Blog Author: Becky Annison – Director of Engagement, The Chancery Lane Project
The opportunity: It is estimated that the built environment contributes 39% of global greenhouse gas emissions, with the operation (energy consumption) of buildings responsible for 28% and the embodied carbon associated with the materials and construction process throughout the whole building life cycle accounting for 11%. The construction industry is also notorious for its tight profit margins and onerous risk allocations, with precious little room to manoeuvre. However, it is an industry with great potential and opportunity to innovate to meaningfully contribute to the global response to the climate crisis, in fact, it is a very necessary part of our transition to net zero emissions . Regulation would be the best way to achieve it by levelling the playing field, however regulation is slow and the window of opportunity on climate is running out. The next best thing is using contractual frameworks and the existing body of law on contractual enforcement to bring in tangible solutions. Tangible solutions need to be practical though, which brings us right back to the initial problem – what can a high risk, low margin industry do?
The Net Zero Toolkit: The Chancery Lane Project has just published a Net Zero Toolkit. This is a curated collection of peer reviewed and free to use contract clauses and tools to assist corporations in understanding net zero and decarbonising their projects and operations across the value chain. The Project’s construction and infrastructure model clauses and tools can be used to help construction companies meet their climate goals. A number of the clauses are amendments to the standard JCT Design and Build fitting seamlessly into existing ways of working.
Why Net Zero? Because that is the science-based goal agreed by 196 countries in the Paris Agreement to ensure that greenhouse gases produced would not be greater than the greenhouse gases removed from the atmosphere by 2050. A target (which if achieved) would limit global warming to 1.5 degrees and prevent the most catastrophic impacts of climate change.
Setting a net zero target is easy, but preparing and executing a plan to achieve that target is complex. Contracts provide a familiar mechanism to achieve those plans because they are such well trodden ground. If a company decides a certain risk position or profit position is necessary, that strategy eventually ends up in the contract in some form. That is one of the most powerful levers companies have to make things happen. Climate goals are the same.
Over Spring and Summer 2021, the Chancery Lane Project brought together international construction, infrastructure, project finance and real estate lawyers as well as industry experts and professionals to create a set of construction specific clauses and tools to get climate goals into construction contracts. The clauses are all named after children to reflect the impact they will have on the lives of the next generation.
Clause ideas generated at the event and developed collaboratively by a group of diverse multidisciplinary experts, include:
- How to incentivise (rather than penalise) Employers, Consultants and Contractors to design and build construction projects in a climate aligned way with practical solutions and commercially viable approaches; and
- Clauses to include in a development agreement where modular construction is contemplated.
Two of the new construction clauses published by the Chancery Lane Project are:
Robyn’s Due Diligence Questionnaire which is a self-assessment questionnaire for suppliers and subcontractors to determine their ability to deliver on climate goals, both their own and the Contractor’s goals.
Rose’s clause which uses a Construction and Operations GHG Emissions Management Plan as a condition for obtaining finance for significant construction projects including built infrastructure assets.
The Project’s clauses are already being used in contracts internationally impacting multiple sectors and supply chains. A significant success for the Project is the Environment Agency who has been using clauses influenced by the work of the Project since September 2020. The Environment Agency’s Team 2021 initiative used clauses inspired by Alex’s clause and Aatmay’s clause to require subcontractors to use a certain amount of materials certified under, for example cradle-to-cradle certified® certification; and deliver against wider sustainability objectives, including carbon reduction. This has embedded the principles of the circular economy into their supply chain and decreases waste.
The Chancery Lane Project was established in 2019 to bring together lawyers and industry experts to create contract clauses to tackle climate change. All the clauses are free to use and download from their website here, together with case studies on how the clauses are being used and their impact.
Becky Annison is the Director of Engagement at The Chancery lane Project where she works to inspire people to use all the tools that contracts provide in order to fix climate change. Prior to her role at The Chancery Lane Project she was a senior solicitor at Carillion plc for 12 years.