The NEC launches new climate change clause

The NEC has recently published a climate change clause that is specifically aimed at tackling climate issues in the built environment. The new X29 secondary Optional clause (Option X29) imposes tangible sustainability and net-zero commitments that can be tailored to the specific requirements of a project. The NEC is the first organisation to introduce such a clause into its suite of contracts and it is expected that other standard form building contract providers, such as JCT and FIDIC, will soon follow the lead. 

Option X29 – How does it work?

Option X29 aims to reduce the impact of the creation, operation, maintenance and demolition of construction works on climate change. It introduces three key defined terms to achieve this:

1. Climate Change Requirements

The Climate Change Requirements are the things that the contractor must comply with or provide in order to provide the works in accordance with the scope of the contract. They are included by the employer (though they may be requested by the contractor) and form part of the contractor’s scope of works and therefore any failure to comply with the Climate Change Requirements will amount to a breach of the contractor’s obligations. 

As one might expect from NEC, Option X29 does not prescribe what the Climate Change Requirements should or must consist of but they may include, amongst other things: the levels of recycling, the use of renewable power or electronic vehicles used on site, the reduction of waste generation, including designs that reduce carbon emissions. The parties must of course carefully consider the content of the Climate Change Requirements and ensure that they are appropriate for the particular project. 

2. Performance Table

The Performance Table provides a performance management regime in relation to matters impacting climate change. It is not a mandatory part of Option X29 and where it is used the employer has the flexibility of including any targets related to climate change that it may want the contractor to achieve. The employer has the option for example to set financial incentives, which can be positive or negative, linked to stated performance targets. While Option X29 contains no restrictions on what or how many elements the contractor’s performance can be tracked, the accompanying guidance notes recommend that each performance target should be capable of objective measurement and suggest that the use of subjective phrases such as to the employer’s “reasonable satisfaction” should be avoided.

3. Climate Change Plan

The Climate Change Plan is a statement of intent on how the contractor intends to achieve the Climate Change Requirements. There are no direct contractual sanctions for failing to comply with the Climate Change Plan. Contractual sanctions only relate to a failure to fulfil the Climate Change Requirements although detailed requirements of the form and content of the Climate Change Plan can of course be included as part of the Climate Change Requirements. 

Why is Option X29 significant?

Standard form contracts are becoming increasingly central in addressing climate issues across various sectors. Option X29 grants extensive freedom for parties to decide, on a commercial basis, what the key achievable aims to tackle climate change should be, based on the specific requirements of a construction project. The introduction of this clause follows the example set by the UK government, which recently updated the Construction Playbook for sourcing and contracting public works projects in September 2022 (The Construction Playbook – September 2022 (publishing.service.gov.uk)) with its latest guide on promoting zero carbon sustainability in construction (20220901 Carbon Net Zero Guidance Note (publishing.service.gov.uk)). It will be interesting to observe the extent to which parties will use this new tool to drive decarbonisation and help the construction industry deliver a greener built environment.