Sustainability is becoming increasingly important in project
development. While many companies have embraced sustainable
practices as part of their corporate social responsibility, the
push towards sustainability is also driven by European regulations
such as the EU Taxonomy and the Sustainable Finance Disclosure
Regulation (SFDR). Consequently, sustainable construction is
evolving into more of a necessity than a choice. Beyond regulatory
compliance, financiers increasingly consider the presence of
sustainability certification in credit assessments. These
certificates can even enhance the value of real estate projects,
making them a key consideration for developers and investors
alike.
Among the wide range of sustainability certificates available,
BREEAM-NL is the most widely used in Dutch project development.
This blog explores the importance of such certification and offers
practical guidance on incorporating sustainability ambitions into
building contracts.
What is BREEAM-NL?
BREEAM-NL stands for Building Research Establishment
Environmental Assessment Method and is a certification method
system used to assess a building's sustainability performance.
This assessment method is divided in several categories, including
(i) new construction and renovation, (ii) in-use, (iii) demolition
and disassembly and (iv) area development.
For the design phase of the building, a BREEAM-NL design
certificate can be obtained. After the execution phase, a BREEAM-NL
delivery certificate may be awarded. The final assessment of a
building's sustainability performance occurs post-delivery,
once all construction work is complete, the users fit-out works
have been implemented and they are moved in.
To obtain a BREEAM certificate, the building is assessed on various
parameters, known as "credits". The more credits
a building scores, the higher the BREEAM-NL qualification. These
qualifications range from "Pass" to
"Outstanding," with "Outstanding" being the
highest sustainability score.
Considerations for sustainability certification in building contracts
Successfully achieving the desired BREEAM Certificate, requires clear and timely arrangements between all parties involved, including the principal and the (sub)contractors. Below are some key considerations for drafting building contracts aimed at achieving BREEAM Certification:
- Certification as part of the scope of work: It is prudent to include provisions in building contracts specifying that obtaining the BREEAM Certificate forms part of the contractor's scope of work. This ensures that the associated costs for achieving and securing the certificate are included in the contract price.
- Use of the credit list: We recommend appending a "credit list" to the building contracts, specifying which party is responsible for achieving each credit. Where multiple contractors are responsible for delivering the works, it is crucial to maintain an up-to-date "credit list".
- Use of exchange credits: During the project, it may become possible to obtain more credits than are strictly necessary for the intended certification. Contractual provisions can address such scenarios, allowing contractors (under certain conditions) to use "exchange credits" if certain designated credits cannot be achieved.
- Engage a BREEAM expert: To avoid unexpected issues after delivery of the building, it is wise to engage a BREEAM expert during the construction phase. This expert can assist with the coordination and supervision required to achieve the credits and help identify and resolve potential problems early on.
- Engage a BREEAM assessor: Engaging a BREEAM assessor at the appropriate stage allows for interim review of the contractor's documentation and evidence. By conducting this review during the construction phase, the assessor can do on-site checks and the contractor can demonstrate compliance with all the sustainability requirements.
- Incorporating certification into construction meetings: It may be desirable to include the progress of the BREEAM certification process as a standing agenda item in the regular construction meetings. This ensures ongoing insight and involvement from the entire project team.
- BREEAM as a delivery requirement: We recommend stipulating in the building contract that, upon delivery, the building must meet all the necessary criteria to obtain the BREEAM Certificate. This requirement can be evidenced at the date of delivery by an assessor's report assessing compliance with the applicable conditions and the absence of any known impediments to final certification.
- Withholding payment pending certification:As the final BREEAM Certificate is often issued several months after delivery of the project, it is advisable to retain a portion of the contract sum until the BREEAM Certificate has been issued to the principal. If desired, a specific term could be linked to this; typically three to six months post-delivery, after which a fixed penalty takes effect for each calendar day that the certificate is delayed; and
- EU Taxonomy Guide: Finally, consider using the EU Taxonomy Guide published by the DGBC to assess whether the building, based on the relevant BREEAM credits, aligns with the EU Taxonomy and Paris Proof standards.
Conclusion
Sustainable construction is no longer a passing trend but an essential standard that should be firmly embedded in building contracts. By incorporating clear provisions on sustainability requirements and specifying obligations related to obtaining the BREEAM Certificate in the building contract, all parties can be held responsible for delivering the credits assigned to them. This approach ensures that sustainability certifications, such as BREEAM-NL and Paris-Proof, are achievable without unexpected hurdles. More importantly, it contributes not just to more sustainable construction, but also to a more sustainable real estate sector.
Other blogs in this series
- ESG - How does the EU Taxonomy Regulation impact the real estate sector?
- ESG - How does the SFDR impact the real estate sector?
- ESG - How does the CSRD impact the real estate sector?
- ESG - Green and sustainability-linked loans in the real estate sector
- ESG - Key criteria impacting taxonomy-alignment of real estate
- ESG - Stay classified, real estate fund managers
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
