One of the most interesting projects Jeremy Glover has been involved with over the past few months is FIDIC Net Zero Task Group 23, where the team has been drafting guidance on the use of carbon emissions on projects. As he explains below, he has learnt a great deal from his talented colleagues,[1] and as the Guidance for use with the Red Book is due to be published at the end of 2025, he is able to share some of the details of what is being proposed.
What do we mean by “green” construction and sustainability?
There are many answers to this question. Essentially, it is the application of processes that are environmentally responsible and resource-efficient throughout a building’s lifecycle – from planning to design, construction, operation, maintenance, renovation and demolition.
There are almost as many definitions of net zero. The United Nations Net Zero Coalition says:
“Put simply, net zero means cutting carbon emissions to a small amount of residual emissions that can be absorbed and durably stored by nature and other carbon dioxide removal measures, leaving zero in the atmosphere.”
As for sustainable development, in essence, it means designing and constructing buildings to make as little impact on the environment as possible. The FAC-1 Contract defines sustainability as:
“Sustainability – measures intended to reduce carbon emissions, to reduce use of energy and or natural and manmade resources, to improve waste management, to improve employment and training opportunities, and otherwise to protect or improve the condition of the Environment or the well-being of people”.
Sustainability is all about the reduction of energy use, carbon emissions, and pollution and waste, as well as the conservation of our finite resources.
Recycling too, must always be a consideration. One of my favourite diagrams comes from the Infrastructure Carbon Review of HM Treasury in 2013 – “Build nothing, build less, build clever, build efficiently”:
What about other contracts?
NEC4 uses a secondary option X29. The aim is to support the reduction of the climate change impact with built assets. The clause allows for the parties to agree certain minimum Climate Change Requirements (“CCRs”). A failure to comply with these constitutes a defect. Alternatively, a performance table (“PT”), which is not mandatory, can be used by the client to set out specific climate change targets in addition to the CCRs. Here, a failure to achieve targets is not a Defect. The parties are free to agree financial incentives to achieve these targets, or use the PT as a tool to measure and record the performance achieved. In addition, the contractor can propose changes that may lessen the climate change impact of the Works. If the contractor does so, there is a duty on the project manager to address any such proposal.
The JCT Design and Build 2024 adopts a similar approach. Under new clause 2.1.5, contractors are “encouraged” to suggest amendments to the project which “may” result in improvements in environmental performance or sustainability. Contractors are further required by clause 2.2.2 to provide any information reasonably requested by employers in respect of the environmental impact of the supply and use of goods and materials. Strictly these clauses are not new. The JCT has simply moved the supplemental sustainability provisions of the JCT D&B 2016 into the main contract.
So, what about FIDIC?
The existing FIDIC Contracts do, of course, include many sustainability aspects, not least in GCC 4.18 [Protection of the Environment], which provides that:
“The Contractor shall take all necessary measures to:
(a) protect the environment (both on and off the Site);
(b) comply with the environmental impact statement for the Works (if any); and
(c) limit damage and nuisance to people and property resulting from pollution, noise and other results of the Contractor’s operations and/or activities.
The Contractor shall ensure that emissions, surface and subsurface discharges, effluent and any other pollutants from the Contractor’s activities shall exceed neither the values indicated in the Employer’s Requirements nor those prescribed by applicable Laws.”
The existing FIDIC contract covers environmental protection, resource efficiency and waste management, which provide a sound foundation for introducing enhanced provisions for carbon management. The new Guidance applies to the management of carbon emissions.
The new carbon management guidance adopts a whole lifecycle approach. Every project is different, with its own strengths, challenges, and objectives. BS EN 15978:2011 Sustainability of construction works categorises the whole lifecycle approach as follows:
- Design, feasibility, planning ;
- Building and construction: construction products and procedures;
- Building operation: operational energy, maintenance, repair, refurbishment, and waste use;
- Soft hand-over from construction to operation;
- Extended hand-over period;
- Biodiversity;
- End of life: demolition, recycling, waste, and disposal;
- Beyond the lifecycle: carbon savings from material and re-use.
FIDIC have also noted the adoption by the World Bank and other development banks of rated criteria. In September 2023, Enzo de Laurentiis said this:
“A key objective of procurement in bank operations is to help borrowers achieve sustainable development objectives through value-based principles and transparent procurement strategies… Rated criteria help to better manage environmental, social, supply chain and cyber-security risks as well as leverage new opportunities such as promoting green procurement.”
This is reflected in the first of six Carbon Management Principles (“CMPs”) adopted by FIDIC as part of the new Carbon Emissions Management (“CEM”) Guidance, which requires that the Carbon Emissions Budget (“CE Budget”) forms a part of the evaluation criteria. The six CMPs are as follows:
It is FIDIC’s intention that, by integrating the CEM principles into practical contractual mechanisms, the CEM Guidance enables the construction industry to move beyond aspirational sustainability goals towards measurable, accountable performance. The provisions maintain FIDIC’s commitment to balanced risk allocation whilst enabling all parties to contribute meaningfully to the global sustainability transformation that the construction industry must achieve.
The nature of the Guidance will depend on the form of contract. The question of who carries out the design is particularly significant. Under the FIDIC Red Book, where the contractor executes the employer’s design, that design has a significant impact on the possible reduction of GHG emissions. In contrast, the contractor can only reduce emissions resulting from its activities in the execution of the works.
As a result, the Guidance explains that it is the employer who retains responsibility for the whole-life Carbon Balance Sheet of the asset and for implementing Carbon Removal Measures to address the project’s GHG emissions, while the Contractor can contribute to the reduction of GHG emissions through optimising construction methods, material choices and execution processes within the scope of the employer’s design requirements.
The Task Group felt that, rather than add a significant number of amendments to the existing sub-clauses, the cleanest and most transparent approach would be to introduce a comprehensive solution through a new CEM Clause and Schedule of Carbon Emissions, which could integrate with the existing contractual framework. Multiple amendments across multiple sub-clauses can lead to errors and inconsistencies.
The new CEM clause still reflects the fundamental principle that underlies all FIDIC contracts, namely balanced risk allocation between the parties to the contract. The clause also introduces the concept of GHG emissions, whose efficient management is essential to achieving the sustainability objectives of the project. Under the new CEM clause:
- GHG emissions are treated as a critical resource requiring efficient management alongside financial resources, with quantified objectives. This should create clear, centralised obligations for Carbon Emissions Management;
- The CE Budget, which is proposed by the tenderer and not imposed by the employer, establishes the contractor’s commitment to specific emission targets, with clear mechanisms for adjustment when circumstances beyond the contractor’s control affect these targets;
- A balanced incentive structure provides both Carbon Emissions Incentives (“CE Incentives”), when the contractor achieves savings under the CE Budget, and Carbon Emissions Damages (“CE Damages”) when the contractor is responsible for the Actual Carbon Emissions (“Actual CE”) exceeding the CE Budget;
- The Schedule of Carbon Emissions provides adaptability to accommodate different project types, sizes, and specific GHG emissions management requirements, whilst maintaining consistency with the FIDIC CEM principles.
Employers need to appreciate the importance of care when preparing the tender documents, as they are absolutely fundamental to achieving meaningful Carbon Management and to the tenderers’ ability to propose a realistic CE Budget.
A key document is the new Schedule of Carbon Emissions. The idea behind the schedule is that it serves as an adaptable component that allows the CEM Special Provisions to accommodate the specific requirements of each project. It can therefore address a variety of aspects, including Carbon Emissions Objectives, Milestones, Calculation Methodology, Risk Management requirements, reporting procedures, supply chain obligations and taking-over procedures. The schedule, which is in effect a single contractual document, can therefore provide a comprehensive and adaptable framework for carbon emissions management.
It is important to note that the Guidance does not simply discuss the new CEM clause. It also includes guidance and examples for the preparation of any CEM Contract Data or CEM Special Provisions required for the new CEM mechanism, as well as additional optional CEM provisions, the Schedule of Carbon Emissions, and any CEM inputs needed for the Specification.
As for the new CEM clause, it comes in seven parts:
- Definitions: As with anything new, it is particularly important that everyone understands what the terms mean and that everyone uses the same terminology.
- Objectives: Here, the clause encourages the parties to collaborate to achieve any carbon emissions objectives.
- Obligations: The aim is that the contractor completes the works and comes in on or under the CE Budget.
- Reporting: The reporting obligation is separate from the regular Progress Reports.
- Meetings: These are to be organised by the engineer.
- Budget changes: The system here mirrors the traditional FIDIC approach.
- Incentives/damages: As noted above the new clause adopts a balanced incentive approach.
As I have said, the new Guidance is scheduled to be launched in December 2025. It will be interesting to see the industry’s reaction. The Guidance will sit alongside the Carbon Collaboration Initiative (of which Fenwick Elliott are founder members), which FIDIC have said aims to develop a: “common, replicable and standardised process of calculation and disclosure of embodied and operational CO2e (carbon dioxide equivalent) emissions related to infrastructure projects”. This new initiative recognises the different levels of understanding and technology around the globe, when it comes to issues relating to sustainability, including carbon emissions. As part of the initiative, a new Carbon Management Framework is being developed, which can be used by anyone to help build up their knowledge around carbon management at a project level. The aim is for this to receive wide adoption across the industry.
The Guidance is therefore just one part of FIDIC’s commitment to helping engineer solutions to the global challenges of climate change and biodiversity loss.
[1] Hugo Fonseca, ADEPT, Portugal (Task Group Chair); Adriana Spassova, EQE Control OOD, Bulgaria (FIDIC Contracts committee; Rami Ismail, Morganti Saudi Arabia, Jordan; Bipin Bahri, Ramboll Denmark, India; Edith Bustamante, ACCIONA, Spain; Idriss Kathrada, Inoal, France.