A new way to make contracts greener

It’s well known that the built environment is one of the largest contributors to carbon emissions in the UK and the rest of the world. This applies both to the construction process, which contributes to a building’s embodied carbon, and to the use and maintenance of the property once built – operational carbon.

With greater awareness of their impact on the planet, businesses in the built environment have been paying closer attention to how they can reduce their carbon footprint. One of the biggest barriers to implementing sustainable practices is the often hefty price tag. However, considering climate issues early during the construction process and introducing small changes can make a huge difference. And as well as benefiting the project’s environmental impact, such changes also allow alignment with a growing trend to use two-stage tendering and early contractor or supply chain involvement.

To support developers, contractors, lawyers and other built environment stakeholders, lawyers TLT and The Chancery Lane Project (TCLP) – a network dedicated to promoting decarbonisation through climate contracting – have produced a new free-to-use contracting tool that flags sustainability considerations at all stages in the building lifecycle. It allows those drafting and negotiating project contracts to identify the right climate causes and sustainability solutions for the specific requirements of the project or building, reducing the need for renegotiation later.

At the beginning of a project’s lifecycle, the tool will direct users to suggestions for the pre-planning and planning stage, followed by construction, funding and lease or sale of the property. In each case, there are also links and suggestions as to which of the TCLP clauses (see below) can be used: the tool is designed to bring relevant drafting together so that users can easily find appropriate wording. It is hoped that, by doing this, TCLP’s climate contract drafting will be used more widely, and its inclusion will become market standard.

Sustainable contracts

When thinking about drafting a construction contract for a new building, there are a number of aspects to consider from an environmental perspective. The choice of materials is an important step in ensuring the finished building meets sustainability requirements – for instance, using sustainable materials such as prefabricated straw panels for walls and rammed earth as an alternative to a concrete slab floor, and making less use of carbon-heavy or embodied-carbon materials such as concrete. Including a specific obligation in a contract (such as TCLP’s Tristan’s clause) or alternatively making sure the provisions in the technical documents require the use of such materials is a good step towards doing this.

A contract can also include specific obligations to achieve certain climate standards

A contract can also include specific obligations to achieve certain climate standards. The NEC, for example, has published an option clause X29 which covers this, and TCLP has produced Mary’s clause (for use in JCT contracts), Olivia’s clause (for use with FIDIC EPC contracts), Luna’s clause (proposing “green modifications” to project works) and Estelle’s clause (requiring contractors to adhere to best industry practice in mitigating climate risk and ensuring the project meets environmental objectives).

A wider point to consider is what procurement methods to use. Employers and contractors have frequently used the design and build procurement method, which requires the contractor to take full design responsibility – often by taking responsibility for work carried out by architects and other designers appointed earlier in the project by the employer, as well as constructing responsibility for the works. Alternatively they have used traditional procurement methods, where a team of consultants design the works and retain responsibility to the employer for these designs, with contractors then being appointed to carry out the works.

Alternative methods such as two-stage tendering… can have additional benefits in ensuring all parties are aligned at an earlier stage

As mentioned above, in recent years there has been a move towards more frequently using alternative methods such as two-stage tendering, whereby the contractor is engaged at an earlier stage and collaborates with the design team prior to being appointed to carry out the works. This can have additional benefits in ensuring all parties are aligned at an earlier stage and can consider together how to carry out the works in a sustainable way.

Within the built environment, most green drafting currently tends to be “light green”, with parties agreeing to co-operate and use reasonable endeavours or share data relating to environmental performance. There is often reluctance to go further, not necessarily because the parties don’t care about minimising emissions, but often because they don’t know where to start, and they may not understand how they could reduce the impact on the climate by doing things differently.

>>Also read: The innovations to tackle construction’s carbon problem

>>Also read: The battle SMEs face in reducing their emissions – and proving it

Added to this, the fact that sustainability often hasn’t yet made it on to the list of things to discuss at the initial design stage (in a development context) or the heads of terms stage (in a landlord and tenant context), means that it is not forming part of those initial negotiations. Trying to introduce it later, when lawyers are drafting documents, means that clauses are struck out, delay often being cited as a reason.

Josh van den Dries, project associate at TCLP, says: “Decisive, practical action against climate change is critical in the built environment, which generates almost 40% of global energy-related carbon emissions. TCLP publishes a breadth of freely available precedent clauses for use with a variety of sector contracts. This new tool empowers you to quickly identify the content relevant to your client or organisation, offering a range of innovative and creative options to deliver decarbonisation. I encourage all built environment professionals to browse these options, map out which will be most relevant to their needs and start using them in contracts.”

Alexandra Holsgrove Jones is a knowledge partner in TLT’s real estate group, and Jamie Olsen Ferreira a knowledge lawyer in TLT’s projects, infrastructure and construction group.