Circularity and the Construction Sector Part.2

The Circular Economy is not just an environmental regulation, but is being promoted in many countries as a policy to change the very structure of the economy. How is Japan faring in this context? How does it look to those who, like investors, keep a close eye on economic trends and changes?

 In 'Talk Circular x Economy', Mr. Andre-Hottinguer, who has been involved in investments in global companies for more than 10 years and has travelled back and forth between Europe and Japan, gives his unique perspective on these topics, drawing on his background as an investor and as a foreigner.  Let's enjoy his 'way of seeing' and explore the 'Circularity x Economy

In this column and the upcoming ones, we will explore industries where circularity plays a crucial role due to their high consumption of raw materials and resources, starting today with the construction industry.In Part 2, I will discuss "innovation cycle", following on from Part 1.

When it comes to innovations, despite impressive engineering accomplishments spanning centuries, in today world the construction industry is still often viewed as low-tech. Heavy regulation is one reason but the lack of trial and error, which is a common driver of innovation, is another one. Adjustments during construction or after project completion are often complex and costly. While this cautious approach is not inherently a drawback, it slows the adoption of new technologies and often lacks the necessary data for thorough analysis. As a result, accurately measuring how circular a building truly remains a challenge.

Additionally, due to the high capital investment, many owners are hesitant to adopt new technologies—often for legitimate reasons, as making the wrong choice could lead to a significant loss in value. As a result, construction companies frequently have to test new technologies on their own projects before offering them to external clients.

However, a bit counterintuitively, Japan’s shorter building lifecycle makes the country an ideal place for testing circular innovation in construction.

Several Japanese companies have addressed the challenges mentioned above by transforming the way houses are built. One major difference compared to Europe is the widespread use of prefabricated elements in low-rise housing (one to two stories). While prefabricated construction in Europe is often associated with lower quality and shorter lifespan, Japan has spent decades refining the technology, achieving a level of quality that is equal to or even superior to traditionally built houses. Once completed, most customers would struggle to distinguish a prefabricated home from a conventionally constructed one. Although customization options are more limited—typically in the hundreds rather than thousands—this trade-off is often acceptable to buyers. In recent years, Japanese homebuilders have even expanded into Europe, exploring opportunities to introduce high-quality, cost-effective housing solutions.

By focusing either partially or entirely on prefabricated homes, Japanese companies such as Sekisui House, Sekisui Chemical, Daiwa House, and Panahome have significantly reduced costs while addressing the severe labor shortages in the construction industry. Modular construction helps address key challenges (aging workforce, declining number of skilled workers) by shifting a large portion of the building process to controlled factory environments, where automation and robotics can further improve efficiency. In my discussions with Sekisui Chemical, they mentioned that up to 80% of a home can be built in their factory. This also dramatically shortens the construction timeline—from nearly a year for a traditional house to just a few months. This faster process is particularly valuable in dense urban areas, where procurement and on-site construction can be highly complex.

Concrete production, a major source of greenhouse gas emissions, is also being addressed. Although cement comprises only about 10-15% of concrete (with aggregates/sand making up 70-80% and water around 10%), it accounts for nearly all of concrete’s carbon footprint. This is because its key ingredient, clinker, is produced by heating limestone and clay in a kiln at extremely high temperatures (up to 1,450°C).

To reduce this carbon footprint, clinker can be partially replaced with less carbon-intensive alternatives such as fly ash, slag, and limestone calcined clay. For instance, Taisei’s innovation (T-eConcrete®) limits the amount of cement used, while maintaining the same strength and workability as ordinary concrete and is also reducing CO2 emissions. One remaining challenge for the industry is that this substitution affects the setting time and strength of concrete, often necessitating a controlled and stable environment—something that is difficult to achieve on construction sites.

Returning to wood, while it has traditionally been used in low-rise buildings, advancements in technology are now making it possible to construct taller structures that are entirely or partially made of wood. A notable example is Obayashi’s 44-meter, 11-story building in Yokohama, where all above-ground structural elements, including columns, beams, floors, and walls, are made of wood.

Some challenges are similar to those faced in low-rise construction, such as wood procurement and fire protection. However, due to the size of these buildings and the frequency of natural disasters, specific improvements on the structure are required. For instance, not all types of wood are suitable. Japanese cedar (sugi, 杉), which constitutes most of the country's forest stock, doesn't have the strength required for columns and beams in tall timber buildings. More suitable alternatives include larch and other pine species, mainly found in northern Japan. For sugi and other softer woods, engineering processes such as lamination (Cross Laminated Timber, CLT) are necessary to enhance strength.

Fully wooden structures may not always be feasible, making hybrid construction a practical alternative by integrating wood with reinforced concrete. An example of this approach is the Tamadic Nagoya building, where CLT boards form an enclosed section, with concrete poured inside. This design allows the reinforced concrete to bear the vertical load while the timber provides resistance to horizontal forces. Another innovation comes from the Japanese general contractor Shimizu. Their wood hybrid technology (Hy-wood) focuses on strategically placing wood components within the building to optimize earthquake and fire resistance, construction efficiency, and cost effectiveness. 

Finally, an exciting and promising trend appears to be emerging: Japan incorporating its rich tradition of construction techniques into modern architecture.

Many traditional wooden structures, such as temples, shrines, and townhouses (machiya, 町家), were built using interlocking joinery (tsugite 接ぎ手 and shiguchi 仕口) instead of nails. This technique allowed buildings to be easily dismantled, repaired, and rebuilt, showcasing an early example of circular principles even before the term was widely recognized.

Similarly, many traditional buildings utilized natural materials like bamboo, washi paper, clay walls (shikkui, 漆喰), and straw, which are biodegradable and can be repurposed, aligning with the ideals of the circular economy. Tatami flooring, sliding doors (fusuma 襖, shoji 障子) provide flexibility and adaptability, making it easy to reconfigure spaces.

Today, we are witnessing a resurgence of rebuildable architecture, drawing inspiration from traditional wooden joinery techniques. An example of this is the work done by Obayashi, which combines GIR joints—short for “Glued in Rod”—and nuki 貫, a traditional Japanese carpentry joint. This innovative technology blends modern engineering with ancient construction methods.

In the future, construction projects will likely involve selecting and optimizing the following parameters, some long established and others more recently introduced: Durability, Recyclability, Reusability, Modularity, and Low embodied carbon.

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