“Business as usual approach will get us nowhere on net zero”

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Net zero and sustainability in the spotlight at London contracts conference, with need to revisit project procurement and risk allocation sharply posed.

The issue of integrating net zero clauses and embedding sustainable performance criteria into FIDIC contracts was discussed at a special breakout discussion at the FIDIC International Contract Users Conference in London on 29 November 2022.

Opening the session, Adriana Spassova, vice chair of the FIDIC contracts committee, said that she was keen to hear from contract users on their views on how best to incorporate net zero and sustainability into the FIDIC suite of documents.

CMS partner Emma Schaafsma outlined some of the themes that had been seen in the market to date. She highlighted that there had been much talk in the press about green financing which had given rise to an industry discussion about green assets and how to drive this approach right down through a project. Schaafsma also raised the importance of promoting innovation and questioned whether FIDIC needed to do more to ensure that its contracts promoted a more sustainable approach.

Fenwick Elliott partner Jeremy Glover highlighted the work of the Chancery Lane Project (TCLP), https://chancerylaneproject.org/about/ a collaborative initiative of international legal and industry professionals whose vision is a world where every contract enables solutions to climate change. The TCLP is looking to create new, practical contractual clauses ready to incorporate into law firm precedents and commercial agreements to deliver climate solutions.

Glover said that contractors and engineers were ahead of the game from a sustainability and contractual point of view and it was important to ensure that this positive approach was embedded into FIDIC contracts.

There was some discussion from the floor around which party to the contract would impose sustainability deliverables. Would this be the contractor, the client, the engineer, the funder? Clearly clients and funders had a key role to play in the process, but this needed to be clearly understood, as should be the issue of ‘who pays?’, given the fact that many clients and funders were unwilling or unable to spend the money needed to address net zero issues.

During the session, FIDIC president Tony Barry said that there was a real need for a reality check in the discussions around sustainability. “Despite all the discussions at COP and other events, we are not there with the strategic roadmap for getting this right. We need to be honest and real about where we are and beware of the current wave of greenwashing that is going on,” he said. “There is not a reason in the world why contractors shouldn’t power all plant on site from renewable energy,” said Barry, but this wasn’t yet happening.

In the spirit of Winston Churchill’s famous quote about “never letting a good crisis go to waste”, other attendees highlighted the importance of acting now with urgency to ‘force’ designers and contractors to deliver on net zero and sustainability. There was also a need to temper the carrot and stick approach in order not to alienate those who otherwise would want to do the right thing.

Notwithstanding the recommendations outlined in the recent FIDIC Climate Change Charter, it was made clear that project procurement and risk allocation in construction needed to be revisited to address sustainability and net zero. Robust carbon balance sheets were advanced as one solution, which could be a longer-term undertaking, but there also needed to be agreement on the approach taken, the costing methodology used and this needed to be built from the project inception phase.

It was reported that FIDIC’s contracts committee had been busy in the area under discussion, recently setting up a new task group to develop new net zero clauses and this work was continuing apace. There was a real opportunity to do things in a different way and the chance for engineers to take a leading role on this key issue.

Those working with contractors present at the session agreed that innovation was key in addressing net zero and sustainability. “Adopting the usual, classic approach will get us nowhere,” one said.