France’s international development agency has put significant sustainability and social clauses into contracts for its €12bn per year projects.
Emeline Oudin, head of Procurement Support Division at France’s international development agency AFD, has set out strong environmental and social requirements on those bidding for the organisation’s €12bn per year allocations for development projects.
Ms Oudin explained that while 50% of AFD finance goes to climate change mitigation projects, almost a quarter also goes to climate change adaptation projects improving resilience across communities and infrastructure.
This makes for some clear procurement objectives. Oudin said: “Each area of financing is analysed during the preparation phase to check that the project being financed is consistent with long term low carbon and high resilience development of the country in which it is implemented.”
“This analysis is included in the feasibility and preliminary technical studies of the infrastructure to be financed. This means that the design studies need to take into consideration the impact of climate change on the infrastructure, or how to minimise the greenhouse gas emissions during both the construction phase and the operation of the infrastructure.”
Strengthening contractual obligations
This sets a clear challenge for companies seeking to deliver the projects that AFD finances.
“For infrastructure with major activity with civil engineering, we always include measures relating to the construction phase and worksite management. This includes measures to avoid pollution, protect biodiversity, and social measures like local recruitment or health and first aid in case of an accident,” she said.
“So we decided in 2017 to strengthen requirements for worksite management in the works contracts we finance. The goal was to be able to select a qualified and experienced contractor that will be capable of applying the right measures to protect the environment and people during the implementation of the contract.”
To achieve this. Oudin explained that they had added new qualification and evaluation criteria to their bidding documents.
“So on top of the classical financial experience criteria, a bidder must also meet ESHS [Environmental, Social, Health and Safety] criteria such as having an ISO certification or providing proof of already having properly managed a worksite where ESHS impacts were similar to those to be carried out. And we also added some evaluation criteria, for example, bidders must provide information on how they were confronted with some ESHS challenges on other worksites.”
Adapting contracts to this new norm
Emeline Oudin was speaking at a FIDIC global webinar discussing how to ‘green’ its internationally recognised suite of contracts. And with such significant growth in sustainable and social requirements attached to procurement, other experts stressed it was important to adapt.
Adriana Spassova, Partner at EQE Control, Bulgaria, explained: “We have to act now [on issues like climate change] because it’s already late. So, let’s start from the procurement. We need to focus on green procurement not only on the lowest prices.”
To do this she said “We can insert some evaluable criteria like the carbon footprint, we can have some requirements for ISO147000 certificates, and have requirements for environmental management plans, waste management plans, for green suppliers, reusable materials and so on.”
To make this work, she explained that consultants had an important role to play as the designers and overseers of projects. But she stressed that to take advantage of that opportunity would mean introducing net zero performance damages and bonuses through contracts and terms.
“We can add here the green budget which is a very important instrument for additional payments for net zero incentives and bonuses for exceeding targets,” she said.
What does good look like?
Euginio Zoppis, project manager of Webuild in Italy, illustrated the actions that should be taken on projects.
“It is now becoming common to understand the need to reduce the carbon footprint and work towards a net zero target for the future. The contracts are quite clear on that now but in practice the commitment must go through mandatory or voluntary recognised standard guidelines or corporate policies.”
Zoppis then set out an example of the outcomes this should drive. “Conservation, restoration and reforestation – limiting the interference with the natural environment and other measures like developing trees and grass nurseries or securing their supply in areas where these can be purchased. We need to restore areas that were cleared or used for temporary works and then plant trees both for restoring areas which were covered by the works, or as a compensation measure for areas near to the project.”
To achieve this and more, he said “Moving towards net zero must be an effort not only of contractors but must involve all stakeholders in a project. All contractors must have the same goals. Suppliers must be involved to produce materials that reduce the emission of greenhouse gases.”
To make that happen, he said employers and developers must have this commitment at heart and pay higher costs if necessary. But they are leading the process from procurement to the entire lifecycle of the project up to thinking of the decommissioning of the project.
When best practice isn’t possible
Millie Farmelo, a solicitor with Arup, said that the industry had great opportunity to influence and grow its role as environmental and sustainable requirements became more important, but she warned that tough choices also had to be made when that influence does not work.
“We need to be asking ourselves can we do things better. Arup is involved in the construction innovation hub value toolkit which is being developed in the UK market and aims to change the driving force behind decision-making to shift the focus from costs and time to a more value-based approach. The intention is to ask the question early on ‘what are we doing here, and how are we going to tackle this?’.”
Then she stressed that there should be consequences when projects aren’t right. “If we aren’t able to influence the client and we’re not able to influence the supply chain then we should be considering walking away from projects that do not comply with UN sustainability goals.”
FIDIC president Tony Barry hosted the event, and said: “At FIDIC, we are extremely exercised by the sustainability and net zero agenda. And so we should be! The construction industry has a huge impact on the sustainability of our world. The industry’s transformation from a big polluter and resource consumer towards a sustainability enabler is happening, but still too slowly to meet climate emissions targets.”
Industry experts were speaking at the FIDIC global webinar: “Greening FIDIC’s Rainbow Contract Suite”, which is part of the 2022 global webinar series.