In a rare show of unity, New Zealand’s political leaders agree on one thing — the urgent need for climate action. The construction sector is a cornerstone of New Zealand’s economy, employing more than 308,000 people and contributing more than $17.6 billion to GDP (as of mid-2023). Geoff White (Principal) and Shaun Watt (Lawyer) of Greenwood Roche discuss the sector’s role in the climate challenge — and its potential to lead New Zealand’s transition to a low carbon future.
New Zealand’s climate legislation, established under the Climate Change Response Act 2002, was strengthened following the 2015 Paris Agreement.
The Climate Change Response (Zero Carbon) Amendment Act 2019 set a goal of net-zero emissions by 2050, with an interim target of reducing emissions to 50% below 2005 levels by 2030.
The construction sector accounts for roughly 10% of New Zealand’s greenhouse gas emissions and, given its size, the sector has significant potential to drive meaningful climate action.
Incorporating climate-conscious provisions in construction contracts is now a crucial tool for ensuring that the sector does its part in achieving New Zealand’s ambitious emissions targets.
Standard form contracts
One way to drive meaningful changes in response to climate change is by adopting standard clauses in construction contracts that support New Zealand’s net-zero targets.
Historically, the New Zealand Standard (NZS) suite of construction contracts has not addressed environmental goals, beyond basic compliance with environmental laws.
However, reflecting the sector’s growing use of special conditions addressing sustainability, the updated NZS 3910:2023 introduces clause 5.21 – Protection of the Environment – which sets out standardised duties for contractors to prevent environmental harm, such as avoiding discharging contaminants, and causing adverse environmental effects.
While clause 5.21 is a step towards greater environmental responsibility, its impact remains limited. It focuses on avoiding harm rather than promoting positive action, and relies on the Resource Management Act 1991, which many argue should establish stronger environmental bottom lines itself.
The clause also lacks clarity, including the vague requirement to avoid “any adverse effect on the environment”, and the undefined threshold obligation that contractors must apply “reasonably practicable steps” to prevent environmental harm, breaches of the Resource Management Law, or enforcement actions related to their work.
Looking overseas for proven models
New Zealand has an opportunity to learn from international best practices and adopt proven approaches to climate-conscious contracting.
For example, the UK’s NEC Contracts introduced the X29 Climate Change clause, requiring contractors to meet sustainability targets outlined in the project scope — such as cutting emissions, reducing waste, and adopting sustainable practices throughout the project.
Non-compliance is treated as a contractual breach and a defect in the works, ensuring accountability.
While NZS3910:2023’s clause 5.21 is an aspirational step towards climate-positive contracting, a stronger clause like X29 could accelerate the transition towards low-carbon practices.
However, successful adoption in New Zealand will depend on fair risk allocation, given substantial risk has traditionally been placed with contractors.
The Chancery Lane Project
The Chancery Lane Project (TCLP) is a key advocate for climate-conscious drafting, providing model clauses to help parties integrate net-zero goals into commercial contracts.
TCLP offers a wide range of freely available, environment-focused legal resources — including a dedicated set of clauses for construction-specific agreements. TCLP names each model clause after a child to highlight the importance of today’s actions on future generations.
For example, “Tristan’s clause” places obligations on parties to procure life-long, environmentally-friendly construction materials.
The clause incentivises and effectively reduces emissions during the project and asset life cycle through the use of more sustainable materials.
Greater adoption of TCLP clauses in construction contracts in New Zealand can support domestic and international climate goals, mitigate environmental risks, and promote a more sustainable built environment.
Successful case study — AUT Campus Project
Naylor Love highlights how organisations can lead the charge towards a greener future.
It included specific sustainability goals in its construction contract to deliver three new buildings at Auckland University of Technology’s campus, agreeing to divert 90% of its construction waste from landfills.
As part of its broader sustainability strategy, this initiative realised cost savings, and illustrated the potential for players in the construction industry to adopt circular economy principles, and positively contribute to New Zealand’s broader environmental goals.
The New Zealand construction industry must continue to embrace and implement new environmentally-responsible practices.
Embedding sustainable practices into every project and contract is no longer an option — it is essential.
