An important strategy for protecting and regenerating the earth’s climate and its ecosystems is to transform the current linear economic model into a circular one.

Sabine Nallinger
Executive Director of Stiftung KlimaWirtschaft
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STRABAG and Stiftung KlimaWirtschaft drive forward climate targets

In cooperation with companies and politicians, the Stiftung KlimaWirtschaft is committed to meeting European and German climate targets.

Sabine Nallinger, Executive Director of the Stiftung KlimaWirtschaft, explains in an in-depth interview what makes STRABAG as a construction company the perfect cooperation partner for more sustainability in the construction industry, what it takes to actively promote climate protection and what framework conditions the Stiftung KlimaWirtschaft expects from politicians in order to achieve the European and German climate targets.

What is Stiftung KlimaWirtschaft?

Sabine Nallinger: Stiftung KlimaWirtschaft, the German CEO Alliance for Climate and Economy, was founded in 2007 under the name Stiftung 2° and renamed to Stiftung KlimaWirtschaft in 2021. We are a non-profit organisation that operates independently of political parties and across sectors and industries. Our mission is to promote climate action and the sustainable use of natural resources by activating and focusing the responsibility, innovative strength and problem-solving skills of German companies. The foundation works with policymakers to identify specific opportunities for the transition towards climate neutrality. In doing so, the foundation’s role is that of a bridge builder.

How do you rate the construction industry in terms of sustainability in business operations?

Sabine Nallinger: The construction sector is very resource-intensive. In Europe, 65% of cement, 33% of steel, 25% of aluminium and 20% of plastics are used exclusively in the construction of buildings. In Germany, the building industry accounts for 55% of the total waste generated. This corresponds to 229 million tonnes of construction and demolition waste, which is rarely recycled or reused without any significant loss of quality. An important strategy for protecting and regenerating the earth’s climate and its ecosystems is to transform the current linear economic model into a circular one. This goal remains a long way off, however, in part because the public sector does not reward such approaches in their tendering processes and there is too much focus on cost as a criterion for contract award. The potential for sustainability, however, is enormous.

The construction industry currently finds itself caught between two conflicting priorities. On the one hand, housing and infrastructure need to be built. On the other hand, we need to achieve the climate targets. And it all has to happen in an economically challenging context exacerbated by inflation and the war in Ukraine. How can we reconcile these seemingly conflicting interests?

Sabine Nallinger: At the moment we have about 1,400 different funding programmes in Germany in the building sector alone. A lot of money is being wasted here without any real added value for protecting the climate. We need a new government subsidy system that clearly addresses the conflict mentioned in your question with just a few effective funding programmes. The fact is that we have to realise many new housing and infrastructure projects to make Germany fit for the future. But the market environment has deteriorated dramatically. A rise in construction costs of up to 20% and a significant increase in financing costs mean that many important investment projects are being put on hold. We also face a shortage of skilled labour and materials for the many construction and infrastructure projects that are already underway. There also needs to be a clear priority focus on expanding and modernising our railways. Furthermore, the rehabilitation and maintenance of road infrastructure must be accomplished with a maximum increase in mandatory recycling rates. The drastically deteriorated investment environment and the lack of government guardrails mean that, although there is unprecedented pressure for transformation in the sector, not enough investment is being put into it. We need to overcome this wait-and-see attitude. 

Where do you see the biggest potential for the construction industry to make a difference?

Sabine Nallinger: Buildings in Germany, especially those already standing, are responsible for 35% of energy consumption and 30% of carbon emissions, according to the German Environment Agency (UBA). If we don’t accelerate the transition to a climate-neutral building sector now, Germany will fail to reach its climate targets. For a long time, policymakers prioritised new construction in the available state subsidies. Now the focus will have to be on existing buildings, especially on those buildings with the worst energy performance.

The European Parliament has voted for minimum performance standards, meaning it wants to prescribe that residential buildings must achieve a minimum of energy efficiency class E by 2030 and energy efficiency class D by 2033. Various progressive voices from the German business community support these demands. The German construction ministry, however, is very critical of this sharp regulatory sword. This is because KfW, the German investment and development bank, estimates the cost of realising this target at over €240 billion in Germany alone. The new climate social fund, which is being financed with revenue from emissions trading for the road infrastructure and buildings sectors, is intended to provide financial assistance to low-income households. But it is still completely unclear to me what powerful funding regimes are to be used to support these huge sums in a socially acceptable way. And money isn’t the only reason why the transformation is failing.

Exactly which funds can be made available for the renovation of the existing housing stock is fraught with great uncertainty, given the dispute within the German governing coalition over the budget. In addition to the drastically deteriorated investment environment that I mentioned earlier, this acts as an additional uncertainty factor in the market. If we continue like this, we will not be able to solve the dilemma of providing climate-friendly housing at socially acceptable prices. In our roadmap process for the building sector in 2023, we are currently working out specific proposals on how we can do things better.

What can Stiftung KlimaWirtschaft and STRABAG accomplish by working together?

Sabine Nallinger: Stiftung KlimaWirtschaft and STRABAG are united in their goal of advancing corporate climate action and supporting the ambitious path towards a carbon-neutral economy with many good ideas and practical proposals. For a long time, policymakers only set goals; now it’s a matter of finding ways of achieving these goals. And this is where we still see many regulatory hurdles and misguided incentives. I’m thinking in particular of the unused potential of public tenders or a multitude of often contradictory financing instruments. A company like STRABAG, which is so committed to driving change in its business areas and has set itself such clear strategic goals, is an excellent match for our circle of supporters. Our strength as a CEO initiative is that we have a group of committed entrepreneurs with an overarching perspective who are willing to engage with policymakers to advocate for a regulatory framework that supports companies in their transition and enables climate action as a business model.

In conclusion, please complete the following sentence: In five years, together we will have…

Sabine Nallinger: …brought a breath of fresh air to the political discussion on more climate-friendly infrastructure projects and on the circular economy and will have effectively addressed our ideas at the European and national levels.

Thank you very much for the interview!

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