Climate change is increasingly influencing how construction projects in New Zealand are being designed, procured and, ultimately, delivered. As governments introduce emissions targets and regulatory frameworks, sustainability considerations are beginning to appear directly within construction contracts themselves.
In New Zealand, climate policy is primarily driven by the Climate Change Response (Zero Carbon) Amendment Act 2019, which amended the Climate Change Response Act 2002. The legislation essentially establishes a framework for reducing greenhouse gas emissions through mechanisms such as emissions budgets and emissions reduction plans and sets a long-term target of achieving net-zero carbon emissions (excluding biogenic methane) by 2050. These measures support New Zealand’s international commitments under the Paris Agreement, which aims to limit the increase in global average temperatures to 1.5°C above pre-industrial levels.
While climate policy has traditionally been addressed through legislation and regulation, there is now a growing expectation that environmental responsibility should also be reflected within commercial relationships. In the construction sector specifically, this has led to the emergence of so-called “green clauses” in standard form construction contracts. These clauses are intended to encourage more sustainable construction practices and, in some cases, to require measurable emissions reductions during the delivery of projects.
This trend is particularly significant for the construction sector. The built environment accounts for approximately 12% of New Zealand’s domestic greenhouse gas emissions. Around 9% arises from operational emissions generated during a building’s use (for example – heating, cooling, and lighting) while the remaining 4% arise from embodied carbon produced during activities such as raw material extraction, manufacturing, transportation, installation, and demolition.[1] Globally, the built environment is responsible for almost 40% of energy related emissions.[2] As a result, emissions reductions in the construction industry have the potential to play a meaningful role in achieving national and international climate targets – towards net zero.
Environmental obligations in New Zealand construction contracts
The 2023 revision of NZS 3910:2023 introduced, for the first time, an express environmental protection provision.
Clause 5.21, requires contractors to take all reasonably practicable steps to avoid:
- Discharging contaminants into the environment.
- Exceeding boundary noise limits.
- Causing any adverse environmental effects (as defined in the Resource Management Act 1991 (the RMA)).
- Breaching any duty, obligation, rule, or condition under a relevant resource consent or the RMA.
- Engaging in any act or omission that could give rise to an abatement notice or enforcement proceedings.
If any of these circumstances occur, the contractor must notify the contract administrator. Importantly, unless the contractor is not at fault, the consequences will not entitle the contractor to a variation, extension of time, or additional payment.
While the clause reflects a growing emphasis on environmental protection, it does not mandate specific proactive sustainability measures. Instead, it adopts a broadly framed preventative obligation requiring contractors to take “all reasonably practicable steps” to avoid “any adverse environmental effects”. Such wording leaves considerable room for interpretation and may create uncertainty in practice – leading to potential cost implications as well as increased risk of disputes.
It is also arguable that, when considered alongside the wider contractual framework, the clause may add little in terms of substantive obligations. That is because clause 5.14.1 of NZS 3910:2023 already requires contractors to comply with all statutes applicable to the contract. With most projects requiring resource consents, the RMA is often applicable. Under section 338 of the RMA, it is an offence to contravene the RMA’s core restrictions relating to land use, subdivisions, coastal and freshwater activities, water use, discharges, and to breach enforcement notices, enforcement orders, or excessive noise directions (ss 9,11,12,13,14,15, 322(1)(c), 329, and 327). In that context, clause 5.21 largely reinforces obligations that contractors are already required to comply with under existing legislation.
Developments in the United Kingdom
Internationally, construction contracts are beginning to incorporate more developed sustainability provisions. In the UK, two widely used standard form construction contracts are the Joint Contracts Tribunal (JCT) suite and the New Engineering Contract (NEC) suite.
The 2024 edition of the JTC Design and Build Contract introduced cl 2.1.5, which encourages contractors to propose amendments to the project that “may” improve environmental performance or sustainability outcomes. It also introduced cl 2.2.2, requiring contractors to provide all information reasonably requested by the employer regarding the environmental impacts of materials and goods used in the works.
Although these provisions remain relatively modest, their inclusion within the main contract conditions (rather than supplemental provisions, as was previously the case) reflect the growing importance of sustainability within construction procurement.
A more developed approach can be seen in the NEC suite of contracts. In 2022, NEC introduced secondary option X29, which allows parties to incorporate specific climate change obligations into the contract.
Under this option in the NEC4 Engineering and Construction Contract, the employer may set Climate Change Requirements (CCRs) within the contract scope. These requirements are measured using a performance table that establishes emissions-related targets a contractor must achieve, and sets out the adjustments to payments depending on whether the measured performance is above, equal to, or below the target.[3] The contractor must also submit a climate change plan, setting out how they plan to meet the CCRs. [4] Similar to NZS 3910:2023 there is an obligation on the contractor to notify the project manager if matters arise which could adversely affect the CCRs.[5] Additionally the contractor may propose to the project manager that the scope be changed in order to reduce climate change impacts resulting from the works.[6]
This approach allows sustainability targets to be incorporated directly into the commercial framework of the contract. However, it also requires careful calibration. If climate obligations are unrealistic or poorly defined, contractors may decline to tender or may include significant risk allowances in their pricing.
The introduction of option X29 was also intended to address concerns about “greenwashing” in procurement processes, where bidders make sustainability commitments that are difficult to verify or enforce. By linking climate targets to measurable performance indicators, the option provides a mechanism for holding parties accountable for environmental outcomes.
Emerging carbon management frameworks
Further developments are also occurring at an international level. In December 2025, the International Federation of Consulting Engineers (FIDIC) launched its Carbon Management Guide (CM Guide) and its accompanying Carbon Emissions Management Guidance (CEM Guidance).
These documents provide guidance on how carbon management principles can be integrated into projects delivered using FIDIC contracts. The CM Guide establishes an overall framework defining key carbon management principles, and guides parties in setting emission targets and maintaining a carbon balance sheet. Whereas the CEM Guidance comprises contract specific companions to standard FIDIC forms, providing contractual clauses, obligations and mechanisms for measuring reporting and managing carbon performance.
The CM Guide suggests that the framework has the potential to promote industry transformation by incorporating greenhouse gas emission performance as a competitive factor within project procurement processes. By requiring tenderers to submit proposed carbon emission budgets, the procurement stage may encourage innovation and improvements in carbon efficiency. The framework also proposes the introduction of enforceable contractual mechanisms intended to strengthen carbon accountability across the construction supply chain. Central to this approach is the use of a carbon balance sheet, designed to monitor carbon budgets, actual emissions, and carbon removal measures throughout the lifecycle of a project. At the same time, the CM Guide emphasises that these mechanisms are intended to support decarbonisation without undermining the commercial viability of contracts or disrupting the fair allocation of risk.
Although the implementation of these carbon management measures remains voluntary, early adoption may assist industry participants to build capability in anticipation of future regulatory or contractual requirements relating to carbon management.
Conclusion
Environmental provisions in construction contracts remain an emerging area. In New Zealand, the environmental obligations introduced in NZS 3910:2023 are broadly framed and largely reinforce existing statutory requirements rather than imposing detailed sustainability obligations.
However, international developments suggest that more structured climate-related provisions may become increasingly common in construction contracts. Mechanisms such as emissions targets, climate management plans, and performance-based incentives are already being incorporated into standard form contracts in other jurisdictions.
For principals, these provisions may provide a practical mechanism for encouraging emissions reductions and demonstrating environmental, social and governance (ESG) leadership within projects, and incorporating such practices either as part of procurement / tender selection practices, or in specifying particular materials or practices to achieve these goals.
For contractors, the growing use of sustainability clauses presents both opportunities and risks. While early adoption with climate obligations may improve competitiveness during procurement, contractors may also face additional reporting requirements and potential contractual consequences if environmental targets are not achieved.
The effective use of green clauses will therefore depend on careful drafting. Sustainability targets must be measurable, risk allocation clearly defined, and reliable monitoring systems established. As climate considerations continue to shape the construction sector, environmental provisions, like green clauses, will become increasingly common features of construction contracts – likely shifting from optional additions to standard components of construction contracts.
If you have any questions about environmental clauses and obligations in construction contracts, please get in touch with our Construction and Infrastructure Team or you usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
[1] Our journey towards net zero: New Zealand’s second emissions reduction plan 2026–30 (published December 2024, amended January 2026)
[2] Global Monitoring of Policies for Decarbonising Buildings: A Multi-level approach
[3] NEC4 ECC X29.1(4) and X29.12
[4] NEC4 ECC X 29.4
[5] NEC4 ECC X29.3
[6] NEC4 ECC X29.11(1)
