPV. Furthermore, results show that a PSS alternative can act as a positive future-proofing strategy to safeguard the building owner’s position in the face of uncertain future market indicators and carbon taxation. Recommendations for policymakers, investors, financiers, building owners, and end-users are presented to identify the economic value of PSS contracts, leading to better-informed decisions which can accelerate deep energy retrofit of the building stock. ... Read more

The servitisation of the built environment, through the implementation of product–service systems, is considered a promising business strategy to achieve a circular economy transition. This servitisation faces a number of practical challenges, among them the technological readiness and effective integration and application of existing and emerging products, manufacturing processes, and digital monitoring and management tools. The research builds on targeted literature review, and on a research-through-design approach based on full-scale pilot projects developed in an ongoing feedback loop between researchers, planners, and industry partners representing both the demand and supply sides of the façade industry in the Netherlands. The paper analyses the technical implementation challenges currently preventing the façade industry from adopting performance-based contracts. It then proposes the roles that existing and emerging digital design and engineering technologies, manufacturing processes, and asset management systems can play in the development, implementation, and fulfilment of such contracts. The paper proposes a multi-stakeholder, systemic model for the development and application of façade technologies capable of overcoming many of the technical implementation barriers to the delivery of performance-based contracts for integrated facades. From this it concludes that an effective development of building technologies should strategically align with the solving of economic and contractual challenges such as circularity-readiness, profitability, risk distribution, legal demarcation, performance monitoring, and residual value stewardship. The resulting framework provides a strategic and conceptual basis for the development of circularity-enabling façade technologies, accounting for the diverse and sometimes conflicting interests of the multitude of stakeholders involved throughout a project’s lifecycle. The framework aims to support planners, manufacturers, and builders accelerate the circular deep energy renovation of the built environment while also exploring new business opportunities. ... Read more

Scientific and professional dissemination of the Facade Leasing Demonstrator Project. This technical report is an annex to the Facade Leasing Demonstrator Project 2019 performance report(2.7.3.FLD.D1). For general information on the Facade Leasing research project, its process, and objectives please refer to the aforementioned document. The focus of the resent report is the dissemination and expansion of knowledge related to the FLD project. This includes academic work such as scientific publications, conferences, and master graduate thesis; as well as professional knowledge-sharing and networking events addressing the knowledge triangle of academy, industry, and research. The sensitive political and strategic nature of the CiTG building demonstrator case throughout the decision-making and execution period in 2018 and 2019 has prevented the external dissemination of specific information regarding the case-study. A draft plan has been setout, however, for a broader dissemination of the case as a large scale success story in early 2020, now that the project’s construction has been successfully finalised. ... Read more

This technical report is an annex to the Facade Leasing Demonstrator Project 2019 performance report(2.7.3.FLD.D1). For general information on the Facade Leasing research project, its process, and objectives please refer to the aforementioned document. This technical delivery report focuses on the design, engineering, construction, and monitoring process towards the energy retrofit of the East facade of the building of the Civil Engineering and Geo-sciences faculty at TU Delft (CiTG in Dutch). Having built an initial prototype in November 2018, on one of the building’s typical office spaces, the project continued with the execution of a full large-scale retrofit of the East facade of the building throughout 2019.The CiTG case is representative of a massive volume of buildings across Europe - over 50% according to someestimates - which have been built during the post-second world war period, and which are currently reaching the end of their original service life. Such buildings need urgent technical intervention in order to improve their energy, safety, and indoor comfort performance. Such interventions, however, must be realized in line with Circular Economy principles, as they demand the strategic investment of immense amount of resources: material, financial, and human. Resources which we cannot afford to keep using under a linear mentality of take - make -dispose. ... Read more

Incentivising investment and long-term collaboration in high-performance facadeprojects. This technical report is an annex to the Facade Leasing Demonstrator Project 2019 performance report(2.7.3.FLD.D1). For general information on the Facade Leasing research project, its process, and objectives please refer to the aforementioned document. This technical delivery report focuses on the economic and business model aspects of the FLD project. The innovation behind the Facade Leasing research project lies not so much in the creation of new, energy-efficient facade technologies, but rather the creation of new investment and management processes leading to amore widespread and effective use of available and upcoming technology. The present report starts by describing the large, and growing, market for economically feasible facade renovation solutions. The research presently focuses on the Dutch non-residential, (semi-)publicly owned market, which has been identified as an ideal early adopter, but extrapolations are made to other European segments in the “Upscaling” chapter. The report then presents the work done by the research and practice consortium of the FLD project, represented by real estate owners/operators, facade fabricators, financial institutions, and other key stakeholders towards the definition of a promising business and financial model for the contracting of Facades-as-a-Service. ... Read more

This technical report is an annex to the Facade Leasing Demonstrator Project 2018 performance report (4.2.6.FLD.D1). For general information on the Facade Leasing research project, its process, and objectives please refer to the aforementioned document. This technical delivery report focuses on the economic and business model aspects of the FLD project. As has been mentioned before, the innovation behind the Facade Leasing research project lies not so much in the creation of new, energy-efficient facade technologies, but rather the creation of new investment and management processes leading to a more widespread and effective use of available and upcoming technology. The present report starts by describing the large, and growing, market for economically viable facade renovation solutions. The research presently focuses on the Dutch non-residential, (semi-)publicly owned market, which has been identified as an ideal early adopter, butextrapolations are made to other European segments in the “Upscaling” chapter. The report then presents the work done by the research and practice consortium of the FLD project represented by real estate owners/ operators, facade fabricators, financial institutions, and other key stakeholders towards the definition of a promising business and financial model for the contracting of Facades-as-a-Service. ... Read more

Accelerating deep building energy retrofits within the Circular Economy transition. This technical report is an annex to the Facade Leasing Demonstrator Project 2018 performance report (4.2.6.FLD.D1). For general information on the Facade Leasing research project, its process, and objectives please refer to the aforementioned document.
This technical delivery report focuses on the design, engineering, construction, and monitoring process towards the energy retrofit of the East facade of the building of the Civil Engineering and Geo-sciences faculty at TU Delft (CiTG in Dutch). After building an initial prototype in November 2018, on one of the building’s typical office spaces, plans are to continue with the full retrofit of the
East facade of the building throughout 2019.
The CiTG case is representative of a massive volume of buildings across Europe - over 50% according to some estimates - which have been built during the post-second world war period, and which are currently reaching the end of their original service life. Such buildings need urgent technical intervention in order to improve their energy, safety, and indoor comfort performance. Such interventions, however, must be realized in line with Circular Economy principles, as they demand the strategic investment of immense amount of resources: material, financial, and human. Resources which we cannot afford to keep using under a linear mentality of take - make - dispose. ... Read more

The construction and renovation of the building envelope represents a significant fraction of a project’s life-cycle costs. It also has a determinant effect on the potential reduction in energy use, as well as on the improvement of the building’s indoor comfort. Nevertheless, the challenge of a low rate and depth in building energy renovations cannot be solved through technological innovation alone. Instead, the Façade Leasing research project proposes a systemic shift in economic and business incentives, towards the creation of a performance-based contracting model for integrated façades.

Façade Leasing explores an integral, cross-disciplinary model promoting accelerated strategic investment in energy-efficient building envelopes. A focus on performance delivery, rather than product sales, would in turn impulse ongoing innovation in products and management processes. It would also provide the foundations for Circular Economy strategies for the reuse and remanufacturing of building components, leading to a potential reduction in primary raw material consumption across the façade industry.

This study starts by describing the “Façade Leasing pilot project” developed and built at the TU Delft campus by a consortium of açademic and industry partners. It then outlines the main drivers and barriers to the commercial application of the Façade-as-a-Service concept in the Dutch public, nonresidential real estate sector, from the perspective of four key stakeholder groups: Demand drive, or the decision-making process of real estate developers, owners, and managers; Supplier readiness, or the necessary reorganization of products and processes along the supply-chain; Finance, or the distribution of financial resources bridging the gap between initial investment cost and longterm service fees; and governance, or the necessary regulatory innovation required to separate ownership of building and façade.

The research shows that, while further research and validation work is needed to test these principles in a controlled, case-study setting, the potential for façade-as-a-service delivery is within reach under the current legal and economic environment. ... Read more

The Circular Economy (CE) attempts to realign business incentives, across all fields of human industry, to support the preservation of raw materials within closed economic loops. Within this conceptual frame, Product-Service Systems (PSS) combine the use of tangible products such as building technologies, with intangible maintenance and monitoring services, to enhance the delivery of valuable performance while limiting the use of materials and other finite resources. This paper explores the potential for the application of CE and PSS organization principles in the delivery of Facades-as-a-Service. It explores how the benefits brought about by this way of thinking: Lower initial capital requirements, material ownership retention by suppliers, and long-term interdisciplinary collaboration, could lead to a more efficient façade construction industry, while accelerating the rate and depth of building energy renovations.
Within the current process for designing, manufacturing, and operating facades there is a gap between supply-side discoveries and demand-side needs, which hinders the implementation of resource-efficient facades. Facade leasing as a form of product-service system keeps suppliers committed, throughout the building’s service-life, to safeguard optimum performance in operation, while actively stimulating clients to adopt innovative technical solutions.
The paper elaborates on both supply-side facade innovations and the demand-side conditions necessary to implement such business models. This while exploring the costs and benefits of product-service systems as new collaboration models to align supply and demand incentives. It builds upon the research project “Facade leasing” (MSc thesis by Azcarate-Aguerre, J.F., 2014) and combines knowledge about facade design and engineering (supply-side approach) with the knowledge about client needs, performance criteria, and willingness to pay (demand-side approach). The research methodology includes literature review and expert interviews, integrating both theory and practice.
This paper argues that a Product-Service System approach to facade design, construction, operation, and renovation could accelerate the rate and depth of building energy renovations. It could also provide incentives to supply- and demand-side stakeholders, to implement Circular Economy principles through new models of product ownership, service contracting, and performance delivery. It aims at establishing the general conceptual frame of a Product-Service System for leasable facades, setting the basic parameters to be taken into account when designing a PSS-based business model, and formulating its value proposition.
... Read more

The ambition to renovate the post-war building stock to an energy-neutral quality is getting a lot of attention in social housing association and other institutional owners, financial institutions and users. The Energy Agreement for Sustainable Growth indicates that 300.000 dwellings have to be renovated in the Netherlands annually. An effective renovation plan has to be long-term, target the deep transformation of the existing building stock, and to significantly improve its actual energy performance towards nearly zero energy levels. This level of energy saving typically requires a holistic approach, viewing the renovation as a package of measures working together. Even though the need for refurbishment is urgent, the rate of renovation and the resulting energy savings are relatively low. Main barriers identified are related to the available investment funds, awareness, advice and skills and the separation of expenditure and benefit. To address these issues, the paper presents a prefabricated and integrated façade module that gives the possibility to improve the current energy performance up to zero energy, while ensuring minimum disturbance for the occupants, during and after the renovation. Given that the design and installation take this constrain into consideration, it is possible to reach zero energy by adding more efficient installations and energy generation, as well as taking possible behavioural changes into account. Moreover, the paper evaluates such a zero-energy refurbishment in terms of financial feasibility. The proposed approach results in a feasible solution, which achieves high energy savings and addresses the complex issue of integrated refurbishment. ... Read more

The ambition to renovate the post-war building stock to an energy-neutral quality is getting a lot of attention from social housing corporations and other institutional owners, financial organizations, and users. An effective renovation plan must significantly improve the current energy performance of a target building towards nearly zero-energy levels. A number of facade solutions have been developed in recent years to solve the problem of large-scale renovation of housing. In the Netherlands, several exemplary renovation projects have the ambition to achieve an energy-neutral objective. One such project is the 2ndSkin Façade refurbishment approach for post-war residential buildings. Nevertheless, the market intake of such renovation is currently very slow, as housing associations are reluctant to invest the increased cost of a zero-energy refurbishment, despite the energy savings and ongoing benefits for the occupants. Within the framework of the research project 2ndSkin, this paper presents a prefabricated and integrated façade module that provides the possibility to improve energy performance up to zero-energy use, while ensuring minimum disturbance for the occupants, both during and after renovation. Based on the proposed integrated refurbishment solution, the study presents a financial breakdown of this case-study concept - including options to lower the initial investment - in order to outline a more attractive business case. Firstly, three design variations, ranging from a standard external insulation upgrade to a zero-energy renovation, are compared, using a range of positive, average, and negative values for a series of financial and economic parameters. Subsequently, the financial performance of a zero-energy renovation investment is calculated for three different apartment properties with diverse market values, to determine the circumstances that can justify an energy renovation investment. The analysis showed that, for properties with an intermediate to high market value, the investment can be attractive under current economic and market conditions, but this attractiveness drops significantly for lower-cost properties such as social housing. The study objective is to develop both the technical solution and the related business case to support the implementation of zero-energy refurbishment strategies into diverse real estate market tiers of the residential building stock. ... Read more

The challenge of transitioning towards circular economic models requires a
broad reorganization of processes and responsibilities throughout an industry’s
supply chain. Such reorganization can no longer be solely conceptualized by
academics in diverse manufacturing fields, but must be developed and grounded
with the involvement of business-oriented industry partners who represent
the interests and concerns of real supply and demand side stakeholders. The
shift towards circular development starts at a strategic level, by identifying
the business potential of models that extend collaboration, reinforce customer
loyalty for suppliers and optimize performance-oriented services for clients.
This strategic decision must then trickle down their respective organizations
to include all technical, administrative and executive teams and facilitate the
creation of product-service combinations.

Alternative ownership and financing models are emerging, in line with the
principles of circular economies. These models are based on lower initial capital
investments, material ownership retention by suppliers, and the delivery of
buildings as living, dynamic and adaptable platforms, as opposed to current
enclosed and static constructions. The business processes underlying such a shift
in industrial culture can accelerate the rate and effectiveness of energy- and
resource-efficient building renovations by applying the principles of constant
vitalization of systems and components, thus future-proofing buildings and
extending their potential service-life indefinitely.

This report will describe a foundation roadmap towards the implementation of
circular, integrated façade systems, based on our team’s experience developing a
pilot project with the involvement of leading industry partners in the Netherlands.
The process will be described in sequence: starting with the creation of a pilot
supply chain and consortium; working through the integration of independent
technologies into physical and digital product packages which allow (de)
centralized control and management of smart, interconnected, performance delivering
products; and finishing with the new business scheme and value
proposition created by long-term collaboration between suppliers and clients. ... Read more