By Mike Mustapha, Division President of ABB Smart Buildings
Buildings are at the center of the global climate challenge. Today, buildings account for around 30 percent of global final energy consumption and 26 percent of global energy-related emissions1. As governments and businesses face growing pressure to meet 2025 and 2030 climate targets, the urgency to decarbonize has never been greater.
Yet, the idea that we can demolish and rebuild our way to net zero is unrealistic. With 75 percent of today’s buildings still expected to be in use by 20502, retrofitting is the only viable path forward. But not just any retrofitting.
The next frontier is circular retrofitting – a smarter approach that focuses on reusing materials, optimizing energy efficiency with digital solutions, and integrating resource-efficient technologies.
This shift isn’t just about sustainability; it’s also a massive economic opportunity. According to McKinsey, the retrofit market is projected to grow from $500 billion today to $3.9 trillion by 20503.
The question is no longer if retrofits will happen – but how we make them more intelligent, sustainable, and scalable.
From ambition to action
We believe in pushing innovation while making the most of what already exists. Traditional retrofits focus on insulation, heat pumps, and efficiency upgrades, but to truly achieve net zero, we must go further. That means integrating circularity, automation, and smart building systems.
Recent research from WorldGBC, McKinsey, and BCG highlights four key trends shaping this shift:
- Circularity in materials – Up to 50 percent4 of materials from retrofits can be recirculated, cutting waste and lowering carbon footprints.
- Energy efficiency at scale – AI-driven energy management can cut consumption by 30 percent5 without requiring major structural changes.
- Smarter resource use – Digital twins and predictive analytics6 improve retrofit efficiency, reduce costs, and enhance building performance.
- Regulatory momentum – Stricter energy efficiency laws in Europe and the U.S. are accelerating the demand for sustainable retrofits7.
By adopting circular construction principles, smart automation, and integrated energy solutions, building owners can cut emissions, reduce costs, and extend the life of their assets – without the environmental and financial burden of new construction.
Challenges of smart, circular retrofitting
While momentum for circular retrofitting is growing, several challenges must be addressed to scale these solutions effectively. One of the biggest hurdles is material recapture and recycling. Many older buildings weren’t designed for deconstruction, making it difficult to reuse or recycle materials efficiently. Without advanced tracking, sorting, and reuse technologies, much of the waste from renovations will continue to end up in landfills, limiting the environmental benefits of retrofitting.
Another key challenge is data integration and smart retrofitting. Smart energy efficiency solutions depend on real-time data and digital connectivity, yet many buildings still operate on outdated infrastructure that lacks interoperability. To make smart retrofits seamless, the industry must continue to adopt open standards such as KNX and Matter, ensuring that new and existing technologies work together to optimize energy use.
Regulatory complexity is also a growing concern. Governments worldwide are introducing stricter energy efficiency laws, pushing property owners to upgrade their buildings. However, compliance requirements vary across regions, creating uncertainty and potential delays. Businesses that act early will have a competitive advantage – waiting until regulations force change could mean rushed, costly upgrades.
Financing and return on investment (ROI) are also top of mind for many decision-makers. The upfront cost of retrofitting can be significant, and building owners often face challenges in securing capital or demonstrating clear ROI. However, the projected growth of the retrofit market – from $500 billion today to $3.9 trillion by 20508 – suggests strong confidence from investors and analysts alike. This anticipated expansion signals that capital will increasingly flow toward sustainable retrofits on their own merits, as smarter, more efficient buildings deliver measurable value over time.
Finally, skills and workforce gaps present a significant barrier. Circular and smart retrofitting requires expertise in data analytics, AI and automation, but many facility managers and construction professionals lack these skills. Without targeted upskilling and training programs, the industry risks slowing adoption, limiting the full potential of these innovations.
Overcoming these challenges requires collaboration, investment, and innovation. By tackling these barriers head-on, we can accelerate the transition to smarter, more energy-efficient buildings, where technology and sustainability drive long-term value.
How ABB is leading the circular smart building movement
Collaboration is key. The transition to smart, circular retrofitting isn’t something one company can achieve alone, it requires an industry-wide movement, driven by partnerships, shared expertise, and collective action.
At ABB, we believe that the fastest, most effective way to scale sustainable retrofitting is through strong collaboration across the entire ecosystem – from architects and engineers to technology providers, policymakers, and real estate leaders. Through our recent partnership with the World Green Building Council in Europe, we aim to reinforce this approach, demonstrating how aligning industry expertise with policy frameworks and the latest technology can accelerate real change.
By working together, we can break down barriers to innovation, ensure interoperability between systems, and create a scalable, standardized approach to retrofitting that benefits businesses, communities, and the planet. The future of sustainable buildings isn’t about working in silos, it’s about joining forces to drive meaningful, lasting impact.
We are pioneering solutions that make retrofitting faster, more cost-effective, and truly sustainable. Our smart building automation systems dynamically optimize HVAC, lighting, and power consumption, adjusting in real-time based on occupancy and external conditions. This ensures energy efficiency without compromising comfort or performance.
Additionally, we are advancing circularity-focused retrofits, using digital twins, intelligent materials tracking, and predictive analytics to maximize material reuse and extend the lifespan of existing buildings. By integrating heat pumps, solar PV, and energy storage, we provide seamless electrification upgrades, allowing businesses to decarbonize operations at scale.
For companies managing multiple properties, our portfolio-wide energy efficiency solutions make a measurable difference. With advanced buildingmanagement systems, organizations can track, optimize, and meet 2025-2030 energy efficiency targets across their entire real estate portfolio.
By combining automation, circularity, and energy intelligence, we are redefining the way buildings are retrofitted, delivering sustainability, efficiency, and long-term value in one smart, scalable solution.
Secure our future today
The risks of inaction are growing:
- By 2025, tougher regulations will mandate energy efficiency upgrades9, forcing property owners to act or face penalties.
- By 2030, demand for sustainable buildings will outstrip supply 3:110, making inefficient buildings less attractive to tenants and investors.
- Stranded asset risk is real – Buildings that fail to meet decarbonization targets risk losing long-term value and becoming non-compliant.
- The technology to solve these challenges exists today. What’s needed is bold action from building owners, policymakers, and industry leaders.
At ABB, we’re committed to driving this transformation. The question is, who’s ready to join us?
About the author
Mike Mustapha
Mike is the Division President of ABB Smart Buildings and was appointed in February 2022. In this position, he has full accountability for the performance of the global Smart Buildings business in ABB, which includes a broad portfolio of market-leading home and building automation solutions as well as the portfolio for energy distribution systems and products. After starting his career in the U.S. in 1990 as an Application Engineer with Rotoflow Corp. Inc., a leading supplier of high-speed rotary and cryogenic machinery for process industries, Mike built global leadership experience with Altas CopCo, a multinational industrial company, where he held various leadership positions. In January 2009, Mike founded the new Pre-Engineered Buildings and Hot Rolled Structured Steel Group, headquartered in Jeddah, KSA, with its own independent Board. Mike assumed overall accountability for the company, overseeing the Middle East. Mike joined ABB in August 2011 as Low Voltage Division Regional Manager for India, the Middle East & Africa. In June 2014, he was promoted to Global Managing Director for the Building Products Business Unit prior to his 2018 appointment as Head of Global Markets for the Electrification business. Mike currently resides in Dubai and holds a Master’s degree in Mechanical Engineering from the University of Southern California (USC), U.S.
Sources
[1] Buildings - Energy System - IEA
[2] Circular retrofits | World Economic Forum
[3] Circular retrofits in the built environment | McKinsey
[4] WEF_Circularity_in_the_Built_Environment_2024.pdf
[5] The growing imperative of energy optimization for telco networks | McKinsey
[6] Circular-Metrics-for-Business.pdf
[7] Building an integrated approach to sustainable real estate | Deloitte Insights
[8] Circular retrofits in the built environment | McKinsey
[9] Building an integrated approach to sustainable real estate | Deloitte Insights
[10] Building an integrated approach to sustainable real estate | Deloitte Insights
