A calculation model that provides insight into the residual financial value of a building product, with the advantage that the owner prefers to reuse it in a high-grade application rather than process it into low-grade raw material. This is the Residual Value Calculator that TNO is developing together with its partner C2C ExpoLAB.
Want to know more?
Is your organisation active in construction or financing? Would you like to contribute to the further development of the Residual Value Calculator? Please contact Willemijn van der Werf.
The built environment is responsible for half of the total materials used in the Netherlands and approximately 25 Mton of waste is produced annually in the construction and demolition sector. If we want to reduce our ecological footprint, we need to think more about raw materials, scarcity and limiting demand (reduce, refuse) and to keep products in circulation for longer (reuse, recycle, repurpose).
Loss of added value
“Over the entire lifespan of homes and offices, we expect their financial worth to depreciate to nothing,” says Willemijn van der Werf of TNO. “However, building components, such as internal walls, often have a residual value at the end of their functional life that is higher than the return from the materials alone. Besides a certain amount of wood or concrete, for example, the product also contains craftsmanship, technology and machine use that together represent a specific value. Destruction of the product leads to a loss of that added value.”
An inner wall lasts a long time but its function can change, for instance due to an expansion of personnel or the creation of an open plan office. Van der Werf: “The owner must then decide what to do with it. If they have it demolished and processed into woodchips for the chipboard industry, the raw materials remain and the added value is lost. But suppose the inner walls are disassembled into their components, given a layer of paint and reconstituted into one inner wall elsewhere. The product can then be used for another ten years, the added value is retained and the owner not only contributes to the circular use of materials, but is financially better off.”
“If the residual financial value is clear, reuse is more likely to occur at the end of the economic lifespan”
Providing economic insights
To provide insight into the residual value of construction products, and thereby create financial and material value, TNO is working with the C2C ExpoLAB on the Residual Value Calculator. As Sara Wieclawska of TNO explains: “Our calculation methodology is based on factors such as raw material price, quality, detachability, transport and maintenance and repair costs. If the financial residual value is clear, then reuse is more likely to occur at the end of the economic lifespan. We expect this to create an incentive not to demolish but to dismantle, and also to think about the detachability or ‘lego-isation’ of the design of various products.”
The prototype of the Residual Value Calculator was developed around inner walls in offices. Wieclawska: “In the long term, we foresee a predictive model for a larger portfolio of building products, providing insight into the actual residual value of the various movable, semi-movable and perhaps also immovable items in a building.”
“Because the residual value ensures that value is retained, this involves less risk for financiers such as banks”
Other business models in sight
“By assigning a residual value, other business models become apparent, such as for leasing or for repurchasing,” continues Van der Werf. “Because the residual value ensures that value is retained, there is less risk involved for financiers like banks, promoting more secure and frequent investments. As a result (and just as important as the development of a residual value method), a shift is needed towards ensuring that the parties involved stipulate agreements about the residual value of construction products as early as the planning stage.”