Limiting construction's environmental footprint using climate conscious drafting

It is 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 to both the construction process, as well as the use of the property once built. Once built, properties must comply with minimum energy efficiency standards, and there are various voluntary accreditations that can further a property’s sustainability credentials. But what about emissions, and wider ESG considerations, during the construction process?

The first stage is awareness – knowing why it matters and the impact that the construction process has on the environment is key. And that’s not just about making the project materials and on-site (or off-site) construction more environmentally sustainable, it’s also about making it more resilient to ESG factors in the supply chain. So, if you are sourcing materials from a politically unstable area, or an area vulnerable to extreme climate events, will you be able to get those materials? How are they being manufactured? Do you know what the working conditions of employees are? Do you know what energy sources are being used during the manufacturing process? How are the goods being transported? Could extreme climate events impact the production and transportation? All of these will affect whether you can get the materials for your project, and their cost.

Although one of the biggest barriers to implementing sustainable practices in the built environment is that it is perceived as coming with a hefty price tag, the question is really can you afford not to think about these factors?

Considering these issues early on is the best strategy. This is beneficial not just to the project but will also allow alignment with the use of two-stage tendering and early contractor / supply chain involvement during the construction process, particularly with the Building Safety Act 2022 and the introduction of the Gateways process – where the design team will be involved from an early stage. It is key that the procurement and technical teams are in alignment with regards to the ESG requirements on the project, which will help to ensure that the contract terms align with the technical requirements. You may find that introducing small changes to your processes can make a huge difference. ESG should be considered from the beginning and not as an afterthought.

Sustainable contracts

But with many projects being time sensitive, how can you ensure that the inclusion of climate conscious drafting does not cause delay? The Chancery Lane Project (TCLP) helps organisations reduce emissions using the power of legal documents and processes. They rely on a community of lawyers, working in over 110 countries, to create, and peer review, climate conscious drafting on a pro bono basis. TLT works closely with TCLP and has created a Built Environment Climate Contract Tool to enable those involved in the built environment to easily navigate drafting solutions for each stage of the lifecycle of a project – going from pre-planning, through planning, construction, and on to sale or letting.

When thinking about drafting a construction contract to construct a new building, there are a number of aspects to consider from an environmental perspective. The choice of materials, for example using sustainable materials such as pre-fabricated straw panels for walls and rammed earth as an alternative to a concrete slab floor, and using less carbon heavy/embodied carbon materials such as concrete, is an important step in ensuring the building when constructed meets sustainability requirements.

Including a specific obligation in a contract (such as TCLP’s Tristan’s clause, which sets a carbon budget) or alternatively making sure the provisions in the technical documents require the use of such materials is one way of doing this. A construction contract, rather than the technical documents, can also include specific obligations to achieve certain climate standards – the NEC contracts include an option clause X29 which covers this, and the JCT 2024 contracts have included the environmental provisions within the conditions (whereas they were previously a supplemental, or optional, provision). TCLP have also produced clauses including Mary’s Clause (for use in JCT 2016 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). Although ESG provisions will be more common in collaborative style contracts, such as NEC4, it is still essential for ESG objectives to be SMART, that is specific, measurable, achievable, realistic, and time specific. These might be aspirational objectives for the parties to achieve working together, but if the project stalls and disputes arise, a party will want to be able to rely on the objectives and point to a success / failure.

A wider point to consider is what procurement methods to use. Employers and contractors have frequently used either the Design and Build procurement method or the Traditional procurement method (often referred to as a standard building contract). Design and Build requires the contractor to take full design responsibility, often taking responsibility for work carried out by architects and other designers appointed by the employer earlier in the project, as well as responsibility for constructing the works. The Traditional procurement method is where a team of consultants designs the works and retains responsibility to the employer for these designs, with the contractor then being appointed to carry out, or construct, the works. As mentioned above, using alternative methods such as two-stage tendering has become popular, where 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 terms of making sure that all parties are in alignment at an earlier stage and can potentially consider together how to construct the new building / works in a sustainable way.

Involving all parties on a project from the start, or at least early on, can ensure that contractual requirements, including ESG provisions, are reflected throughout the contractual chain. It is key that subcontractors and suppliers are aware of ESG requirements and are also working towards the same targets. TCLP have developed Robyn’s Questionnaire (Subcontractor / Supplier Self-Assessment Climate Questionnaire (Construction)), a questionnaire that identifies the climate change risk expectations of an organisation and asks subcontractors / suppliers to self-assess across these criteria. The questionnaire includes subcontractor / supplier guidance, explaining why the questionnaire is being used and the need to ensure the supply chain is also accountable for the same or similar ESG targets.

Modern Methods of Construction

Modern Methods of Construction (MMC) is a collective term for building methods that focus on offsite construction / manufacturing processes to build homes, often involving new and innovative methods. MMC are designed to be faster, or more efficient, and with less waste than traditional construction methods such as bricks and mortar. MMC has been referenced in the housing plans for both this Labour government and the previous Conservative government, as a solution to the housing shortage.

There are environmental benefits to using MMC, including:

• Reduced carbon footprint – working towards delivering operational net carbon zero homes (operational carbon referring to the emissions associated with energy used to operate the building, such as heating, cooling and lighting) .
• Reduction in embodied carbon emissions – wider use of recycled materials, quick, precise and repeated manufacturing processes, less waste, reduced workforce on site (meaning less travel) and reduced deliveries (less lorries on the roads).
• Less disruption for neighbours as homes are completed faster than using traditional methods, with reduced noise and vehicle pollution.
• Improved efficiency of the finished home, with better insulation and ventilation, resulting in less energy usage (cutting costs and lowering household bills, as well as benefitting the environment).

In addition, the social in ESG is also addressed with improved health and safety for workers, creating more regional jobs away from large cities, and the reduced disruption mentioned above. The use of MMC in the housing sector has increased and seems likely to continue to do so under the current government, as an efficient, sustainable and cost-effective method of achieving housing targets.

TCLP have produced Madhavi’s clause (Modern Methods of Construction (MMC) and Net Zero Provisions for Construction or Development Agreements), which adapts sustainable practices and net zero aligned provisions from TCLP’s construction clauses for use in MMC contracts.

Post-construction

When considering property use, it’s important to focus on sustainable practices beyond just the construction phase. Green leases, although established, have largely been limited to ‘light green’ commitments, where parties agree to collaborate, make reasonable efforts, and share environmental performance data. Progress has been cautious—not necessarily due to a lack of concern for reducing emissions, but often because parties are unsure where to begin or lack understanding of how alternative approaches can mitigate climate impact. Additionally, sustainability discussions are frequently overlooked during critical early stages, such as the design phase in development or the Heads of Terms phase in landlord-tenant agreements. Consequently, when these considerations are introduced later during document drafting, they often face resistance, with delays commonly cited as a reason for their removal. But that doesn’t have to be the case. And the Built Environment Climate Contracts tool flags both drafting, and issues to consider. It also links to the Green Lease Toolkit, a new version of which was released by the Better Buildings Partnership (BBP) in January this year. This new toolkit goes way beyond the previous version, and, in addition to ‘green’ drafting, includes social impact drafting. As before, there are ‘shades’ of green – with light green being the least ambitious, moving through medium, to the most ambitious dark green drafting. The toolkit also has what it calls ‘green lease essentials’ – those elements that the BBP says it would expect to see covered in a lease to help define it as “green”. So, we are moving away from a lease being referred to as ‘green’ if it simply prohibited alterations that damaged the EPC rating, and towards parties thinking about, not only emissions, but also the impact of a project on a local community.

The Built Environment Climate Contracts tool is designed to bring relevant drafting together so that users can easily find wording appropriate for their matter. It is hoped that, by doing this, TCLP’s drafting will be used more widely, and its inclusion will become market standard. Embracing sustainable procurement methods and innovative contract clauses will be paramount in supporting the UK to achieve its environmental goals. The shift towards green leases and more robust environmental commitments will not only reduce emissions but also enhance the social impact of projects, benefitting both local communities and the planet. By prioritising the environment from the pre-construction stage all the way through to completion, the built environment will play a significant role in reducing carbon emissions.

Written by Alexandra Holsgrove Jones and Corinna Whittle

This article was first published in Construction Law