Jane Hughes and Adam Turner discuss the 2024 updates to the JCT sustainability obligations. "No one thinks of winter when the grass is green" (Rudyard Kipling).
The Joint Contracts Tribunal (JCT) publishes the most popular standard form construction contracts used in the UK. During 2024 they are issuing an updated contract suite, starting with the Design and Build Contract. This article will discuss the 2024 changes to the JCT's sustainability clauses in the JCT Design and Build Contract.
The 2024 edition sees the old Supplemental Provision 8, Sustainable development and environmental considerations, expanded and moved from the Supplemental Provisions to new clauses 2.1.5 and 2.2.2. The clauses will therefore apply automatically, instead of requiring the parties to include them as an option.
What's changed?
Supplemental Provision 8 consisted of two optional clauses relating to sustainability considerations. The first enabled the Contractor to suggest changes to the Works that would result in an improvement of their environmental performance. The second obliged the Contractor to provide the Employer with information reasonably requested about the environmental impact of the supply and use of goods and materials selected for the Works.
The 2024 JCT suite moves these clauses into the conditions of the contract. The wording is largely preserved but expanded so that the Contractor is now entitled to suggest changes that would result in an improvement in the "environmental performance and sustainability" of the works, "and a reduction in environmental impact".
Why does this matter?
The move is significant because it indicates a deepening environmental commitment on the part of the JCT. It also represents a direction of travel towards contractualisation: tackling the negative environmental impact of the construction industry head-on, through the use of contractual terms, rather than in the technical documents. Previously, for example in its Building a Sustainable Future Together 2011 Guidance Note, the JCT had indicated that its preference was for sustainability provisions to be included primarily within the specification and design criteria for a project, rather than in the contract conditions. So there is a clear change of direction here.
An opportunity missed?
Their location may have changed but the impact of the provisions, for all intents and purposes, has not. Under the 2016 suite, the Supplemental Provisions – including the sustainability clauses – were included as optional clauses that the parties could choose to apply or not. By moving the clause into the Contract "conditions proper", it means that the parties have to expressly remove the obligation via a Schedule of Amendments. In other words, the obligation is harder to take out than to leave in. However, the change to the wording does not indicate any considerable widening of the basis upon which a Contractor may be entitled to recommend changes to the works. In fact, the new conjunctive "ands" in the clause arguably makes this basis narrower than the 2016 version.
What's more, the new clauses are brief, fairly vague, do not include any financial consequences or incentives and have no procedures of timescales for proposing changes: contrast, for example, Supplemental Provision 7, cost savings and value improvements, which is much more detailed and includes a procedure and a mechanism for sharing any financial benefits. Following the scheme of Supplemental Provision 7 would have resulted in more effective sustainability clauses, while using a familiar approach.
What could they have done?
The omission of more comprehensive sustainability obligations in the 2024 Design and Build Contract is surprising, particularly as the JCT does include sustainability provisions in some of its other contracts, primarily within the JCT Framework Agreement and Constructing Excellence Contract, which it could have "borrowed" to include in the 2024 suite.
However, we understand that the JCT intends to include more comprehensive sustainability obligations in its updated PCSA, which is due to be published towards the end of this year. Pending this update, parties who want to include stronger sustainability clauses will have to make bespoke amendments to the contract.
Project financing is increasingly contingent on developers complying with funders' environmental requirements, and developers may find that investors may be attracted to a more creative and bold approach to contractualised sustainability aims.
What have others done?
There has been a proliferation of "green clauses" in recent years. These cater for a range of approaches; the NEC4 suite of contracts includes a secondary option 'X29' which inserts a schedule of regularly measured environmental aims into the agreement, along with pre-determined financial consequences. As of their recent updates, FIDIC and IChemE contracts also contain, as standard, optional drafting that allows the parties to impose environmental requirements on the works – or, similarly to the JCT suite, suggest environmentally beneficial alternatives.
Beyond the standard form contracts, The Chancery Lane Project has a bank of over one hundred and fifty green clauses that users are free to adopt and adapt as they please. They range from "green protocols" for litigation and arbitration to a Climate Standard of Care for construction contracts, which makes defined Net Zero Objectives a contractual term, and non-compliance with which constitutes a substantial breach.
There is also growing number of certifications and standards of environmental performance coming to market. For example, BREAAM: building contracts now often require a contractor to carry out the Works such that the finished building reaches a certain BREAAM certification. A UK Net Zero Carbon Building Standard is being drawn up by leading construction bodies and the RICS has released a Whole Life Carbon Assessment methodology. The Science Based Targets initiative validates targets set by companies and financial institutions, including within legal agreements. There are many more.
A greener future?
The stage therefore appears to be set for increased contractualisation: there is a moral obligation to engage, given the built environment's emissions; there are incentives to engage, given the opportunity to unlock green investment and to realise efficiency gains; there are many ways to engage, given the large range of "green clauses" that may be used.
The JCT Design and Build Contract should be seen, perhaps, as a thought of winter while the grass is green, a promising step on the journey towards the contractualisation of increased sustainability and environmental requirements for building projects.
