By Louise Monger, Vice President, Digital Energy at Schneider Electric
A glaring blind spot sits at the heart of most construction projects, one that threatens our ambitions to protect the climate. Construction procurement, project planning, and purchasing (a key economic driver as a major contributor to Australia's GDP and employment), has not kept pace with sustainability and technological innovation, potentially derailing sector growth and emissions reductions.
There are significant performance and financial benefits to be realised with a modern approach to procurement. Additionally, the fact that our built environment accounts for about 40% of global carbon emissions should be enough to spark transformative change across the construction industry.
Despite a growing focus on sustainability, including mandatory climate related financial disclosures in Australia, procurement practices have not evolved. Traditional approaches – optimised for cost compliance, not carbon performance – are still deeply entrenched in how buildings are designed, financed, and delivered. These methods might have once been fit for purpose, but in a decarbonising world, they now lock in inefficiencies for decades.
Outdated models, underperforming outcomes
Procurement decisions made at the feasibility stage often shape the performance of a building for the next 60 years. Yet these decisions are still largely based on outdated cost models, like historical per-square-metre rates – leaving no room for innovation. Sustainable technologies are routinely excluded from feasibility budgets. Design and construct contracts prioritise a least cost path to a compliant building over comfort and performance, producing buildings that tick the compliance box but overlook the people who use them and adding unnecessary operating costs to the building over its lifecycle.
This disconnect is unrelated to intent or disinterest in sustainability. Everyone is striving to do the right thing, while also needing to meet commercial realities, which is the heart of the issue – split incentives. Developers optimise for sale price. Asset owners live with the consequences: poor ventilation, overglazing that leads to overheating, long-span roofs that can't support solar, and leaky doors that waste conditioned air year-round.
We must shift from compliance to performance
To meet climate targets, we need to move beyond the checkbox approach to sustainability. Instead of building to minimum standards, we must demand real-world performance metrics: energy efficiency, occupant comfort, and long-term operational outcomes.
This starts with protecting the design brief and involving contractors early, so sustainability goals don't get watered down in the name of cost control. Budgets should be based on total cost of ownership, not just capital outlay. Technology, collaboration, and innovation must also be embedded at every phase, from design and construction through to operation and maintenance.
One compelling example comes from a collaboration between Schneider Electric, global property and infrastructure group Lendlease, and Arup, a multidisciplinary engineering and design consultancy. Together, we explored how AI-driven adaptable building services could reduce emissions and improve returns in commercial real estate. Applied to one floor of Sydney's Salesforce Tower, the study revealed the potential for over 1,500 tonnes of CO₂ savings over 30 years – all while enhancing tenant experience through real-time energy optimisation.
Financing and policy must catch up
To enable this shift, we also need financial models and policy frameworks that reward sustainability.
Sustainability-linked loans and environmental upgrade agreements can help bridge funding gaps. Scape, for instance, has a $2.5 billion sustainability-linked loan with a 0.5% interest discount if it meets agreed targets, a powerful incentive for long-term outcomes.
Similarly, a Passive House feasibility study for a large student accommodation project revealed just a 4% cost premium could reduce whole-building energy consumption by 67%. These numbers aren't theoretical, they're achievable with the right commercial and policy levers.
Governments must also modernise the National Construction Code and rating schemes. Policies should support green supply chains (like low-carbon concrete and green steel), align with real-world comfort standards (20–25°C), and promote global metrics with transparent disclosure.
Sustainability is a behaviour shift
Technology can enable change, however, sustainability is ultimately a behaviour shift. It requires a clear, shared vision that is held firm across procurement and delivery – not compromised when budgets tighten or priorities shift.
Everyone in the value chain has a role to play: from ESG managers and consultants to builders, owners, and financiers. We must align around long-term value, not short-term savings. In the climate transition, the way we build buildings is critical to achieving our carbon reduction targets.
Now is the time to fix the blind spot in our approach. The path to net zero isn't paved with lowest-cost contracts – it's built on procurement models that put performance, people, and the planet first.
