The construction crisis nobody's talking about

I recently returned from the UK after attending the Chartered Institute of Building’s members’ forum. My key takeaway wasn’t about what I saw on the ground in London and across Europe, but about what I see missing here in Australia.

The difference is that they’re serious about embodied carbon. We’re not. We’re handing out participation awards and pats on the back.

I saw a presentation that stuck with me. It went like this: if you were polluting a river and declared to the regulator, “I’ve reduced my pollution by 30 per cent this year,” the regulator wouldn’t applaud you. They would demand that you eliminate the pollution entirely (and fine you, heavily!).

Yet when we say, “We’ve reduced our embodied carbon by 30 per cent,” everyone pats us on the back. What a wonderful job, aren’t we great for trying.

The rest of the world treats embodied carbon as a regulatory and competitive reality. Australia treats it like a nice idea, rewarding participation rather than actual carbon reduction achievements.

Where the UK leads on embodied carbon

Walk through a UK construction tender process, and you’ll notice something we’re only beginning to experiment with here: embodied carbon carries equal weight to price. Not more. Equal. Because the UK market, and increasingly Europe, understands that the carbon you lock into a building at the design stage stays with it for decades.

They’re also further ahead on circular economy principles. When a building is demolished, they ask, “Can we repurpose those materials?” “Can we design the new build around salvaging the old concrete frame?” I saw retrofits that would be impossible here because of our code compliance rigidity around floor-to-floor heights, minimum slab thicknesses and core layouts. They’re solving those problems while we’re saying, “it can’t be done”.

Australia has pockets of excellence, but globally, we’re behind. On embodied carbon, we’re probably two or three years behind the UK regulatory curve.

The quality, rework and carbon trap

In a challenging economic environment, when margins are paper thin, the instinct is to choose the lowest-cost option. The lowest cost option often means quality suffers, and when quality suffers, defects follow. When defects follow, rework is close behind, and once rework happens, any carbon reduction you’ve engineered into the design evaporates.

A 2018 Australian study tracking more than 19,600 rework events across 346 projects found that rework consumed 34 per cent of a construction budget and reduced mean yearly profit by 28 per cent. Meanwhile, we know that up to 80 per cent of a building’s total carbon footprint is locked away in its materials. Tear those materials out to fix defects, crush them, and put new ones in? You’ve just wiped out your carbon initiative while eroding your margin.

New South Wales has 39 per cent of its residential buildings with serious defects. The average cost to rectify? $332,000 per building. That’s not just a financial cost—that’s embodied carbon being discarded, remade and wasted.

The irony is this: making the right choice of materials and building systems early costs less and saves carbon. Trying to retrofit it later costs a fortune and wastes carbon. Yet every time the economic cycle tightens, we collectively choose the expensive, wasteful path.

Mandatory compliance is here

Australia’s mandatory embodied carbon reporting framework is here. NCC 2028 is scoped to make it mandatory, and medium-sized entities must report Scope 3 emissions from 1 July 2026, with embodied carbon squarely within Scope 3.

But here’s what should worry the Australian property sector more: international investors don’t wait for local regulation. Tier 1 institutional capital has already set the bar. If we want to attract that capital, we need to be credible on embodied carbon, and right now, we’re not.

UK lenders are penalising poorly performing buildings in asset valuations and resale prices. Residential energy efficiency ratings are mandatory to disclose; they directly impact what people will pay. None of this is optional. It’s market discipline enforced by capital allocation.

Australia’s still in the “we’ll probably do something about this” phase. Meanwhile, investors are quietly deprioritising deals that can’t demonstrate genuine carbon reduction. Not because they’re environmental purists, but because they’re protecting asset values and managing risk.

What needs to change

The window for meaningful embodied carbon reduction is narrow and closing fast. We don’t need more participation awards. What we need is action.

Carbon outcomes are largely determined during planning and concept design, when your influence over materials, systems and approach is highest. Every decision made later, such as during detailed design, procurement, and construction, diminishes your ability to change course and increases cost. Start early or don’t start at all.

We also need developers, contractors and architects to treat embodied carbon as a design input, not a reporting checkbox. We need capital to flow toward buildings that genuinely reduce embodied carbon, not buildings that can claim a 30 per cent reduction by dropping concrete strength in a way that sounds good in a press release.

And we need to accept that the cheapest option isn’t the best one when the total cost of ownership, including carbon, defects, rework and long-term asset value is the real measure.

The UK and Europe aren’t perfect in this. But they’ve decided it matters. Australia has decided it’s a nice idea. That difference is starting to show in who gets funded, who wins tenders and what gets built.

The question is: how long are we comfortable staying behind?