The use of modern methods of construction (MMC) has a key role to play in a number of environmental, social and governance (ESG) issues: from the construction of more energy efficient homes and buildings to cutting waste in construction, and even presenting an opportunity for diversification of the workforce by moving construction activities off site into local factories (and thereby adding to the overall social value of developments).
At Trowers, we have written extensively on the subject of MMC, in particular on the challenges to its wider adoption and issues around the funding of such projects. As the construction sector grapples with how to reduce emissions, the question of whether existing contract forms are fit for purpose to maximise the benefits of MMC is one that we are often asked.
In this context, it is unsurprising that The Chancery Lane Project (TCLP), whose aim is to "create new, practical contractual clauses ready to incorporate into law firm precedents and commercial agreements to deliver climate solutions" has now published a clause dealing with MMC: Madhavi's clause.
Madhavi's clause adapts a number of existing TCLP clauses and has amalgamated them for use specifically for projects using MMC; with the objective of promoting sustainable practices and achieving net zero aligned provisions. The intention of the TCLP clauses is that they can be easily incorporated into existing contract forms.
As with most of the TCLP clauses, the obligations are a mixture of high level aspirations (e.g. "to carry out the Works… responsibly, sustainably [and] ethically") and more detailed, science-based targets (e.g. "to ensure that the Works… on practical completion has GHG Emissions per m2 (Carbon Intensity) which… (A) is Net Zero (by Offsetting only Residual Emissions); or (B) meets the [1.5 degree aligned Carbon Risk Real Estate Monitor (CRREM) decarbonisation pathway for that asset class/ Paris Aligned decarbonisation pathway]".
It is these latter obligations where, in my view, the true value of including green drafting in the legal terms and conditions lies. Without objective and measurable standards linked to contractual sanctions or incentives, we risk such clauses being mere window dressing. Historically, where the parties had thought about such obligations at all, they were often buried in policy documents or technical specifications. The benefit of including these in the contractual terms and conditions means that all parties can be held to account for failure to implement real change to their construction methods.
Another example of real practical solutions in Madhavi's clause is the use of a Site Waste Management Plan; a hangover from the now defunct Site Waste Management Plan Regulations 2008, albeit one which most developers continued to use notwithstanding that this is no longer a legal requirement. Whilst the extent of waste reduction varies depending on the type and scale of MMC used; it is widely acknowledged that the precision design and off-site factory production common to most forms of MMC leads to significant raw material waste reduction. Some estimates suggest that volumetric MMC building systems can reduce waste to 50-60% compared with traditional building methods.
Madhavi's clause also recognises a key element to the success of using MMC; early collaboration with the contractor to assess buildability (and propose carbon reduction solutions) and to fix the design prior to production. In our experience, clients who have recognised and adopted this approach have been most successful in implementing MMC, especially for projects 'at-scale'.
The TCLP clauses provide an excellent starting point for those looking at how to ensure their use of MMC is translated into binding and meaningful obligations for achieving overarching net zero and sustainability objectives. As with all standard drafting, the important thing is to examine these in the context of the specific targets of your business and how you want to get there; often a mix of carrot and stick.
This will involve a detailed conversation with the experts within development teams; again recognising that in order to effect real change, it is not enough simply to put meaningless "we must try harder" statements into contracts. Only real practical obligations will drive real practical change.
For our final article in this series, we look at climate clauses promoting the use of and transparent sourcing of renewable energy and how contract provisions may enable energy sector supply chains to reduce emissions and wider environmental impact.
