A New NEC Option to tackle greenwashing in the construction industry

At a time when tendering and winning business is reliant on one’s green credentials – it is perhaps unsurprising that some companies are resorting to misleading green claims or “greenwashing”.

This week NEC has announced that it is to launch a new secondary option clause X29 to its NEC4 suite of contracts in a bid to tackle greenwashing in the construction industry.

In response to the drive towards decarbonising construction in recent years there has been a proliferation of “green” marketing and public relations campaigns by construction companies containing grand environmental claims and long-term commitments. Unfortunately, much of this has been labelled “greenwashing” (a play on the term “whitewashing”); meaning that environmental claims are often unsubstantiated, misleading, or false, with companies not being held to account for their promises to combat climate change. This was confirmed by a Competition and Markets Authority co-ordinated global review last year which discovered that a total of 40% of green claims made online could be misleading consumers.[1]

Amidst fears about the prevalence of greenwashing in the industry, and in a drive towards achieving net-zero emissions and sustainable outcomes in construction projects, NEC has developed a new secondary option clause X29 for its NEC4 suite of contracts. This is due to be unveiled this week.

Until now, sustainability goals have largely been considered a technical issue to be addressed in the contract scope. However, NEC4 contract board member Ian Heaphy believes that contractual conditions can be used to formalise standards by making it a legal obligation for those operating in the construction industry to reduce the environmental impact of built assets.[2] It is hoped that this new clause supports and incentivises carbon reduction initiatives through tangible sustainability and net-zero commitments and greater accountability and transparency between clients and contractors in future construction projects.

This new secondary option clause X29 will be published in early 2022 in consultative form, and potential users are encouraged to put it to the test and provide NEC with their comments.

This is a welcome step for many employers who take their net-zero commitments seriously. However, a range of tools are needed to fight the increasing prevalence of greenwashing. A contractual clause alone will not be enough to solve the problem as it can only be as effective as the attached mechanism of enforcement. Few employers would want to terminate a contract over greenwashing or even sue a long-term business partner. As such (and as with all issues of social value), appropriate incentives and KPIs will be required to hold contractors to their green and net-zero claims. Concerned employers should also consider implementing measures in their selection and evaluation criteria in this regard, ensuring that green credentials are tested in earnest prior to appointment. Sharpe Pritchard LLP has advised many clients on the best means of testing and enforcing social value clauses including in respect of environmental issues. We look forward to writing further about the new clause X29 and adding it to the ever-growing toolkit for clients seeking to deliver on net zero.

Allan Owen is a Senior Associate and Sophie Drysdale is a Solicitor at Sharpe Pritchard LLP

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