Clause X29 – where ESG meets NEC

NEC has recently unveiled X29, the clause specifically designed to combat climate change. The overarching aim is to help entities using NEC4 to achieve net zero emissions and sustainability targets. Not only is your business intertwined with ESG concerns, but with the inclusion of Option Clause X29, both energy and climate change matters will be weaved through construction projects like never before.

NEC4 is widely recognised for enabling project collaboration and modernising contract administration. The recent addition of X29 climate change clauses to NEC4 is a welcomed change at a time when the construction industry faces great scrutiny on its efforts to reduce emissions and become more sustainable.

What is X29?

X29 Secondary Option Clauses concern one of the most topical issues in the construction industry – climate change. According to NEC, X29 will be used to “tangibly demonstrate carbon reduction initiatives on future builds across the construction sector”.

How X29 Works

X29 will reduce the impact of emissions which arise from the lifecycle of an asset i.e., emissions created during construction phases, the production of materials and the operation and maintenance of the resulting asset.

X29 has been introduced to:

• Signpost the issues to be covered in the scope and/or raise its profile.
• Incentivise performance against climate change targets.
• Add to existing processes or create new ones that help reduce the impact of the works, service and supply on climate change.

‘Clients’ under NEC4 will be able to include ‘climate change requirements’ under X29 in the Contract’s Scope. These requirements can include a variety of issues such as reducing CO2 emissions or using renewable energy sources during the construction phase of a project. This is where the snowball effect of X29 will occur. The Contractor will have to comply with these requirements, which will result in more eco-friendly and sustainable construction projects. It is this process that will help achieve net-zero.

X29 also allows financial incentive through the use of a ‘performance table’ to help motivate and encourage Contractors achieving additional targets regarding climate change and sustainability. The performance table can also be used to monitor and assess performance. However, unlike with the climate change requirements, failure to achieve a performance table target will not be considered a defect. It is therefore worth assessing at contract stage the differences between X29’s climate change requirements and the performance table, and the risk-profile associated with these provisions.

A ‘climate change plan’ is also introduced by X29 to allow the Contractor to set out the relevant timescales, tasks, processes etc for achieving the climate change requirements. It is clear that the collaborative nature of NEC runs true with X29 as all of its features will require good working relationships and communication between the Client and the Contractor. This further emphasises that not only are construction projects a collaborative effort, but so too is the strategy towards removing greenhouse gas emissions from the atmosphere.

Impact

X29 comes at a time when net-zero and climate change are at the forefront of many Clients’ and Contractors’ minds when entering new construction contracts. X29’s impact will largely rely on i) the Client’s implementation of the optional clauses and what specific climate change requirements it includes under the contract and ii) the ability of the Contractor fulfilling those requirements.

In an industry which generates 40% of annual global CO2 emissions, X29 could prove to be a crucial stepping stone in the path to change and progress as we move towards the net-zero target by 2050.

Editorial by Conor Mulligan, Solicitor, Construction @ Mills Selig

For further information on all of the above, do not hesitate to contact the Construction Team at Mills Selig

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