Climate change clauses for construction contracts

By David Brown, Partner, Construction, CooperBurnett LLP

The Construction Engineering sector scale and industrial character means that it has a huge environmental impact both globally and in the UK.

According to one United Nations report, globally ‘the buildings and construction sector counts as 36% of final energy use and 39% of energy and process related carbon dioxide (CO2) emissions in 2018, 11% of which resulted from manufacturing building materials and products such as steel, cement and glass’.  

Although that report is from 2018, the situation has not improved and the buildings and construction sector is not on track to achieve decarbonisation by 2050.

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Specifically, looking at the UK, the Office for Budget Responsibility (OBR) estimates that its four largest emitters are vehicles (23%), buildings (19%) (with residential buildings accounting for 15% and non- residential buildings for 4%), industry (13%) and power generation (10%).

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The key areas for tackling climate change in the construction industry include:

1. The selection and use of materials (including the associated impact of transporting such materials); and
2. The energy use of the completed building once it is occupied.
   

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There is little solid information on the type of climate change obligation that is most commonly found in a construction contract. One exception is a case study published by The Chancery Lane Project (TCLP), which is the world’s largest network of law firms and lawyers working together to provide climate clauses for contracts, to deliver rapid decarbonisation at scale.

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In June 2023, TCLP published two new climate clauses for use in the construction industry:

• Tessa’s Clause (Sustainability Enterprise Delivery Measures within Construction Works Task Orders).
• Daniel’s Clause (Sustainability Key Performance Indicators in Construction Works Task Orders).
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Each clause is drafted for use with the NEC4 suite of contracts and, taken together, the clauses identify sustainability and net zero that may be relevant in a construction context.

The guidance notes accompanying Tessa’s clause suggest that they may lead to performance related incentive payments, whilst both sets of guidance notes envisage a contractual regime in which the client can engage third parties to fulfil unmet criteria and reclaim the costs of doing so from the contractor. However, neither clause includes drafting to implement such a regime. As such, the clauses provide a valuable means of identifying relevant criteria in measuring performance but do not offer complete contractual solutions.

If you would like to discuss this further, please do not hesitate to contact David Brown on email: dcb@cooperburnett.com or tel: 01892 515022.

This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.