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Legal Notes: Canada and U.K. stand oceans apart on contractual GHG reduction

John Bleasby
Legal Notes: Canada and U.K. stand oceans apart on contractual GHG reduction

Environmental, Social and Governance (ESG) are dominating both public and corporate agendas. Over 80 per cent of S&P 500 companies have set and report their ESG standards.

Global law firm Dentons believes it is incumbent on the construction industry to do the same.

“In addition to certifying ‘green credentials’ of buildings, inclusion of community benefits within construction contracts is a key component in maximizing social, economic and environmental benefits within construction.”

In this context, it is interesting to contrast the initiatives being taken in the United Kingdom to incorporate specific GHG-reduction wording into contracts, versus those in Canada.

There is growing pressure on the U.K. government to enshrine emission targets into legislation and regulation. In advance of such changes, a massive collaborate effort has been launched from the U.K. called the Chancery Lane Project (CLP). This has brought together 1,300 legal professionals developing “new, practical contractual clauses ready to incorporate into law firm precedents and commercial agreements to deliver climate solutions.”

The CLP has launched a Net Zero Toolkit that helps contract lawyers implement “effective and impactful” clauses across various industries and jurisdictions.

Dr. Stacy Sinclair, a partner with U.K. construction law firm Fenwick Elliott, told a recent webinar audience the current contractual landscape is “immature,” partially as a result of lawyers “rubber stamping” agreements. Instead, she feels lawyers must be brought in early so that contractual obligations concerning net-zero are included at the start of project design, construction and operational phases.

Sinclair pointed out the CLP playbook offers several suggested clauses applicable to construction. These include net-zero construction standards, carbon budgets concerning the procurement of construction materials and construction waste management as well as those that secure net-zero through development and planning.

In many ways, Canada lags the U.K.’s progress.

For example, the effectiveness of Canada’s most ambitious energy-efficiency regulation, the BC Step Code, has been questioned. At a British Columbia Part 9 sub-committee meeting in June, it was observed that a gap persists between the province’s highly-praised Step Code and actual outcomes.

In fact, the sub-committee passed a motion to inform B.C.’s Step Code Council that the Step Code, “as currently enacted, does not enable Part 9 residential buildings in British Columbia to achieve the goals of the Energy Step Code, Clean BC or achieve performance outcomes aligned with international norms.”

Meanwhile, the 2020 National Building Code has been beset with delays, exacerbated by filibustering and appeals from certain interest groups within the building industry. Publication is now not expected until early 2022.

Even future construction procurement at the federal level lacks a solid punch.

“Departments will ensure all new buildings and major building retrofits prioritize low-carbon and climate resilience. Investment decisions will be based on total cost of ownership,” which includes, among other factors, life cycle cost-benefit analysis and optimal GHG savings over a 40 year span.

As a result, there is little bite in current CDCC contracts addressing GHG reduction, only the option to include LEED clauses in supplementary conditions if parties wish to address certain “sustainability” issues.

LEED, however, does not invoke strong GHG reductions. It focuses on overall sustainability objectives. In fact, it is possible to achieve a basic “LEED Certified” rating by only addressing the program’s basic energy performance, water use and construction waste criteria, then opting for points granted for bicycle racks, EV charging stations, site planning and location. While LEED accreditation has some value and boasts brand recognition, it pales compared to gold-standard Passive House criteria requiring stringent verification of energy efficiency, GHG reduction and occupant comfort targets.

The initiatives being undertaken by the U.K.’s legal community through the CLP are reversing a past practice of contractual “followship,” that is, construction contract wording that responds to regulatory change.

Instead, U.K. lawyers are taking a leadership role in anticipation of rigorous GHG-reduction regulations in the future. It is not known whether Canada’s legal community is prepared to engage in similar proactive initiatives.

John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com

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