To keep up with environmental regulations, contractors must build sustainability into their contracts
The UN’s World Commission on Environment and Development (now known as the Brundtland Commission) defined a sustainable development as one that “meets the needs of the present without compromising the ability of future generations to meet their own needs”.
The scope of the sustainability agenda, therefore, goes beyond energy efficiency and reducing carbon footprints. It extends to issues such as a structure’s legacy, its impact on the community, the reduction of waste and use of responsibly sourced materials.
To ensure that all these factors are dealt with, there is a growing weight of government guidance and regulation. The implementation of energy performance certificates for all commercial and residential property sold or rented is an example of this, as is the Code for Sustainable Homes, which aims to ensure all new homes are zero-carbon homes by 2016. A code for sustainable non-domestic buildings is also likely to be introduced, following the government’s stated aspiration that all these should be zero-carbon by 2019. The recent consultation on the definition of zero-carbon (17 December 2008) is the latest stage in that process.
The issue of disposing of, reducing and recyling construction waste has been addressed by the requirement for on-site waste management plans to be in place on all projects worth more than £250,000. Building Regulations are likely to be amended soon to require new buildings to meet stricter energy efficiency and CO2 emissions standards.
June this year saw the publication of the Strategy for Sustainable Construction, which sets out current and future expectations and refers to five “means” and six “ends”, including mandatory biodiversity surveys for all projects worth more than £1m by 2012 and a 50% reduction in construction, demolition and excavation waste going to landfill.
The industry can Either to be reactive and change when legislation is implemented or introduce changes
and contractual provisions to address sustainability now
On 3 November 2008, the House of Commons Environmental Audit Committee published a paper entitled Greener Homes for the Future? An Environmental Analysis of the Government’s House-building Plans. This contained a number of recommendations including higher penalties for developers who fail to meet energy efficiency standards.
This increased regulation leaves the industry with two options. Either to be reactive and make changes to comply with legislation as and when it is implemented or to introduce changes to practices and contractual provisions to address sustainability now.
Those that choose the second option could incorporate sustainability provisions in their contracts in any of the following ways:
- Require new buildings to be assessed using a recognised environmental standard, such as BREEAM standard
- Set clear objectives at the outset and reflect those in the employer’s requirements
- Consider including a gain-share mechanism whereby the contractor and professionals share a cash benefit where goals are met
- Oblige contractors to sign up to the Considerate Contractor Scheme, which requires attention to be paid to the local environment, waste management and the recycling of materials
- Amend provisions to allocate risk associated with the rapidly changing legal requirements relating to sustainability
- Require materials to be sustainable
- Specify a monitoring regime with compensation flowing from a failure to achieve required sustainability outcomes
- Consider whether certain outcomes could be made a pre-condition to practical completion and whether they should be reflected in funding requirements and lease and development agreements.
The JCT has announced that sustainability provisions will be introduced into all its standard form contracts from spring 2009. The JCT Framework Agreement 2007 already requires parties to explore ways to improve environmental performance. It remains to be seen how far other contracts will go in creating legally enforceable sustainability provisions and whether such clauses survive contract negotiations.
Steve Abraham is a partner and Amanda Greenwood a senior associate at Norton Rose