Why contracts in the built environment need to get greener

When you think of legal contracts and processes, your first thought probably isn’t innovation, collaboration, or fighting climate change.

However, here at The Chancery Lane Project, that’s exactly how we think contracts can and should be used. The way we use contracts within the built environment has stayed the same for decades, and some property contracts written today look suspiciously similar to those from the eighteenth century. That’s exactly what makes contracts ripe for disruption, and ready to be re-wired to work for you and your business in a more innovative, future-proof way. 

Here’s what you need to know.

Innovate to meet your climate goals

Contracts have long existed to record a transaction’s aims and boundaries, as well as to ensure each party’s corporate goals are reflected in the deal framework. But, what if you could also use contracts to help meet your climate goals?

Increasingly, companies are creating climate transition plans. This is great, but these plans aren’t legally binding, meaning they’re essentially just a good idea. This changes completely if you use your contracts to reflect your climate goals. By making low-carbon choices in your transition plan, and recording those choices in your contracts, you can reduce emissions associated with a particular project or counterparty in a legally binding way. Essentially, you can stand behind your plans and satisfy investors or other stakeholders who want to know how you intend to achieve them.

Collaborate with supply chain partners

The built environment is both a major contributor to climate change and also uniquely vulnerable to its adverse effects, given the vulnerability of physical assets to a changing climate. Even with the best intentions and a beautifully written plan, no single company can tackle this challenge alone, so it’s crucial to collaborate with partners across your supply chain.

Again, contracts and legal processes can help. Contracts govern every aspect of every deal – from financing to occupational arrangements to choice of building specifications. They allow you to have these conversations with your partners and suppliers early on, so you can work together on reducing emissions across your supply chain.  

Contractual innovation and collaboration in practice

Let’s explore the options for a building contractor that pledges publicly to use greener transport arrangements and work with greener suppliers. This contractor could consult our guides on requesting due diligence information in questionnaires or introducing climate provisions to contract parties. 

They could also use our detailed construction-specific questionnaire to test which supplier would allow the contractor to meet its climate goals and deliver the project on budget and on time. As an added measure, they could enforce this with a clause requiring suppliers to use zero-emission vehicles when transporting goods to the site.

Raising the climate question early, at that pre-contract stage, paves the way for an easier conversation about climate clauses at the contract negotiation stage.

We’re seeing significantly more interest and energy around these clauses in a way that wasn’t there just a few years ago. Organisations are starting to realise that this sort of contractual solution is critical to achieving climate goals – and may also help with the raft of upcoming sustainability legislation such as the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive.

Find out more about how to do this, and learn how organisations from Buro Happold and the Environment Agency have already started their climate contracting journeys by visiting our new Built Environment sector page today!

Tell us how you’re already using climate contracts by completing our impact survey here.