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It's no secret that the built environment and construction sectors are among the largest contributors to global carbon emissions.
With the Government being committed to reaching its net zero greenhouse gas emissions target by 2050, the construction and engineering industries need to continue to seek to reduce the impact that the UK's built environment has on climate change.
Environmental Social and Governance is increasingly becoming a key consideration for developers, funders, building contractors, and investors.
It will therefore come as no surprise that parties to construction contracts are increasingly seeking to incorporate clauses that promote sustainability.
The Chancery Lane Project
The Chancery Lane Project is an international body of legal and industry professionals that creates free model clauses intended to be used in construction contracts to drive solutions to climate change.
In addition to the draft model clauses, the Chancery Lane Project also helpfully provide an overview of the particular climate change issue that the clause seeks to address, a link to a separate user manual detailing how the clause works to address the issue and drafting notes.
Examples of provisions that can be incorporated into construction contracts include the following:
- JCT Energy Efficiency and Environmental Obligations (Mary's clause): this clause is intended for use in the JCT Design and Build contracts to ensure that the works meet specified energy efficiency targets before completion is certified.
- Net Zero Aligned Construction Modifications (Luna's clause): this clause allows contractors to propose variations to the works to achieve agreed green objectives.
- Climate Standard of Care (Construction) (Estelle's clause): This clause seeks to revise the standard of care to require contractors and service providers to ensure that the project meets its "Net Zero Objectives".
Option X29 NEC4
In an attempt to assist in reducing the impact of construction works on climate change, the NEC has developed the Secondary "Option X29" clause for inclusion in its NEC4 suite of contracts.
Clause X29 was published in July 2022 and is available with all of the NEC4 suite's main contract and sub-contract forms. The key elements of the provision are as follows:
- Climate Change Requirements: to be complied with by the contractor as per the project's scope. Examples of such requirements could be using renewable power on-site or electric vehicles. If the contractor does not meet the requirements, it will be classified as a defect that must be remedied. When drafting the Climate Change Requirements, it is important to ensure that they are not too onerous on the contractor and that the requirements are, in fact, achievable.
- Climate Change Execution Plan: this is to be prepared by the contractor and must demonstrate how climate change requirements will be achieved by setting out tools, key milestones, timescales and stakeholders. The project manager must approve this plan.
- Non-mandatory Performance Table: this sets out targets to be achieved and incentives for the contractor. The incentives may be financial (positive or negative), and the contractor must report its performance against the table targets at regular intervals.
- Climate Change Partners: the clause requires the contractor to collaborate with other Climate Change Partners that have been identified in the Climate Change Requirements.
Option X29 is the first clause to be included in any of the leading standard forms of construction contract that directly addresses climate change.
Option X29 is an optional clause, so parties are not obliged to include it within their contract; however, as the desire to implement sustainable construction clauses increases, the use of Option X29 will likely become more prevalent.
JCT Suite of Contracts
The JCT suite of contracts already includes a sustainable development and environmental considerations option in supplemental provision 8, which states in clause 8.1 that "The Contractor is encouraged to suggest economically viable amendments to the Works which, if instructed as a Change, may result in an improvement in environmental performance in the carrying out of the Works or of the completed Works".
The provision then says in clause 8.2, "The Contractor shall provide to the Employer all information that he reasonably requests regarding the environmental impact of the supply and use of materials and goods which the Contractor selects".
Supplemental provision 8 enables the contractor to improve the environmental performance of the construction project.
The parties to the contract may select this provision as being applicable to the contract.
However, the clause does not obligate the contractor as the use of the words "encouraged" and "may" is vague.
In addition, there appears to be a lack of financial incentive for the contractor to suggest changes, as although the contractor would be paid more for any additional work that may arise, any changes that exclude works or reduce the contract sum to achieve sustainability would not likely be taken up by the contractor.
FIDIC Suite of Contracts
The main forms of FIDIC contracts require the contractor to take all necessary measures to:
- Protect the environment not only on-site but also off-site.
- Limit any damage and nuisance to people and property from pollution noise and "other results of the contractor's operations or activities".
- Comply with any environmental impact statement for the Works (applicable to the 2017 Editions only).
The contractor must also ensure that any emissions, surface discharges, effluent and other pollutants from the contractor's activities will not exceed the values stated in the Specification or those prescribed by applicable laws.
The provision grants the client the opportunity to include all of its environmental requirements for the project in the Specification at the very outset of the project, and should the contractor fail to comply with any of these requirements, they will subsequently be in breach of the contract.
Careful consideration must be taken when incorporating sustainability provisions into construction contracts to ensure that risk is appropriately allocated between the parties and to avoid any uncertainty which may cause a subsequent dispute to arise.