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WWW.IBISWORLD.COM Sustainable Building Material Manufacturing in the US October 2014 1

IBISWorld Industry Report NN005Sustainable Building Material Manufacturing in the USOctober 2014 Britanny Carter

Built to last: Revenue will soar as the green movement gains ground

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

3 Additional Resources

4 Industry at a Glance

5 Industry Performance5 Executive Summary

5 Key External Drivers

7 Current Performance

9 Industry Outlook

11 Industry Life Cycle

13 Products & Markets13 Supply Chain

13 Products & Services

15 Demand Determinants

15 Major Markets

17 International Trade

19 Business Locations

22 Competitive Landscape22 Market Share Concentration

22 Key Success Factors

22 Cost Structure Benchmarks

24 Basis of Competition

24 Barriers to Entry

26 Industry Globalization

27 Major Companies

29 Operating Conditions29 Capital Intensity

30 Technology & Systems

30 Revenue Volatility

31 Regulation & Policy

32 Industry Assistance

33 Key Statistics33 Industry Data

33 Annual Change

33 Key Ratios

34 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


This industry produces sustainable building materials used during the construction and renovation of all types of building structures. Sustainable materials reduce building water, energy and other resource needs. Sustainable building materials

are frequently composed of renewable (or “green”) resources, rather than nonrenewable resources. Green materials are more efficient than traditional products because they reduce pollution, waste and environmental degradation.

The primary activities of this industry are

Manufacturing green or energy-efficient windows, doors and skylights

Manufacturing green or energy-efficient sealing and insulation

Manufacturing wood-plastic composite and engineered lumber

Manufacturing concrete (insulated concrete forms, dimension stone and recycled stone)

Manufacturing sustainable structural materials (recycled metal, other non-toxic products, reusable or recyclable)

Manufacturing sustainable interior materials (e.g. linoleum and trass)

Manufacturing sustainable exterior materials (e.g. panels made from paper flakes, compressed earth block and adobe)

Manufacturing plumbing components and fixtures made of recycled materials

Manufacturing building materials made of recycled or renewable plant materials (e.g. bamboo)

32121 Wood Paneling Manufacturing in the USThis industry manufactures veneer, engineered wood and other man-made materials used during construction.

32199a Prefabricated Home Manufacturing in the USThis industry manufactures wood windows, doors, skylights, panels and manufactured buildings.

32712 Clay Brick & Product Manufacturing in the USThe industry manufactures clay building construction materials, including: brick and structural clay tiles and ceramic wall and floor tiles.

32731 Cement Manufacturing in the USThis industry manufactures Portland, natural, masonry, pozzolanic, and other hydraulic cements used during construction.

32732 Ready-Mix Concrete Manufacturing in the USThis industry manufactures concrete materials used during the construction and renovation of buildings.

Industry Definition

Main Activities

Similar Industries

About this Industry

The major products and services in this industry are

Exterior building materials

Interior building materials

Plumbing, fixtures and other products

Structural building materials


About this Industry

33232 Sheet Metal, Window & Door Manufacturing in the USThis industry manufactures metal windows, doors, skylights, sheet metal work and ornamental and architectural metal products.

33512 Lighting Fixtures Manufacturing in the USThis industry manufactures lighting fixtures used during the construction and renovation of buildings, including solar lighting fixtures.

Similar Industriescontinued

For additional information on this industry

www.iea.org International Energy Agency

www.nibs.org National Institute of Building Sciences

www.doe.gov US Department of Energy

www.epa.gov US Environmental Protection Agency

www.usgbc.org US Green Building Council

Additional Resources

IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com


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SOURCE: WWW.IBISWORLD.COM

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Revenue vs. employment growth

Products and services segmentation (2014)

44%Structural building materials

28%Interior building materials

25%Exterior building materials

3%Plumbing, fixtures and

other products


Key Statistics Snapshot

Industry at a GlanceSustainable Building Material Manufacturing in 2014

Industry Structure Life Cycle Stage Growth

Revenue Volatility High

Capital Intensity High

Industry Assistance Medium

Concentration Level Low

Regulation Level Light

Technology Change Medium

Barriers to Entry Low

Industry Globalization Medium

Competition Level Medium

Revenue

$31.3bnProfit

$2.3bnExports

$969.0mBusinesses

2,484

Annual Growth 14-19

11.5%Annual Growth 09-14

21.3%

Key External DriversValue of constructionHousing startsPrivate spending on home improvementsPer capita disposable incomeTrade-weighted index

Market ShareThere are no Major Players in this industry

p. 27

p. 5

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33



Key External Drivers Value of constructionThe value of construction is an important indicator of demand within the commercial, industrial and residential construction markets that purchase sustainable building materials. As construction increases, demand rises for industry products used in construction and renovation projects. The value of construction is expected to

increase in 2014, presenting an opportunity for the industry.

Housing startsHousing starts indicate the number of new privately owned houses constructed in a calendar year. An increase in housing starts supports demand for sustainable building materials, as these products are increasingly used in the construction of

Executive Summary

The Sustainable Building Material Manufacturing industry produces building materials primarily using renewable or “green” resources to reduce energy, water and other resource needs. Over much of the past decade, environmental concerns have shed light on the importance of developing and using sustainable materials for the construction of homes, buildings and structures. States, counties and cities have tightened building codes to promote the use of energy-efficient products and sustainable materials, thereby driving growth for the

Sustainable Building Material Manufacturing industry. Tax subsidies and operating cost savings have also supported this trend, especially in light of the rapid rise in Leadership in Energy and Environmental Design (LEED) certified buildings. A LEED-certified building adheres to specific standards related to energy savings, water efficiency, carbon emissions reduction and indoor environment quality. LEED buildings are also evaluated on the materials that are used during construction with an emphasis on sustainable products.

Technological advances have facilitated a rise in demand for sustainable materials, as products become increasingly affordable and readily available. For example, synthetic products used to mimic wood, stone or other natural resources have decreased in cost and are easier to install and maintain than traditional materials. As a result of these trends, demand for sustainable materials has increased dramatically over the past five years, accelerating most recently due to the rebounding construction market. Revenue for the Sustainable Building Material Manufacturing industry is consequently expected to rise at an average annual rate of 21.3% to about $31.3 billion in the five years to 2014, including a 22.1% jump in 2014.

Over the five years to 2019, the industry is anticipated to continue experiencing exceptional growth, with revenue forecast to increase at an average annual rate of 11.5% to $54.1 billion. Demand from residential and commercial construction projects will drive the use of sustainable materials, as property owners, developers and regulators put a greater emphasis on cost savings, environmental protection and energy conservation. Industry growth will also be supported by a recovery in overall construction activity as demand for new projects rebounds from the aftermath of the subprime mortgage crisis and real estate bubble collapse.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

Industry growth will be supported by a recovery in overall construction activity


Industry Performance

Key External Driverscontinued

new single-family and multifamily homes. Housing starts are expected to increase in 2014.

Private spending on home improvementsHome improvement projects often use sustainable products to improve energy efficiency and longevity. Consequently, increased spending on home improvements increases demand for industry products. Private spending on home improvements is expected to grow in 2014.

Per capita disposable incomePer capita disposable income determines an individual’s ability to purchase goods or services. Increases in per capita disposable income give consumers more

to spend on housing renovations and additions. This factor is particularly important for this industry, as products are often more costly than traditional nonsustainable materials. Per capita disposable income is expected to increase throughout 2014.

Trade-weighted indexThe industry participates in international trade; therefore, the value of the US dollar relative to foreign currencies has a direct effect on industry performance. Domestic manufacturers benefit from a weaker dollar, which makes exports more affordable and imports relatively more expensive. The US dollar is projected to appreciate in 2014, presenting a potential threat to the industry.

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Government initiatives drive demand

The Sustainable Building Material Manufacturing industry is fueled in large part by green building construction. The government has updated building codes and initiated tax credits and other financial incentives to promote the use of sustainable building practices, subsequently increasing demand for sustainable building materials. Government entities at all levels have invested in sustainable building construction and renovations. As of 2011, all new construction and major renovations of eight federal agencies and departments, including the Environmental Protection Agency (EPA), the Department of State, the Department of Energy and the General Services

Administration, are required to meet the US Green Building Council’s Leadership in Energy and Environmental Design (LEED) certification standards.

As government incentives in the form of tax credits have transferred over to the private sector, more commercial and residential constructors have incorporated sustainable building materials in their projects. In addition, energy-efficient buildings have lower utility costs and appeal to a growing number of eco-conscious consumers. This has improved property market value for buildings made of sustainable building materials, consequently increasing demand for sustainable building products.

Current Performance

Over much of the past decade, the United States has been in the midst of a green revolution due to environmental concerns regarding carbon dioxide emissions and global warming. In addition, consumers and businesses have become more energy conscious in light of rising energy costs. To reduce energy consumption, the federal government, as well as many state and local governments, has provided incentives for individuals, businesses and developers to use sustainable design and materials for new construction projects and renovations. As a result of these factors, demand for sustainable building materials has grown considerably over the past decade.

Over the five years to 2014, revenue for the Sustainable Building Material Manufacturing industry is expected to increase at an average annual rate of 21.3% to total $31.3 billion. In particular, demand has increased for sustainable floor-covering products made from cork and bamboo, precast concrete products that use recycled materials (such as ash

from power furnaces), engineered wood products that use wood from sustainable forests and energy-efficient lighting and water-efficient plumbing fixtures. Sustainable building materials also include solar energy building materials; energy-efficient windows, doors and roofs; cement-free concrete; and structural building components made with high recycled material content, such as gypsum and cellulose insulation.

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New technology bolsters growth

The industry’s double-digit growth since 2010 is also attributable to product improvements and technology advancements. Companies have continually improved product quality and made products more affordable. This trend has helped drive growth, as a large portion of sustainable materials is now competitively priced in relation to nonsustainable products. The quality of synthetic materials has also improved, particularly in regard to functionality and appearance. For instance, synthetic woods are now largely indistinguishable from real wood products, enabling contractors, architects and homeowners to use these products for surfaces such as

flooring, decking, siding, paneling and roofing. Moreover, these products are often easier to install since they come prepainted or prestained. Synthetic products also require less maintenance, as they are less susceptible to water and sun damage.

The industry’s improved manufacturing processes, through technologies such as computer aided design, have also enabled companies to expand profit margins. IBISWorld expects the industry’s profit (measured as earnings before interest and taxes) to reach about 7.2% of revenue in 2014. During the recession, profit declined as operators lowered prices to counter the

Construction slumps, then recovers

Despite the rising popularity of sustainable building materials, the steep decline in US building construction activity hindered industry expansion during the recession. Demand for industry products is largely determined by new construction activity and steep declines in residential and commercial building construction caused industry revenue to fall 16.1% in 2009. The oversupply of existing homes, driven by a high number of foreclosures, contributed to downward pressure on home prices. This, in turn, caused housing starts to plummet 38.8% in 2009 and reduced demand for industry products. Furthermore, commercial construction fell significantly amid the economic downturn. Many companies were forced to shut down, leaving vacancies for existing commercial buildings and reducing demand for new commercial construction.

Improving economic conditions in the years following the recession have increased demand for new construction. Sustainable building materials have continued to gain ground within the building materials market. As the

economy started to improve in 2010, the industry quickly rebounded, and has continued to do so, with housing starts anticipated to rise at an annualized rate of 13.2% over the five years to 2014. Domestic industry growth has also been fueled by the repairs and renovation market. Tax credits for ENERGY STAR-certified products such as windows, HVAC units and insulation encouraged consumers to renovate their current homes with sustainable building materials. In addition, strengthening environmental regulation has boosted industry demand, with revenue anticipated to jump 22.1% in 2014. Imports and exports are expected to grow in line with revenue over the next five years at average annual rates of 20.6% and 21.0% to $1.1 billion and $969.0 million, respectively.

Improving economic conditions following the recession increased industry demand



New technology bolsters growthcontinued

significant drop in demand for building materials, including sustainable products, in the stagnant US construction market. Enhanced production efficiencies, coupled with improved demand from construction, however, have improved industry profitability over the past five years.

Growth opportunities and new technologies have encouraged existing manufacturers to manufacture sustainable building materials, increasing the number of industry operators at an average annual rate of 23.0% to total

2,484 enterprises in the five years to 2014. Manufacturers have expanded their product lines and increased the amount of recycled content in their products to increase revenue. Unique products or technologies that benefit the industry often characterize other new entrants. The number of industry employees has also subsequently risen, as manufacturers continue to expand operations to meet demand. Over the five years to 2014, employment is expected to rise at an average annual rate of 20.0% to 96,242 workers.

Construction activity fuels demand

Stronger consumer confidence and relatively low mortgage interest rates are anticipated to increase the demand for new homes in the next five years. IBISWorld forecasts the number of housing starts will grow at an average annual rate of 8.0% to 1.5 million units in the five years to 2019. Meanwhile, the value of construction is also forecast to rise, increasing at an average annual rate of 6.4% to $1.4 trillion. Rising construction activity will help drive growth as more material will be needed to construct buildings, homes, office complexes, schools and other structures.

The industry will also benefit from a rise in renovation activities as property owners and landlords will have more

capital to refurbish existing structures. Home renovations are also expected to proliferate as improving disposable income and unemployment levels encourage increased spending on such activities. These trends will help drive growth as more homeowners, landlords and contractors rely on sustainable materials for their renovation and remodeling projects.

Industry Outlook

Sustainable building materials will continue to expand their share of the building materials market as the trend toward environmental conservation persists. In the five years to 2019, industry revenue is forecast to increase at an average annual rate of 11.5% to $54.1 billion, including a 15.1% jump in 2015. During this period, growth will be driven by an upturn in building construction

activity as the market recovers from the aftermath of the recession and the real estate market collapse. Additionally, manufacturers are expected to benefit from growing consumer sentiment toward energy-efficient products and sustainable materials. Government incentive programs designed to promote the use of sustainable materials in construction projects will support this trend.

As the economy further improves, the industry will benefit from a rise in renovation activities



Concerns for energy In the five years to 2014, industry manufacturers benefited from the rapid rise in demand for sustainable materials due to improvements in pricing, quality and product offerings. Over the five years to 2019, this trend is expected to continue, especially as the green movement in the United States gains steam. As a result, competition from substitute products is expected to lose some of its edge, particularly regarding wood sourced from nonsustainable forests. The green movement will continue to spur growth as it did over much of the past decade as consumers, businesses and developers increasingly look to products and materials that have a low impact on the environment or are energy efficient. This trend will be supported by environmental concerns and government programs and incentives designed to promote the use of energy-efficient or environmentally friendly materials. The continued rise in Leadership in Energy and Environmental Design (LEED) certified structures will help drive demand, as part of the certification process relies on the use of recyclable or sustainable materials.

Third-party solar financing is expected to increase in prominence over the five years to 2019. Though the structure varies by company, solar panels are essentially leased to homeowners and estimated cost savings are subsequently paid back to financiers. According to Mericom Capital, 22 leasing funds raised $3.3 billion over 2013. Moreover, Green Tech Media’s US Residential Solar PV Financing Report estimates the solar financing market will rise from $1.3 billion in 2012 to $5.7 billion in 2016. As

financing for solar panels becomes more accessible, demand is expected to rise for solar panel products produced by the Sustainable Building Material Manufacturing industry.

To capitalize on consumers’ growing sentiment toward green materials, the number of companies is anticipated to rise over the five years to 2019, growing an average rate of 14.5% annually to 4,878, while employment is expected to increase at an annualized rate of 16.3% to 204,583 workers. Industry profitability is also expected to expand as companies benefit from exceptional improvements to manufacturing processes. Manufacturing improvements will be driven by technological advancements designed to improve productivity and lower costs. Additionally, operators will benefit from higher business volumes, which will enable them to leverage scale to improve overall margins. As a result, the industry’s earnings before interest and taxes are expected to rise to about 9.8% of revenue by 2019. While growth is expected to slow, imports are expected to outpace exports during the five years to 2019, rising at respective annualized rates of 12.8% and 10.9% to $2.0 billion and $1.6 billion. Import acceleration is primarily attributable to anticipated appreciation of the US dollar, which will reduce the relative cost of imported goods.

Industry operators will benefit from the increasingly popular green movement


Industry PerformanceRevenue is expected to grow faster than US GDP in the 10 years to 2019The industry will experience rapid enterprise and employment growth in the 10 years to 2019Growth continues to be driven by market acceptance and technology advancements

Life Cycle Stage


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-10 -5 0 5 10 15 20

DeclineShrinking economicimportance

Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

Key Features of a Growth Industry

Revenue grows faster than the economyMany new companies enter the marketRapid technology & process changeGrowing customer acceptance of productRapid introduction of products & brands

Wood Paneling Manufacturing

Municipal Building Construction

Sawmills & Wood Production

Prefabricated Home Manufacturing

Home Builders

Sustainable Building Material Manufacturing



Industry Life Cycle The Sustainable Building Material Manufacturing industry is in the growth stage of its life cycle. Over the 10 years to 2019, industry value added (IVA), which measures the industry’s contribution to the overall economy, is forecast to rise at an average annual rate of 17.3%, far outpacing GDP’s projected annualized growth of 2.5% over the same period.

Industry growth has been aided by technological advancements, as the industry’s ability to produce a diverse set of products and materials has dramatically increased over the past decade. This trend has helped boost the scope and function of sustainable materials, allowing contractors, developers, architects and homeowners to increasingly incorporate these materials into new projects, designs and

renovations. Improvements in technology have also helped decrease the costs associated with producing sustainable materials. This trend has helped drive growth as most product prices are now in line or only slightly above similar traditional materials.

Additionally, firms that produce synthetic woods have been able to mimic the look and feel of wood products. This characteristic is particularly important for surface materials, such as siding, decking and flooring because appearance of these products is highly important for esthetic design. At the same time, synthetic woods have been able to gain market share from traditional wood products because they are easier to install and less susceptible to water and sun damage.

This industry is Growing


Products & Services Building materials must meet a number of criteria in order to be considered sustainable under standards set by the US Green Building Council. Environmentally friendly materials must meet guidelines for low toxicity (i.e. formaldehyde free), minimal chemical emissions, recycled content, recyclability, durability and moisture resistance. Materials must also help reduce energy and water consumption.

Structural building materialsStructural building materials are expected to account for about 44.0% of all sustainable building products in 2014. Structural building materials include a diverse set of sustainable products ranging from recycled metal and plastics to concrete and other stone materials.

Recycled metal and plastics are reused to produce beams of all shapes and sizes. These beams are then used to construct ducts, walls or support trusses in homes and buildings. These materials are also used as supports for outdoor decks.

In addition to recycled metal, plastic and wood products, this segment also includes concrete foundations, forms and supports. Concrete is considered a sustainable material for a variety of reasons. First, most of the cement in concrete is made of limestone, the most abundant mineral on earth. Concrete can also be made with byproducts from power plants, steel mills and other manufacturing facilities, such as fly ash, sag cement and silica fume. Concrete is also durable, with a lifespan that can be double or triple that of other building

Products & MarketsSupply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

23332b Municipal Building Construction in the US This industry uses sustainable materials during the construction of municipal buildings, such as schools, courthouses, prisons and other public structures.

23611a Home Builders in the US Many single-family homebuilders utilize sustainable building materials during the construction of new homes.

23611b Apartment & Condominium Construction in the US This industry uses sustainable building materials during the construction of apartments and other multi-family housing structures.

23621 Industrial Building Construction in the US Many builders in this industry use sustainable materials during the construction of industrial complexes, buildings and other miscellaneous structures

23622a Commercial Building Construction in the US Construction contractors in this industry use sustainable materials during the construction of office complexes, malls and other commercial structures.

KEY SELLING INDUSTRIES

32111 Sawmills & Wood Production in the US Sawmills provide raw materials used during the production of sustainable materials.

32521 Plastic & Resin Manufacturing in the US Resin and other plastics are used during the production of many sustainable building products, including manufactured wood and laminated flooring.

32613 Laminated Plastics Manufacturing in the US Laminated plastic plates and sheets are used as inputs during the manufacturing of some sustainable building materials.

Supply Chain


Products & Markets

Products & Servicescontinued

materials, such as wood. Concrete also improves the energy efficiency of homes and buildings, and it can be crushed and recycled into aggregate for use in new concrete pavements or as backfill for roads and concrete foundations.

Interior building materialsInterior building materials are expected to account for about 28.0% of industry revenue in 2014. Most interior sustainable materials are associated with flooring, particularly synthetic wood products. These materials are often cheaper and easier to install than their traditional wood counterparts because they are prestained before installation. In contrast, traditional wood flooring must be stained and sealed after being installed in a home, office or other building. In addition to synthetic wood flooring, sustainable products are also used in kitchens and bathrooms as a substitute for granite or other natural stone materials.

Interior materials also include countertops made of recycled materials. Additionally, the industry also includes wallboard, synthetic wood paneling and other materials used for interior walls and surfaces.

Exterior building materialsExterior building materials are expected to account for about 25.0% of industry revenue in 2014. Sustainable materials often outperform traditional wood products outdoors as they are more resistant to weather and sun damage. These products are generally made of recycled plastics, but aim to reflect the look and feel of traditional wood. As a result, homeowners, property developers and landlords are increasingly using sustainable materials for siding, roofing and decking. In addition to being resistant to water damage, sustainable products also require less maintenance because most outdoor materials can be painted before installation. As a result, landlords and homeowners avoid costly upkeep associated with painting and staining outdoor surfaces.

Plumbing and fixturesThis segment is largely composed of piping, tubing and wiring made of recycled metals, such as copper and aluminum. Other fixtures include recycled bronze bathroom and kitchen accessories, such as tower hooks, faucets, sinks and bathtubs.

Products and services segmentation (2014)

Total $31.3bn

44%Structural building materials

28%Interior building

materials

25%Exterior building materials

3%Plumbing, fixtures and

other products



Products & Markets

Major Markets The Sustainable Building Material Manufacturing industry provides products and materials to contractors, developers and property owners of all types of buildings and structures. The industry is composed of a diverse set of products and materials that meet a variety of needs, so operators are exposed to every major facet of building construction, ranging from single-family and multi-family homes to office buildings and retail centers.

Nonresidential constructionThe construction of new nonresidential structures is expected to account for about 55.0% of industry revenue in 2014, as most sustainable materials are generally associated with large commercial and municipal projects. Within this segment, the commercial and municipal market accounts for about 48.0% due to the steady construction activity of schools, courthouses, hospitals and other public structures. This was

DemandDeterminants

Construction activity in the United States is the main determinant of industry demand, as sustainable materials are generally installed during commercial, industrial, residential and municipal construction projects. Since the recession, tighter lending conditions have made it difficult for businesses and individuals to finance non-residential constructions. In addition, weak demand for housing since the housing crises has created a surplus of new residential properties. As a result, industry growth has slowed. However, despite the recent downturn in overall construction activity, the industry has been able to maintain growth due to increased use of sustainable materials during construction projects.

High energy prices and increased concerns about the environment have created a demand for sustainable materials. This has been particularly evident with the rapid rise in LEED-certified buildings and structures. Additionally, the industry has benefited from improvements in plastic wood composites and other products that increasingly look and feel like their traditional counterparts. The composite of sustainable materials has also benefited from better performance under adverse weather conditions, particularly with synthetic wood products used outdoors. These products are often more

durable and less susceptible to water damage than traditional wood products.

Changes in household disposable income levels can impact the demand for sustainable materials, as these products are often more costly than traditional building materials. Additionally, fluctuations in disposable income also impact real estate investments in home improvement projects, additions and renovations. This was particularly evident over the three years to 2010 as the collapse of the housing bubble crushed individual wealth and sparked a rapid increase in unemployment. However, as the job market improves and consumer confidence continues to rise, home improvement activities will begin to rebound as individuals start to reinvest money into their properties.

The federal government also offers tax credits and incentives to builders and other property owners to promote the use of sustainable building materials and energy-efficient appliances during the construction and renovation of buildings in the United States. State and local governments also provide these incentives. While they are not directly aimed at sustainable building manufacturers, such incentives encourage property owners and developers to use sustainable materials, driving demand for industry products.


Products & Markets

Major Marketscontinued

particularly evident in the healthcare market, which grew steadily even during the economic downturn. The construction of other nonresidential structures, which include transportation buildings, warehouses, stadiums and other miscellaneous facilities, accounts for about 7.0% of revenue. Most sustainable materials used in this segment are related to concrete forms and exterior services.

New residential constructionNew residential homes and apartments account for an expected 15.0% of industry revenue in 2014, down from 2009 due to the collapse of the real estate bubble. Housing starts are expected to ramp up significantly in the five years to 2019, as the economy recovers and demand for new homes improves. As a result, this segment is expected to regain market share as housing starts return to normal prebubble levels.

Maintenance and repair of existing buildingsThis segment includes both residential and non-residential structures, with the majority of demand coming from renovations and upgrades of existing structures. This segment is expected to account for about 23.0% of revenue in 2014. Although declining per capita disposable income hurt demand for home improvement projects that use sustainable building materials, this segment has gained a bigger share of revenue in the years after 2010. Even as new construction remained stagnant, slight improvements in the economy, including lower unemployment and improved income levels, encouraged property owners to invest in home remodeling and property retrofit projects. A stronger uptick in this segment is expected over the five years through 2019 as the economy fully recovers and building owners and managers invest in green building renovations in order to reposition their properties and achieve long-term operating cost savings.

Major market segmentation (2014)

Total $31.3bn

48%Commercial and municipal

construction market

23%Maintenance and

repair market

15%New residential

construction market

7%Industrial

construction market

7%Other nonresidential construction markets



Products & Markets

International Trade The Sustainable Building Material Manufacturing Industry exhibits a relatively low level of international trade. International trade has been limited due to a surplus of US recyclables, a key material input for several sustainable products, and a preference for locally sourced goods. In addition, building materials sourced within 500 miles contribute to a building’s Leadership in Energy and Environmental Design rating. While trade has increased in the five years to 2014, imports as a percentage of domestic demand and exports as a percentage of revenue have decreased slightly during the period.

ImportsThe Sustainable Building Material Manufacturing industry operates at a trade deficit; the value of imported products exceeds the value of exports. Chinese imports have been on the rise as low labor and overhead costs translate into lower prices. However, The

International Trade Commission placed tariffs for Chinese solar panels in 2012 after concerns of dumping and heavy subsidies. Imports from Brazil have risen due to the increasing number of forests certified by the Forest Stewardship Council. Over the five years to 2019, this trend is expected to continue. Imports are expected to

Imports From...

Total $1.1bn

32%Canada

24%Other

21%China

16%Brazil

7%Mexico

Exports To...

Total $969.0m

38%Other

34%Canada

18%China

7%Mexico

2%Venezuela

Year: 2014SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC

Level & Trend Exports in the industry are Low and Increasing

Imports in the industry are Low and Increasing

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Industry trade balance



Products & Markets

International Tradecontinued

account for about 3.5% of domestic demand in 2014, down from 3.6% in 2009. Imports are expected to grow at an average annual rate of 20.6% in the five years to 2014 to about $1.1 billion.

ExportsExports are expected to account for about 3.1% of revenue in 2014, remaining relatively constant since 2009. Canada and Mexico will remain the leading destinations for exports, accounting for 34.4% and 7.1% of total exports, respectively. Government

efforts to increase exports and shifting economic and labor conditions abroad (i.e. wages in China are rising, encouraging manufacturers to relocate production back to the United States) will contribute to rising exports over the next five years. Despite growth, Chinese solar cell exports dropped about 38.2% in 2013 due to a retaliating Chinese tariff on US polysilicon imports, a key input for solar panel manufacturing. Exports are expected to grow at an annualized rate of 21.0% in the five years to 2014 to total about $969.0 million.


Products & Markets

Business Locations 2014

MO2.1

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.5

MA0.7

RI0.2

NJ0.7

DE0.3

NH0.2

CT0.3

MD1.1

DC0.0

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ1.9

CA7.7

NV0.7

OR5.2

WA3.7

MT1.0

NE0.3

MN1.9

IA1.1

OH2.8 VA

3.2

FL6.5

KS0.8

CO2.0

UT1.2

ID1.6

TX3.7

OK1.4

NC5.6

AK0.1

WY0.5

TN2.2

KY1.9

GA4.3

IL2.5

ME0.6

ND0.6

WI3.5 MI

3.2 PA3.7

WV0.7

SD0.5

NM0.9

AR2.5

MS1.8

AL3.3

SC1.9

LA1.3

HI0.4

IN3.6

NY1.6 5

67

8

321

4

9


Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes


Products & Markets

Business Locations The geographic distribution of establishments within the domestic Sustainable Building Material Manufacturing industry is heavily concentrated in the Southeast, West and Great Lakes regions. The concentration of firms within this industry largely mirrors manufacturers of traditional non-sustainable material manufacturers because many of these firms operate specialized divisions that focus on sustainable products.

Geographic factors specific to the Sustainable Building Material Manufacturing industry include regional energy qualifications and proximity to key inputs and markets. For example, qualifications for ENERGY STAR windows vary based on climate. In cold climates, buildings benefit from solar heat and ENERGY STAR windows have a high Solar Heat Gain Coefficient (SHGC). Conversely, ENERGY STAR windows in hot climates require a low SHGC to reduce cooling costs. As a result, the product mix of manufacturers will vary upon the market regions served.

While all manufacturing industries rely on nearby material sources and markets to reduce transportation costs, this is particularly important for the sustainable building industry since LEED ratings factor transportation emissions in their ratings. Materials produced by companies located near key inputs and the markets they serve will contribute to a building’s LEED building rating whereas products that are transported far distances can reduce an LEED rating. As a result, demand for nearby operators is predominantly high for the Sustainable Building Material Manufacturing industry.

SoutheastThe Southeast is estimated to hold 35.2% of the country’s establishments with every state represented. The industry is particularly prevalent in North Carolina

and Florida, where there is ready access to raw materials. Plant closures have been more common here than in most other regions because this area has been affected by modest demand and strong competition from imports in recent years.

WestThe West is estimated to account for 17.8% of the industry’s establishments. California leads the way in establishment numbers, closely followed by Oregon and, to a lesser extent, Washington. This region is particularly significant because the Pacific Northwest’s forests are one of the richest sources of hardwood. Softwood forest and plantations are also widespread. The proximity to forests is important for this industry because many operators also manufacture wood products made from sustainable forests.

Great LakesThe Great Lakes region holds about 15.6% of domestic manufacturing establishments, making it the third-largest region. It is also a fertile area for

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Products & Markets

Business Locationscontinued

forest growth and thus provides abundant raw materials for wood product manufacturers, including some engineered wood products that are considered sustainable. Establishments are spread evenly throughout this entire region, with every state maintaining multiple facilities. This region offers access to efficient transport routes to

nearby markets throughout the eastern United States.

SouthwestMinor operations of the Sustainable Building Material Manufacturing industry are located in the Southwest, whose share of industry establishments continues to grow with investment across the industry.


Cost Structure Benchmarks

ProfitProfit, measured as earnings before interest and taxes, varies between operators in this industry. Larger operators generally have higher profit margins because they benefit from economies of scale. Average industry profit declined slightly during the recession in response to weakened demand for building materials during the prolonged slump in new construction, which forced operators to lower prices. Operators also struggle to keep prices low to compete with more affordable building materials. Because manufacturers in this

industry use recycled steel, plastics and other products to produce goods, volatile raw material inputs also affect profit margins. Average profit is expected to account for about 7.2% of industry revenue in 2014. As construction activity has picked up, profit margins have consequently improved.

PurchasesPurchases of raw materials are the largest expense for this industry, accounting for about 47.5% of industry revenue in 2014. This characteristic is typical for manufacturing industries, as operators

Key Success Factors Having links with suppliesCompanies should regularly monitor and study alternative suppliers and materials based on numerous attributes including quality, service and price in order to ensure product quality and control input prices.

Having a wide and expanding product rangeThe demand for sustainable materials depends on the application of the products, so it is important for firms to manufacture a wide-range of products that meet various customer needs.

Production of goods currently favored by the marketManufacturers need to keep pace with trends in architectural design and green

building construction in order to provide products that meet the needs of downstream construction markets.

Ability to quickly adopt new technologyFuture revenue streams are based on significant investment in research and development, which can result in successful product launches. Successful firms are able to adapt quickly to technological changes and upgrade products on a regular basis.

Economies of scaleThe size and scale of operations and manufacturing locations can be important in keeping production and distribution costs down, build distribution networks and fund design and research and development.

Market Share Concentration

The Sustainable Building Material Manufacturing industry, has a low level of market share concentration. Due to the diverse array of products produced, no single industry operator accounts for more than 2.0% of industry revenue in 2014. While many manufacturers are dominant players in traditional

building materials markets, they do not generate enough industry-specific revenue to capture a significant percentage of total market share. As operators start producing larger volumes of sustainable building materials, industry concentration is anticipated to increase.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Cost Structure Benchmarkscontinued

purchase large amounts of raw materials to produce final outputs. The type of material varies between firms because each operator uses different resources to produce sustainable building materials. For instance, some firms use recycled steel, plastics and other products to produce goods, while others rely on natural resources such as bamboo for product inputs. During the five years to 2014, input prices have been volatile, making it difficult for manufacturers to anticipate future spending and reduce costs. In general, rising commodity prices have negatively affected the industry by slightly increasing purchase costs for operators.

WagesEmployee compensation, including payroll and fringe benefits, accounts for about 12.4% of revenue in 2014. Labor is used to assist in production, packing and

distribution of goods, as well as conducting sales, research and development, management and other activities. In the five years to 2014, wages as a share of revenue have declined from 14.3% in 2009 as firms expanded production capacity through technological improvements in manufacturing capabilities. Overall, revenue growth has outpaced employment increases, causing wages as a share of revenue to fall.

Other costsRent and utilities are estimated to account for 4.2% of industry revenue. Depreciation charges account for about 5.6% of industry revenue. Other costs are estimated to account for about 20.7% of industry revenue in 2019. These costs include sales and general administrative expenses and professional fees, such as legal and accounting costs. Industry

Sector vs. Industry Costs

■ Profi t■ Wages■ Purchases■ Depreciation■ Marketing■ Rent & Utilities■ Other

Average Costs of all Industries in sector (2014)

Industry Costs (2014)

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Barriers to Entry Barriers to entry for the Sustainable Building Material Manufacturing industry vary among entrants. Existing building material manufacturers can easily enter the industry by buying sustainably sourced input goods. This has resulted in a high number of new entrants to the industry in the past five

years, with many existing operators choosing to purchase inputs like recycled metal and Forest Stewardship Council certified wood. However, firms must often able to develop the requisite technologies and processes to produce sustainable materials. These processes include developing products that are

Basis of Competition The Sustainable Building Material Manufacturing industry is fairly competitive. Firms mainly compete on the basis of product innovation, quality, reliability and price. Customer service and product selection are also important differentiators for the industry. The speed that companies can identify new uses for green raw material inputs in developing sustainable building products for downstream construction markets can also determine industry success.

Builders, developers, architects and property owners seek environmentally friendly building materials that are high quality, durable and comparable in price to non-sustainable materials. Successful industry firms continually develop new products that meet evolving customer needs and can provide added advantages to conventional building materials in the areas of aesthetics, durability, convenience of installation and maintenance. Retailers and wholesalers also prefer manufacturers that are reliable and can respond quickly to orders.

Firms that are able to streamline operations and reduce costs are better able to compete on the basis of price. Firms are often forced to pass cost

increases for commodities and other raw materials on to customers. Those enterprises that are able to mitigate the price volatility of certain commodities and materials and to avoid price increases without sacrificing margins are better positioned to gain market share. Changes in energy costs and certain commodities can also have an adverse impact on production costs, and on the cost to transport products.

Operators also compete with low-cost imports of sustainable building materials. Externally, firms compete against manufacturers of non-sustainable materials, which provide products and materials that are often cheaper. The manufacturers of non-sustainable products also benefit from market penetration and familiarity because most sustainable materials are relatively new. Consequently, industry firms must emphasize the benefits of sustainability and differentiate their products beyond price, by emphasizing quality, reliability, product performance, and design innovation. Firms also invest heavily in research and development and marketing designed to better inform and educate downstream markets about their products and uses.

Cost Structure Benchmarkscontinued

operators also incur logistics and research and development expenses. Firms invest heavily in research and development and marketing to better

educate downstream markets about their products and uses. Marketing is expected to account for the remaining 2.4% of revenue

Level & Trend Competition in this industry is Medium and the trend is Steady

Level & Trend Barriers to Entry in this industry are Low and Increasing



Barriers to Entrycontinued

energy efficient or environmentally friendly, the majority of which are produced with recycled and scrap materials. Other entrants will require the purchase of machinery. There are no licensing requirements, government regulations or resource constraints that are significant enough to prevent firms from entering the industry. There is also a low level of industry concentration, with no true major players in the industry. Firms must be able to produce goods in a cost-effective manner because competition is intense among industry operators.

Technological changes in the industry may also pose as barrier to new entrants. In recent years, more focus has been placed on energy-efficient products, which involve significant research and development

(R&D) resources. In order to remain competitive in the industry, new entrants must be aware of technological changes and have access to resources for R&D investments. Most notably, many firms must produce materials that help constructors meet Leadership in Energy and Environmental Design standards.

Barriers to Entry checklist Level

Competition MediumConcentration LowLife Cycle Stage GrowthCapital Intensity HighTechnology Change MediumRegulation & Policy LightIndustry Assistance Medium




Industry Globalization

Although this industry features little foreign ownership, some industry operators compete on a global scale. For instance, successful firms must have the ability to compete on price with foreign competitors – particularly operators from low-cost countries such

as China. In 2014, imports are expected to account for about 3.5% of domestic demand. However, firms also benefit from global demand, with exports accounting for an estimated 3.1% of total industry revenue during the year.


Trade Globalization Going Global: Sustainable Building Material Manufacturing 2002-2014

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International trade is a major determinant of an industry’s level of globalization.

Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.

Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal

Sustainable Building Material Manufacturing 2002

2014

Level & Trend Globalization in this industry is Medium and the trend is Steady


Other Companies Armstrong World Industries Inc.Estimated market share: 1.8%Armstrong World Industries is a global manufacturer of floors, ceilings and cabinets. Based in Lancaster, PA, Armstrong operates 35 plants in eight countries and has about 9,100 employees. In 2014, Armstrong’s consolidated net sales are expected to reach $2.8 billion. The company manufactures a host of sustainable building materials that meet the requirements for the award of Leadership in Energy and Environmental Design (LEED) credits. The company’s sustainable building materials include a wide selection of linoleum floors made from natural materials (linseed oil, resins, recycled wood flour, cork dust, limestone and mineral pigments), mounted on jute backing. Such linoleum floor products are naturally antibacterial and biodegradable.

The company has continued advancing the design and composition of its linoleum products. Most recently, the company introduced its Linoleum with NATURcote product, which, according to the company, offers easier maintenance and greater durability than the regular linoleum products. In addition, the company’s Migrations BioBased Tile flooring is a new material made from renewable ingredients. BioBased Tile contains a patent-pending BioStride polymer made with rapidly renewable ingredients that help reduce the product’s reliance on petroleum and fossil fuels. It is also manufactured with 10.0% preconsumer recycled content. The company also offers a large portfolio of ceilings and suspension systems with high recycled material content and low-formaldehyde products.

The company does not segment financial information by specific products; however, IBISWorld estimates that sustainable building products will account for about 20.0% of total revenue

in 2014, or $564.0 million. Although total company revenue has declined in the five years to 2014 due to a significant drop in demand from downstream construction markets, the company has significantly expanded its selection of sustainable building products. The company is expected to continue expanding its sustainable materials portfolio to take advantage of growing demand for LEED-certified products.

Boise Cascade Holdings LLCEstimated market share: Less than 1.0%Boise Cascade is a privately held building products company headquartered in Boise, ID. The company was launched in October 2004, when it acquired the forest products and paper assets of OfficeMax. Its subsidiary Boise Cascade LLC is a US wholesale distributor of building products and one of the largest manufacturers of engineered wood products (EWP) and plywood in North America. Total company sales are expected to reach $3.7 billion over 2014.

The company’s EWP segment consists of laminated veneer lumber (LVL), I-joists and laminated beams used primarily in residential and commercial flooring, roofing systems and other structural applications. Boise Cascade claims it is the second-largest manufacturer of EWP in North America. The company owns and operates the two largest LVL and I-joist manufacturing plants in the United States in Alexandria, LA and White City, OR. The company’s engineered-wood products are made using about half the wood fiber contained in traditional dimension lumber, resulting in products that more efficiently use natural raw materials. Boise Cascade products are eligible for LEED, National Green Building Standard, Energy Star and other national and regional green building program credits. Boise Cascade’s engineered-wood products can help builders achieve LEED points under the

Major CompaniesThere are no Major Players in this industry | Other Companies


Major Companies

Other Companiescontinued

US Green Building Council standards. In 2014, the sale of EWPs (considered sustainable building materials) is expected to account for about 36.0% of the company’s wood product sales, or $232.9 million. In the five years to 2014, the company has been significantly challenged by the dramatic slump in US construction activity, particularly in the residential market.

Homasote CompanyEstimated market share: Less than 1.0%Homasote Company, based in West Trenton, NJ, manufacturers building products made from recycled materials. The company’s signature product is Homasote, a sustainable structural fiberboard made from recycled postconsumer paper and hot water, which are mixed together to create a slurry, then poured into molds, baked to

remove the water and cut to various sizes. Waste materials from this process are returned to the system and recycled. Homasote is used in construction for structural purposes, paneling, insulation, concrete forming and expansion joint, sound control in floors and walls, and as roof decking. The company also uses Homasote for the packaging and shipping of industrial items such as glass products, stone and metal parts, rolls of paper and film, and metal coils. Homasote estimates that it uses as much as 250 tons of waste paper each day, which translates into the elimination of 65.0 million pounds of solid waste each year and saves about 1.4 million trees. The company’s products are primarily sold to contractors and building material wholesalers. Overall, the company is estimated to generate about $34.8 million in revenue in 2014.


Capital Intensity The Sustainable Building Material Manufacturing industry has a high level of capital intensity. On average, firms spend $0.45 on capital for every dollar spent on labor. Capital investment in the industry is mainly associated with equipment used to produce sustainable building materials. Industry operators also invest in computer systems, trucks and other capital used to distribute and manage product inventory. Investment in technology helps firms reduce the various costs associated with production, with most money allocated to equipment used to improve employee productivity, product quality and production efficiency. Such technology reduces the need for labor input.

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

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Change in Share of the Economy

New Age Economy

Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Wood Paneling Manufacturing

Municipal Building Construction Sawmills & Wood Production

Prefabricated Home Manufacturing

Home Builders


Capital intensity

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SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit


ConstructionEconomy

Level The level of capital intensity is High


Operating Conditions

Revenue Volatility The Sustainable Building Material Manufacturing industry has a high level of revenue volatility. The industry is sensitive to changes in economic activity and the cyclical fluctuations of US construction markets. Changes in expenditure on housing construction and in the home remodeling market also affect this industry. The price of sustainable building materials in relation to the prices of other non-sustainable products used in construction influences purchasing patterns and also contributes to revenue volatility.

The downturn of the US construction market following the subprime mortgage bubble burst has resulted in volatile industry revenue. As demand for new commercial and residential buildings subsided, demand for sustainable building products also declined, resulting

in a double-digit drop in sales; on the other hand, the industry has experienced years of skyrocketing growth. In the five years to 2014, revenue dropped by as much as 16.1% in 2009 and has grown by as much as 29.6% in 2012. As the construction markets improve over the five years to 2019, revenue volatility is expected to moderate.

The demand for green buildings has been supported by the desire of consumers to reduce the consumption of natural resources in light of the harmful effects associated with greenhouse gas emissions. Builders, businesses and government institutions have increasingly purchased sustainable building products to meet consumer demand. In addition, energy saving materials like solar panels offer significant utility cost savings to

Technology& Systems

In terms of manufacturing technology, the types and complexity of technology vary across product segments. However, there are some common technologies that larger manufacturers employ to streamline production and reduce costs. For instance, most large manufacturing operations utilize computer-controlled machinery and other automated handling and assembly technology to perform repetitive tasks. Although these forms of machinery are relatively expensive to set up and install, the associated productivity gains are substantial. An increase in output volume reduces the cost per unit, as fixed costs are spread across more units. However, many medium- or small-size operators in the industry lack the resources to install such machinery and rely on manual labor instead.

The continuing success of many manufacturers relies on their ability to adapt to technological changes. Companies rely on consistent innovation

to meet demand for sustainable building materials, which are primarily chosen based on their contribution to a building’s LEED rating. Factors that contribute to LEED ratings include enhanced material compositions that increase utility and durability, reduced emissions during the manufacturing process, future energy savings and the sourcing of sustainable materials. With an anticipated increase in demand for sustainable building materials in the outlook period, it is essential for manufacturers to continue developing innovative sustainable building products. Expanded product lines will provide industry operators with increased competitiveness and long-term sustainability in the industry. Examples of new sustainable technologies include solar roof tiles that provide solar energy in addition to weather protection and electrochromic glass that blocks sunlight to reduce heating and air conditioning costs.

Level The level of Technology Change is Medium

Level The level of Volatility is High



Regulation & Policy The industry has a low level of regulation, which is similar to other traditional manufacturing industries. Most regulations are related to environmental laws, which cover noise pollution, air pollution and waste emissions and removal. Notable regulations include the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA), the Clean Air Act (CAA), the Cluster Rule, and noise pollution control legislation. Under the CWA and RCRA, the industry is responsible for assuring that appropriate water and solid waste discharge rules have been followed. The industry is also subject to specific provisions relating to airborne pollution emissions. The CAA is designed to protect and enhance the nation’s air resources to protect public health and welfare. It establishes limits to air pollutants such as carbon monoxide, nitrous oxides, sulfur oxides and other

particulate matter. The Cluster Rule is an environmental standard that prescribes integrated concentration limits for a wide variety of environmental parameters. The rule applies to most manufacturers in the United States and is enforced by the Environmental Protection Agency (EPA) with coordination and participation from state regulatory agencies. The Final Cluster Rule protects human health and the environment by reducing toxic releases to the air and water.

Noise regulation is governed by the United States Code, which is a source of federal law enacted by Congress. The law lists the types of industrial machinery considered, and requires the EPA to monitor progress through a developed noise emission standards. In addition, the EPA may regulate noise from unlisted products if necessary to protect the public health and welfare. Noise regulations consider the nature of the

Revenue Volatilitycontinued

consumers. Improvements in technology have also supported growth; sustainable materials often perform better than non-sustainable materials, particularly with regards to the product’s lifespan. This attribute is

particularly noteworthy when comparing traditional wood used in decks and other outdoor structures to composite or artificial wood materials, which are far less susceptible to weathering and rain.


Volatility vs Growth

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A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level & Trend The level of Regulation is Light and the trend is Steady



Industry Assistance Industry assistance varies among operators in the Sustainable Building Material Manufacturing industry due to its wide array of materials and products. While materials like cement incur no tariffs, products like wood doors incur tariffs of 3.2% to 4.8%. Companies that integrate energy manufacturing into their products, such as solar shingles, are eligible for industry assistance in some states. For example, the Clean Energy Business Financing Program in California provides low-interest loans for clean energy manufacturing companies to purchase and install manufacturing equipment. These incentives help operators expand facilities, upgrade equipment and increase production. In addition, the International Trade Commission placed tariffs for Chinese solar panels in 2012 after concerns of

dumping and heavy subsidies. While these tariffs have since been lifted, the Chinese government has retaliated with tariffs on related US exports, causing Chinese solar cell exports to fall by an estimated 38.2% in 2013.

The federal government also offers tax incentives to builders and other property owners to promote the use of sustainable building materials and energy-efficient appliances during the construction and renovation of buildings in the United States. States and local governments also provide these incentives. However, these incentives are not related to sustainable building manufacturers; instead, the tax credits are generally directed toward property owners and developers as an incentive to use sustainable materials and design, thereby raising downstream demand for sustainable materials.

Regulation & Policycontinued

product, noise reduction from the best available technology, and the cost of compliance with those standards. The code allows for the consideration of other standards where appropriate and the participation of interested parties.

In addition to various federal regulations, the industry is also subject to various state and local laws, ordinances and regulations. For example, the Bay Area Air Quality Management District in California is the state’s first regional agency dealing with air pollution. The agency enforces specific rules that limit the emission of volatile organic compounds (VOC) from the application of coatings and adhesives to various manufactured wood products.

Indirectly, the industry is also regulated and supported by the US Green Building Council (USGBC), which

determines whether a structure meets Leadership in Energy and Environmental Design (LEED) certification. LEED-certified structures must meet guidelines and efficiencies related to energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality. The use of sustainable materials contributed to LEED certification, increasing demand for industry products. Examples of sustainable materials include The Environmental Protection Agency and Department of Energy also support the industry by certifying energy efficient building materials like windows through their ENERGY STAR program. Until 2014, ENERGY STAR certified products were eligible for favorable tax credits, a factor that drove growth during the five years prior.

Level & Trend The level of Industry Assistance is Medium and the trend is Steady


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises EmploymentExports

($m)Imports

($m)Wages ($m)

Domestic Demand

Value of Construction

($m)2005 11,855.4 2,963.2 945 744 34,240 172.5 589.1 1,611.6 12,272.0 1,312,961.72006 14,348.8 3,611.9 1,204 932 45,126 209.8 749.9 1,961.8 14,888.9 1,346,984.02007 15,067.3 3,847.8 1,263 978 47,350 293.7 638.1 2,145.2 15,411.7 1,295,656.92008 14,203.7 3,273.6 1,264 958 44,363 386.0 545.9 1,995.3 14,363.6 1,177,334.82009 11,915.4 2,716.9 1,150 882 38,687 374.0 435.3 1,704.1 11,976.7 988,101.92010 13,356.2 3,014.8 1,442 1,103 41,968 488.7 501.9 1,839.5 13,369.4 869,753.82011 16,556.8 3,559.5 1,739 1,322 47,344 644.5 597.7 2,019.8 16,510.0 835,357.02012 21,464.9 4,326.4 1,982 1,504 54,620 710.9 761.7 2,412.9 21,515.7 892,865.52013 25,651.7 6,174.3 2,432 1,845 68,997 791.5 917.4 2,915.9 25,777.6 921,969.02014 31,325.0 7,904.9 3,298 2,484 96,242 969.0 1,109.5 3,895.3 31,465.5 998,990.02015 36,067.8 8,245.9 3,755 2,795 110,942 1,219.0 1,246.4 4,819.5 36,095.2 1,105,881.62016 40,006.9 9,491.0 4,344 3,221 132,302 1,341.6 1,409.4 5,690.4 40,074.7 1,175,552.12017 45,235.4 10,496.4 4,688 3,469 145,861 1,408.4 1,712.1 6,199.1 45,539.1 1,231,978.62018 49,090.1 11,856.6 5,517 4,066 170,961 1,458.2 1,840.2 7,193.0 49,472.1 1,291,113.62019 54,072.0 13,431.3 6,626 4,878 204,583 1,622.0 2,023.6 7,984.8 54,473.6 1,359,542.6Sector Rank 23/63 25/63 46/63 46/63 29/63 1/1 1/1 32/63 1/1 N/AEconomy Rank 303/1302 321/1302 611/1301 591/1301 358/1302 177/393 188/394 382/1302 73/393 N/A

IVA/Revenue (%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2005 24.99 4.80 1.46 346.24 13.59 36.23 47,067.76 0.022006 25.17 5.04 1.46 317.97 13.67 37.48 43,473.83 0.022007 25.54 4.14 1.95 318.21 14.24 37.49 45,305.17 0.032008 23.05 3.80 2.72 320.17 14.05 35.10 44,976.67 0.022009 22.80 3.63 3.14 307.99 14.30 33.64 44,048.39 0.022010 22.57 3.75 3.66 318.25 13.77 29.10 43,831.01 0.022011 21.50 3.62 3.89 349.71 12.20 27.22 42,662.22 0.022012 20.16 3.54 3.31 392.99 11.24 27.56 44,176.13 0.032013 24.07 3.56 3.09 371.78 11.37 28.37 42,261.26 0.042014 25.24 3.53 3.09 325.48 12.44 29.18 40,474.01 0.052015 22.86 3.45 3.38 325.11 13.36 29.55 43,441.62 0.052016 23.72 3.52 3.35 302.39 14.22 30.46 43,010.69 0.062017 23.20 3.76 3.11 310.13 13.70 31.11 42,500.05 0.062018 24.15 3.72 2.97 287.14 14.65 30.99 42,073.92 0.072019 24.84 3.71 3.00 264.30 14.77 30.88 39,029.64 0.07Sector Rank 54/63 1/1 1/1 15/63 61/63 9/63 49/63 25/63Economy Rank 846/1302 330/393 345/393 527/1302 914/1302 381/1301 846/1302 321/1302

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

Value of Construction

(%)2006 21.0 21.9 27.4 25.3 31.8 21.6 27.3 21.7 21.3 2.62007 5.0 6.5 4.9 4.9 4.9 40.0 -14.9 9.3 3.5 -3.82008 -5.7 -14.9 0.1 -2.0 -6.3 31.4 -14.4 -7.0 -6.8 -9.12009 -16.1 -17.0 -9.0 -7.9 -12.8 -3.1 -20.3 -14.6 -16.6 -16.12010 12.1 11.0 25.4 25.1 8.5 30.7 15.3 7.9 11.6 -12.02011 24.0 18.1 20.6 19.9 12.8 31.9 19.1 9.8 23.5 -4.02012 29.6 21.5 14.0 13.8 15.4 10.3 27.4 19.5 30.3 6.92013 19.5 42.7 22.7 22.7 26.3 11.3 20.4 20.8 19.8 3.32014 22.1 28.0 35.6 34.6 39.5 22.4 20.9 33.6 22.1 8.42015 15.1 4.3 13.9 12.5 15.3 25.8 12.3 23.7 14.7 10.72016 10.9 15.1 15.7 15.2 19.3 10.1 13.1 18.1 11.0 6.32017 13.1 10.6 7.9 7.7 10.2 5.0 21.5 8.9 13.6 4.82018 8.5 13.0 17.7 17.2 17.2 3.5 7.5 16.0 8.6 4.8

2019 10.1 13.3 20.1 20.0 19.7 11.2 10.0 11.0 10.1 5.3Sector Rank 1/63 1/63 1/63 1/63 1/63 1/1 1/1 1/63 1/1 N/AEconomy Rank 17/1302 15/1302 2/1301 2/1301 3/1302 11/393 10/394 6/1302 5/393 N/A

Annual Change

Key Ratios

Industry Data



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

Industry Jargon

IBISWorld Glossary

LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN (LE A building certification program that focuses on five key areas: energy efficiency, indoor air quality, material selection, sustainable site development and water savings.

GREEN BUILDING CONSTRUCTION The construction of buildings that meet various standards related to resource conservation and energy efficiency.

SOLAR HEAT GAIN COEFFICIENT (SHGC) A measure used for glass building products to determine how much heat from the sun is blocked.

SUSTAINABLE DESIGN Architectural design that seeks to reduce the negative impacts on the environment, and the health and comfort of building occupants.


Jargon & Glossary

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld Glossarycontinued

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