13. BUILDINGS

The building sector is an essential part of the economy in the Nordic countries, with a market size of USD 235 billion in 2024, and expected to grow in the coming years (Mordor Intelligence, n.d.). However, the sector enormously impacts the climate as it is responsible for 37% of global emissions, equal to 10 gigatonnes of CO₂e (United Nations Environment Programme, 2024). The built environment accounts for over 30% of the global final energy consumption (IEA, n.d.). Moreover, it causes major negative impacts on air quality, water resources, land pollution, and biodiversity loss (World Green Building Council, n.d.).

The sector utilises large amounts of resources for new buildings and renovations, estimated to account for 50% of all extracted materials in the EU (European Commission, n.d.-f.). This results in large amounts of construction and demolition waste (CDW), such as concrete, bricks, wood, glass, metals and plastic, which accounts for more than a third of all waste generated in the EU. To ensure responsible management of CDW and to enable taking full advantage of the potential of CDW, the EU has implemented legislation to improve circularity by requiring the sector to implement various practices to increase reuse, recycling and other material recovery (European Commission, 2024a).

Circular business models provide a large opportunity to translate the challenges from the building sector into business opportunities that can support increased rates of recycling and reuse of materials (Svedmyr et al., 2024). The EU Green Deal and the Circular Economy Action Plan also describe circularity in buildings as an essential part of the green transition towards a carbon-neutral future (European Environment Agency, n.d.). These policies describe the potential of PSS solutions within the building sector to lower resource and material use, reduce CO₂e emissions and optimise energy consumption. The research conducted in this project indicates that PSS solutions can potentially drive the adoption of circular economy solutions in the built environment (Cruz Rios & Grau, 2020). Still, there is a need for further research, e.g. on how to encourage sustainable consumer behaviour (Joensuu et al., 2020).

The importance of circularity in the Nordic context is reflected by the numerous projects of Nordic Innovation, a part of the NCM, regarding circular construction (Nordic Innovation, n.d.), including the Nordic Networks for Circular Construction (NNCC), which works to create a more sustainable built environment (Nordic Networks for Circular Construction, n.d.). Monitoring the performance of private actors in taking advantage of new opportunities and complying with stronger legislation to increase circularity is one critical component of accelerating the green transition of the sector. For the NNCC, Norion has proposed 11 indicators for measuring and integrating circularity in the construction and building sector (Claësson Kaarsberg et al., 2024). Increasing monitoring efforts could also help promote PSS models and solutions in the sector.

Two examples of service models within the sector (Buildings- and Space-as-a-Service and Efficiency- and Energy-as-a-Service) are described below, followed by two other examples investigated in this project's pilot studies. However, examples have been identified during the research within numerous areas, such as cooling, heating, and facades.

Buildings and spaces have long been rented out for various purposes for both individuals and private or public organisations, which can be considered a PSS solution. The business model is seen in multiple segments of the building sector e.g. within vacation, storage, residential, workspaces, facility management, and events. Service solutions are emerging throughout the sector and gaining more interest from providers and customers (Yarotska, 2023; Belt, 2023).

Buildings are now seen as a service, with construction companies as full-service providers who use Business Information Modelling (BIM) systems to design and manage information throughout the lifecycle of buildings to provide the necessary service (Wildenauer et al., 2022). Buildings are now seen as a service, with construction companies as full-service providers who use Business Information Modelling (BIM) systems to design and manage information throughout the lifecycle of buildings to provide the necessary service (Wildenauer et al., 2022). Digitisation and BIM offer new, essential opportunities for implementing and supporting circularity and PSS solutions in the building sector, which makes it likely that the market for these will continue to grow (Cruz Rios & 2020; Fargnoli et al., 2019).

Energy- and efficiency-as-a-service are gaining interest as pay-per-use solutions that incentivise producers to maintain, repair and design products for long-term use and reuse and reduce upfront capital investments (EaaS Initiative, n.d.; gridX, 2024). In Norway, Aneo Retail collaborated with Danfoss and provided Coop with refrigeration-as-a-service, reducing their overall energy consumption by 20% (EaaS Initiative, 2024). Another Norwegian company, Otovo, offers solar power on subscription, including a 20-year warranty where Otovo keeps ownership and responsibility of the panels and maintains and repairs them to prolong their life (Otovo, n.d.). An LCA study shows that solar panels, which are reused and complete the 30-year technical lifetime, are environmentally outperforming the benefits of recycling options and the higher-efficiency rates of new solar panels (Van Opstal & Manshoven, 2024).

The built environment provides many opportunities to implement circular business models such as PSS. The models are usually based on products designed for circularity and characterised by increased collaboration between stakeholders across the value chain. Effective implementation of PSS in the built environment depends on the specific design, efforts to change consumer behaviour, the configuration of PSS models, and using LCAs and data to give valuable insights on optimising the design of products and systems (Belt, 2023).

Lighting accounts for an estimated 15% of global electricity demand and 5% of GHG emissions (Ellen MacArthur Foundation, 2022). Lighting-as-a-service (LaaS) business models can help reduce waste and emissions from lighting. The core concept of LaaS is to provide lighting as a service rather than selling the equipment (lighting fixtures, consoles, control systems, light bulbs, etc.) and installation. This approach incentivises producers to offer higher quality products, as they remain responsible for maintenance and repair services throughout the product’s lifecycle.

In a LaaS model, lighting is provided as a subscription-based service where customers pay a fixed fee, and the service provider ensures continuous, efficient lighting while offering a performance guarantee. This typically includes installation, maintenance, and repair of energy-efficient lighting systems during the contract period and may even include upgrades to new technology. Since the provider retains ownership of the lighting equipment, it can be upgraded, refurbished, and reused at the end of the contract, either with the same customer or a new one, depending on the product’s remaining lifespan and the specific terms of the LaaS agreement (European Union, 2021).

For customers, LaaS offers different benefits, depending on their financial situation. For some customers, LaaS offers an opportunity to upgrade to energy-efficient lighting by minimising the financial barriers. For others, it enables the selection of higher-quality products focusing on circular design instead of settling for less expensive LED options of lower quality. In traditional scenarios, landlords or tenants often avoid investing in long-term, sustainable lighting due to higher installation costs and uncertain tenancy durations. Tenants may hesitate to invest in lighting without knowing how long they'll occupy the space, while landlords risk installing lighting that might not suit future tenants' needs. Thus, by lowering the upfront costs, LaaS can help customers to reduce their operational expenses through energy-efficient LED lighting and to access higher-quality lighting solutions. In some cases, third-party financiers may cover the initial installation costs, making the transition to LaaS even more accessible.

LaaS has the potential to foster a more circular building sector in the Nordics. Despite growing interest in circular construction, larger organisations – both public and private – are still hesitant to switch from purchasing lighting solutions to adopting a LaaS model (Rex & Kron, 2022). Currently, there is no established market for LaaS in the Nordic countries, but pilot projects have begun to explore its implementation, and the Research Institute of Sweden (RISE) investigated the driving forces and obstacles related to LaaS in Sweden (Hunka, 2020).

One example of a pilot project is the Swedish municipality of Bollnäs, where a LaaS model was used to upgrade public pre-schools and schools to energy-efficient lighting as part of a broader national initiative to phase out fluorescent tubes (Rison, n.d.). The service was provided by a start-up company, BrightEco, supported by Umeå’s BIC Factory business incubator, with external financing from an investment firm focused on the energy transition in the Nordics (Directorate-General for Environment, European Commission, 2023). Interestingly, despite this progress, BrightEco lacks a fully functioning website, reflecting the early-stage nature of the LaaS market in the region.

The key drivers for adopting Lighting-as-a-Service (LaaS) in the Nordics include its potential to reduce environmental impact, improve lighting quality, and provide a flexible solution that adapts to changing needs. Reducing environmental impact appears to be the primary motivator for stakeholders such as real estate companies and public institutions, as energy savings align with sustainability strategies and reduction targets. Additionally, the prospect of extending product lifecycles through maintenance and repair is seen as a major advantage, particularly in light of frustrations over the need to replace entire light fixtures rather than individual bulbs (interviews phase 1). New mandatory requirements on the quality of light in office spaces, such as mandatory daylight trimming, could also become a driver of LaaS, according to a Danish lighting company.

Cost savings are another potential benefit of LaaS, although stakeholders are uncertain about the economic implications. Overcoming the high upfront costs associated with installing energy-efficient lighting is viewed as a primary advantage. However, concerns arise over the difficulty of comparing LaaS with traditional lighting purchases and assessing direct and indirect financial effects. For example, shifting costs from capital expenditures (CapEx) to operational expenditures (OpEx) may lower a building's perceived value, complicating discussions with stakeholders like asset managers. This issue was highlighted during a workshop with a Danish pension fund and is supported by academic research that underscores the potential depreciation effects when a third party owns lighting fixtures (Rex & Kron, 2022). Conversely, operational leasing could create a rapidly growing asset for LaaS providers, which may negatively affect their financial stability. In our pilot project with Fischer Lighting, a Danish circular lighting company, we faced difficulties developing a LaaS pricing model that offered customers enough economic incentive to choose high-quality lighting over cheaper, low-quality alternatives while ensuring Fischer Lighting’s financial stability.

A general lack of knowledge about LaaS further contributes to stakeholder uncertainty, as there is limited practical experience with the model in the Nordics. Potential customers are unsure about legal aspects, such as liability in case of damage or the fate of product ownership if a LaaS provider goes bankrupt. There are also concerns regarding the division of responsibilities between service providers, electricians, and facility managers. For lighting companies interested in providing LaaS, understanding market needs and developing a business model based on long-term commitments and revenue generation presents a significant challenge. Furthermore, these companies also depend on the provision of components by their suppliers, which might not be able to guarantee product longevity and availability of spare parts needed to fulfil the LaaS contract. These conditions make it difficult for small, innovative companies to lead the way in this emerging sector.

Legal uncertainties surrounding LaaS stem from the lack of regulatory support for contracts governing functional sales and product ownership. Research shows that elements incorporated into the building, such as facades, windows, etc., will be considered “fixtures” and, therefore, owned by the building owner, even if a contract specifies otherwise. While there is no specific legal assessment for Nordic countries, these principles of property law and ownership of buildings apply in most European civil law systems, where legal solutions to secure ownership over building elements can vary (Ploeger et al., 2019). However, recent research on circular economy principles in construction provides evidence that lighting is considered a non-fixture. This means LaaS is generally not problematic from a property law perspective (Ploeger et al., 2019). Nonetheless, investigating these legal issues of property ownership can still be complex and costly for companies interested in LaaS development and may be perceived as a barrier to transitioning.

The primary environmental benefit of LaaS lies in its ability to reduce energy consumption by installing energy-efficient lighting – especially in cases where such upgrades would not have occurred due to high upfront costs. A comparative assessment of a Swedish municipal procurement case found that the long-term environmental impact of indoor lighting in school buildings was reduced by nearly half when using a LaaS solution (Jacobson et al., 2021). However, as with other PSS models, the environmental benefits can vary depending on the business model and specific implementation scenarios.

From a circular perspective, LaaS offers additional benefits by incentivising higher-quality products that can be upgraded, repaired, and maintained. By incorporating take-back schemes and the ability to transfer contracts between customers, LaaS has the potential to extend the lifespan of products further, which otherwise would often get thrown out. Since LaaS providers are responsible for product performance throughout the contract period, there is a strong motivation to design products with modularity and durability in mind. For example, the Swiss lighting producer ETAP adopted a LaaS model and, in this process, completely revamped its product designs to focus on modularity and compatibility between different product types (PAACT, 2024). This shift was crucial, as LaaS contracts often span 3 to 10 years, during which the provider must be able to offer repairs and replacements. Conversely, LaaS can also benefit suppliers already focused on circular design and longevity, such as the Danish lighting company Fischer Lighting, which already follows circular design principles in its product development.

Beyond its environmental potential, LaaS can help overcome financial barriers to acces­sing high-quality lighting. Improved lighting quality is linked to improved mental and physical health and increased productivity. For example, the International Labour Organi­sation finds poor workplace lighting can lead to accidents, eye strain, stress and head­aches. At the same time, too much light can equally lead to headaches and stress (Inter­national Labour Organisation, n.d.). Thus, high-quality lighting can increase work­place productivity and reduce accidents and errors. However, the hidden cost of poor lighting – such as negative health impacts at offices – is often overlooked in cost calculations for lighting. This was demonstrated in the case of Bollnäs municipality (Frisén, 2022).

LaaS can also benefit customers who need flexible and adjustable lighting solutions. For example, for retail spaces that frequently undergo refurbishment to attract customers, LaaS can easily accommodate these changing requirements (Frisén, 2022). According to a large Danish pension fund, shifting lighting needs in buildings often results in facility managers storing functional but old luminaires in basements or other storage areas. However, these stored luminaires are often forgotten and left unused. LaaS addresses this issue by ensuring that lighting is efficiently managed and updated, eliminating the need for redundant storage.

Lighting-as-a-service (LaaS) offers significant potential to reduce environmental impacts by promoting energy-efficient lighting and extending the lifecycle of lighting products through maintenance, upgrades, and reuse. By shifting from a traditional ownership model to a service-based one, LaaS encourages the use of high-quality, durable products, supporting circular economy principles. The environmental benefits are particularly clear in cases where LaaS enables lighting upgrades that might otherwise be delayed due to high upfront costs, as seen in the Swedish municipal case study.

While the primary benefits of LaaS lie in its ability to reduce energy consumption and waste, it also provides some additional value for businesses, particularly regarding flexibility and managing lighting needs over time. LaaS can help avoid the storage of redundant lighting fixtures, as the service ensures regular updates and management of lighting systems. Additional socioeconomic impacts of LaaS include improved health and productivity through better lighting quality.  

Despite the environmental and operational advantages, the uptake of LaaS in the Nordics is still limited. Key barriers include a lack of knowledge, legal uncertainties, and challenges in comparing LaaS to traditional purchasing models. To realise its full potential, broader awareness and policy support will be necessary to overcome these obstacles and encourage more widespread adoption of LaaS in the region.

In the Nordics, there are an increasing number of policy targets that emphasise preservation and repurposing of existing building mass as well as selective demolition in addition to policy targets related to increasing CDW recycling rates and the environmental performance of new buildings (Nordic Council of Ministers, n.d.-b). This is an important development since the highest circularity potential lies in Refuse, Rethink and Reduce strategies, where waste and virgin resource use is avoided and reduced. In the current reality of the building sector, it is, however, hard to avoid (targeted) demolition and redevelopment of buildings, as well as new constructions and demolition of existing buildings to replace them with new ones that meet the requirements of owners and tenants. In this context, circular solutions for building elements become highly relevant since they may add the flexibility needed for tenants but allow for easier reuse and transformation of spaces with positive effects through reduced CDW – both now and in the future.

One major building element in most buildings today is gypsum plasterboard walls, commonly used as partition walls in all types of buildings. When needs change or when new tenants move into a building, or when entire buildings are demolished because the floor plans or other building elements do not suit the tenant’s needs, these plaster walls are torn down. This waste is often disposed of in landfills, leading to the loss of valuable materials, carbon emissions, and further environmental degradation. The urgency of transitioning to circular construction solutions is thus clear. Modular partition walls, which can be easily assembled, disassembled, and reused, represent a critical innovation in this context. These systems align with the principles of the circular economy by allowing for easier reuse and retention of the value of materials within the economy for as long as possible, thereby reducing the demand for new resources and lowering carbon emissions associated with material production and waste management.

Modular or circular walls have existed in various forms for several years, but the growing focus on circularity and sustainability in the buildings sector has spurred new initiatives to innovate the product group and provide new products that do not have the limitations of existing models, which has confined modular walls to being a niche construction element.

In Denmark, the two largest municipalities, Copenhagen and Aarhus, have initiated two separate initiatives to develop prototypes for circular wall solutions together with architects and engineering companies. These are, respectively, a gypsum-based solution that resembles existing plaster walls but with a design that allows them to be reused (Københavns Kommune, n.d.) and a new, fully modular and biobased inner wall design (AART, n.d.). A startup company, Mellow Designs, is also working on scaling up a design that combines universal scaffolding systems and biobased materials for the outer panels to create a flexible and adaptable wall solution (Mellow Designs, n.d.). The modular partition systems can be easily reconfigured to meet changing needs, thus extending the lifecycle of materials and reducing the need for new construction. These are all different from most existing partition walls, including modular variations, because they are designed for disassembly and reuse rather than recycling only. In Denmark, the two largest municipalities, Copenhagen and Aarhus, have initiated two separate initiatives to develop prototypes for circular wall solutions together with architects and engineering companies. These are, respectively, a gypsum-based solution that resembles existing plaster walls but with a design that allows them to be reused.

Walls are generally considered part of the fixed building layout and floor design rather than a standalone product. Therefore, a substantial cultural shift is needed for stakeholders involved in the planning of renovations and new builds to consider walls as temporary elements despite having both an interest and a need for the advantages they provide. A company renting a large office space will likely not want to deal with the hassle of owning the walls, while the building owner does not want to handle the logistics of storing spare parts and surplus walls that may or may not be needed by future tenants. PSS models may offer a solution to this challenge by shifting the ownership of walls to a third-party provider responsible for handling and maintaining the walls while providing a flexible solution to tenants and building owners.

The building sector is under increasing pressure to adopt more sustainable practices, driven by a combination of regulatory, economic, and social factors. Customer expectations are evolving, with an increasing demand for buildings that not only meet functional requirements but also minimise environmental impact. Institutional investors, such as pension funds and large corporations, face increasing requirements for sustainability reporting and seeking carbon emission reductions across their operations, including office buildings and properties under management. This trend in customer preferences drives the market towards greater awareness of buildings’ resource footprints and the need for more circular solutions (Grainer, 2024).

Certifications such as LEED, BREEAM and DGNB have become important benchmarks and a competitive parameter for construction and redevelopment projects for public and private sector clients, encouraging developers to seek out and adopt circular and sustainable solutions (Nordic Council of Ministers, n.d.-b). Some companies are taking further steps to encourage the reduction of carbon emissions by, for example, applying internal CO₂e emission pricing and a threshold for emissions by new buildings to encourage the use of more sustainable materials and building practices (Wihlborgs, 2022).

While the potential benefits of circular walls are significant, their implementation and contribution to emission reduction goals are not without challenges. Technical barriers remain a critical concern, particularly in areas such as sound attenuation, fire safety, and expectations for the adaptability of modular systems. The need for flexibility and circularity of the systems and the use of innovative biobased materials that are yet to undergo rigorous testing may be at odds with the regulatory and technical requirements for sound attenuation and fire safety. To allow for compliance while ensuring adaptability of these systems to different needs, careful consideration and ongoing innovation and testing is needed, which requires significant investment and industry support.

Scalability is another critical issue. While circular walls may work well in specific contexts, such as office spaces, scaling these solutions to broader applications, including residential buildings and public institutions, requires overcoming new technical, logistical and cultural challenges. Addressing these barriers is crucial to ensuring that circular walls can achieve widespread adoption and contribute meaningfully to the sector’s sustainability goals. Another key barrier is the industry's ingrained preference for ownership and the associated economic models. Similar to the challenges faced in other industries, changing the culture of ownership will require a fundamental shift in how companies manage assets. Developing a robust market for circular walls, potentially provided through PSS models, involves establishing new logistical frameworks for modular wall assembly, disassembly, and resale. This includes creating a network of resellers, buyers, and service providers who can support the lifecycle of these products.

Moreover, market maturity and the sector’s risk appetite play a significant role in adopting circular walls. According to stakeholders, cost considerations still dominate customer decisions, though sustainability certifications play an increasing role in tenders for developers. As the solutions mature and awareness of their environmental and economic benefits grows, there is potential for these markets to evolve, especially with the support of targeted policies and incentives.

Due to the early stage of development, there is a lack of comprehensive analysis and practical examples to document the environmental benefits of circular walls. Prototype examples, including those by Aarhus and Copenhagen municipalities, show that resource use and CO₂e emission reductions are possible during the lifetime of circular walls (AART et al., 2022; Københavns Kommune, n.d.), compared to traditional solutions. Unlike other circular economy initiatives that might inadvertently lead to increased consumption elsewhere, using circular walls is unlikely to result in additional resource use and rebound effects. However, quantifying these benefits requires further scale of their implementation and documentation.

The absence of robust data makes it difficult for policymakers and industry stakeholders to fully assess the potential impact of circular walls and develop targeted strategies for their adoption. Nevertheless, the negative environmental effects of existing practices are well documented, including substantial amounts of construction and demolition waste from plaster walls and other building elements across the Nordic countries (Nordic Council of Ministers, 2024b), underscoring the need for new solutions.

While challenges remain, adopting circular partition walls, including the potential of PSS models to overcome market barriers, presents a promising pathway for the construction industry to reduce its environmental footprint and move towards more sustainable practices. By addressing both the technical and market barriers and building a stronger evidence base, the industry can unlock the full potential of these innovative solutions. Actors across the building sector, including owners, developers, and policymakers, can play an important role by increasing their support for developing and scaling up circular walls.