Unlocking Innovation in Construction: Key insights for SMEs
How can small and medium-sized enterprises (SMEs) drive the future of energy-efficient renovations?
Through our Cosme Reno project we seek to answer this pressing question. With the construction industry at a critical turning point—driven by climate goals, rising energy costs, and changing regulations—SMEs must innovate to stay competitive.
Through in-depth expert interviews and a large-scale market survey across six European countries, this new report uncovers the motivations, challenges, and opportunities shaping the future of SME-driven renovations. The findings reveal key innovation trends, the barriers holding companies back, and the strategies that forward-thinking SMEs are using to lead the way.
Key findings from the report
How SMEs are innovating
SMEs are pioneering new ways to make renovations more efficient, affordable, and scalable. Many companies are integrating new energy systems, such as plug-and-play solar panels and smart HVAC technologies, into their projects. Others are prioritizing sustainable materials by conducting Life Cycle Analyses and experimenting with bio-based alternatives. Meanwhile, process innovations—including prefabrication, offsite construction, and increased automation—are improving efficiency and lowering costs. Together, these approaches have the potential to transform the industry and accelerate large-scale energy-efficient renovations across Europe.
What’s holding SMEs back?
Despite these promising innovations, many SMEs face significant barriers that hinder progress. High upfront investment costs and long return-on-investment periods make innovation a risky endeavor. Rigid industry structures prevent new methods from taking root, as supply chains remain fragmented and collaboration models outdated. Additionally, many clients remain unfamiliar with innovative solutions like modular construction or bio-based materials, leading to low demand. Labor shortages further complicate matters, making it difficult to find workers with the technical expertise needed to implement new approaches.
Yet, the research identifies several key factors that help SMEs overcome these challenges. Companies that prioritize collaboration with suppliers, research institutions, and industry partners are more likely to innovate successfully. Embracing digital tools, automation, and data-driven decision-making also gives firms a competitive advantage. Finally, having visionary leadership with a long-term strategy plays a crucial role—many of the most innovative SMEs invest in research and development, pilot projects, or academic partnerships to stay ahead.
Interestingly, resistance to change or “commitment to the status quo” did not emerge as a major barrier. Instead, the findings suggest that financial constraints, regulatory inconsistencies, and a lack of market incentives are the real obstacles preventing SMEs from scaling up innovation.
Why this matters more than ever
The European Green Deal is pushing for faster, deeper energy-efficient renovations, but SMEs need the right conditions to succeed. The renovation sector is booming, yet many companies still rely on outdated, inefficient methods—not because they lack motivation, but because the conditions for innovation aren’t in place. Construction firms face high costs, inconsistent policies, and an industry structure that resists change. With growing demand for energy-efficient renovations, the time to rethink how SMEs innovate is now.
To move forward, SMEs need better access to financing, as financial barriers remain a major bottleneck. Stronger incentives, subsidies, and funding programs could help small firms scale up their innovations. Collaboration will also play a critical role. SMEs that actively build partnerships with research institutions, universities, and innovation hubs gain a competitive edge. Additionally, streamlining certification processes and creating more consistent policies would help build trust in new technologies, making it easier for SMEs to enter the market with innovative solutions.
What kind of SME are you?
The report identifies three types of SMEs based on their approach to innovation:
Leaders – The frontrunners
These companies invest heavily in research and development, prioritize partnerships with universities, and see innovation as a strategic advantage rather than a risk.
Adaptors – The cautious innovators
Adaptors tend to experiment with new methods only when customer demand increases. They often attend industry events to gain insights but need external incentives to fully commit to innovation.
Traditionalists – The risk-averse
These firms prefer tried-and-tested methods and avoid large-scale investment in new technologies. Since customer demand is high, they see little need for innovation and continue using conventional construction methods.
The findings suggest that adopting a Leader’s approach—prioritizing collaboration and R&D—could help SMEs future-proof their business models and remain competitive as the industry evolves.
What’s Next? Practical steps for SMEs & Industry Leaders
To stay ahead in an evolving market, SMEs should consider the following actions:
- Embrace digital transformation – Tools like Building Information Modeling (BIM) and AI-driven energy management can improve efficiency and cost-effectiveness.
- Seek out collaborative projects – Partnering with research institutions or participating in pilot projects can reduce the risks associated with innovation.
- Advocate for policy changes – Engaging with policymakers and industry groups can help push for better financial incentives and standardized regulations, making it easier for SMEs to innovate at scale.
Read the full report & take action
This research presents a roadmap for SMEs looking to thrive in the evolving construction landscape. If you’re looking for practical insights, data-driven findings, and strategies to accelerate your innovation efforts, this report is a must-read.