Despite environmental and sustainability issues being near the top of most businesses' agenda in recent years, the take-up of so-called "green drafting", embedding express sustainability obligations in contracts, has been much slower. While there are articles aplenty in the legal and construction press extolling its virtues, when it comes down to the actual drafting, we are still not seeing it being used much. Why is this? And are there alternatives?
The reluctance to use green drafting in contract conditions is probably attributable to a mixture of reasons, including:
- the traditional place for such provisions is in the specification part of the contract, and not in the legal conditions;
- such drafting is novel. In two naturally conservative industries – construction and the law - novelty is not welcome, particularly where large sums of money are at stake;
- many of the concepts bandied about – net zero, carbon neutral – are confusing and have no agreed definitions;
- some of the drafting produced by bodies such as the Chancery Lane Project is quite experimental and radical and is perhaps just a bit too new and strange.
If you do not want to venture into the world of innovative green drafting, but do want to do something green, most standard form contracts do already contain green drafting provisions which you can use, either as they are, or with minimal amendment. This article will discuss some of them.
JCT
JCT contracts are primarily drafted on the basis that sustainability should be dealt with in the specification and design criteria, and not in the contract conditions.
This is a deliberate choice of the JCT, and followed a consultation some years ago which showed that the preference was for sustainability to be dealt with in the project specification, rather than the contract itself, and the 2011 publication of “Building a Sustainable Future Together".
However, there are some limited sustainability provisions in some JCT contracts already. They are mainly found in the supplemental provisions, but if they are there, why not use them?
The JCT building contracts in the traditional/design and build suite (traditional, design and build, intermediate and minor) all contain a sustainability option in the Supplemental Provisions, whereby the contractor can suggest “economically viable amendments” which if accepted can be instructed as a Change.
While this is a fairly modest commitment – it is not, for example, incentivised like the cost savings and value improvements supplemental provision, where the contractor can get paid a share of the resulting financial benefit – it is there and can be used.
The JCT Framework Agreement requires the Provider to "assist the Employer and the other Project Participants in exploring ways in which the environmental performance and sustainability of the Tasks might be improved and environmental impact reduced". Again, this is fairly a light touch requirement, and contrast it with the value engineering clause, where the Provider benefits financially from value engineering changes it suggests.
The JCT Constructing Excellence Contract contains a supplemental provision which encourages the Supplier to suggest economically viable amendments to the project which, if instructed, may result in an improvement in environmental performance in the carrying out of the project or the completed project. The supplier is also required to provide information as to the environmental impact of the supply and use of materials and goods which supplier selects. The parties have to opt out of this provision.
The provisions are there – why not use them? Or think about amending them to strengthen or expand them?
Since the last round of JCT contracts, sustainability has moved much higher up the commercial, political and social agenda, and we are due a new suite soon, possibly later this year.
NEC
To date, the NEC's approach has been that sustainability issues are predominantly technical and should be included in the technical specification included as part of the Scope. However, it believes that there is now a growing view that standard contract conditions can be used to support sustainability objectives.
With this in mind, the NEC is about to publish a consultative version of a new secondary option dealing with sustainability issues.
The option will incentivise the supply chain to meet emissions and sustainability targets, and to link these into core processes of the contracts, such as early warnings, the programme and compensation events. In addition, contractors will be encouraged to propose changes to the scope that will reduce the climate-change impact of both the construction and operation of the client’s asset.
It will be really interesting to see what the consultative version says.
FIDIC
In FIDIC contracts too the primary place for sustainability obligations is the works specification, although the standard FIDIC contracts do contain some sustainability provisions. For example clause 4.18 of the FIDIC 2017 Red Book and Silver Book requires the contractor to take all necessary measures to protect the environment and to limit damage resulting from pollution, and to comply with standards for emissions, surface discharges and effluent in the Specification or local law. At clause 6.9, the Engineer can require the removal of any person who persists in any conduct which is prejudicial to the protection of the environment.
PPC 2000
The PPC 2000 contract, as might be expected, does things a little differently.
Sustainability is one of the contract's core objectives, and sustainability is defined as " measures intended to achieve reduced carbon emissions, reduced use of energy and of natural and manmade resources, improved waste management, improved employment and training opportunities, and any other measures intended to protect or improve the condition of the Environment or the wellbeing of people". And Environment is expansively defined as "all or any land, water and air including air within any natural or man-made structure or below ground".
The parties are also committed to eliminating or rendering negligible the risk of harm to the environment, to improve the sustainability of the project and reduce the cost of its operation.
The parties are free to agree the key performance indicators for the project, which could also include environmental obligations.
The PPC 2000 contract takes a much more expansive approach to sustainability and looks beyond the environment to include wider social and governance issues.
Next time you are drawing up a contract, whichever one you are using, take a look at what green clauses are already there which you can use as they are, or with pragmatic amendment. Or perhaps think about incorporating provisions which work in other contracts. You might be surprised at the extent of what you can achieve with this approach!
