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ESG requirements prompt the supply chain industry to re-think and consider ways to become "greener".

Given that ESG requirements (Environmental, Social, Governance) are becoming ever more prominent throughout the supply chain we are spending more time talking to our clients about what they should be doing and what we can do to help. When considering how to become “greener”, clients are looking into their supply chains. That not only goes to the heart of where products or services come from but also the transport and logistics journey.

Having recently attended and spoken at the Multimodal 2021 exhibition at the NEC in Birmingham, it is clear that green warehousing plays an important role in the wider transport, logistics and supply chain management community. In particular, we have been discussing how industrial warehousing can become greener in order to:

  • reduce utility consumption and save money
  • comply with statutory requirements to report on environmental issues
  • comply with ESG
  • achieve greater energy efficiency
  • improve reputation/branding
  • increase productivity, recruitment and retention of staff.

There are the obvious changes that can help a transition to a greener warehouse such as the upgrading of lighting to LED, storm water management, using solar power, going paperless etc. However, in the wider context there are numerous points to consider - here is a snapshot of just a few:

Green leases

A series of provisions within a lease that encourage the landlord and tenant to reduce the environmental impact of the premises, to facilitate the installation of energy efficiency measures and to encourage the building to be run in a way that reduces its energy consumption. These can extend to cover the promotion and improvement of environmental performance, sharing of environmental performance data and restrictions on alterations that would adversely affect environmental performance.

Green financing

We are seeing a move for investors to promote climate-neutral, environmentally friendly projects. This extends to those projects more efficiently using energy, water and waste management.

Power purchase

There has been a move in recent years to users purchasing clean/green power through documented offtake arrangements, known as power purchase agreements. These provide contractual certainty for all parties and can work towards improving green credentials.

Turning to the wider construction industry, given the role it plays in the construction and refurbishment of warehousing. The National Engineering Policy Centre published an interesting report last year setting out recommendations aimed at decarbonising the construction industry. The report uses four “Missions” to set out recommendations

Mission one – Product outcomes

A wholesale overhaul of the culture within the construction and engineering industry is required as the report describes the current operation as resource-hungry and wasteful. The report recommends that every decision made during the life of a construction project should be underpinned by a new objective of decarbonising the industry.

Mission two – Design and specification

The Report states that to decarbonise at the design and specification stage will involve an interrogation of the carbon emissions produced by different materials. The report asks the government to create a certification process by which all materials used in the construction process receive accreditation based upon their carbon emissions.

Mission three – Reuse

Rather than considering demolition and rebuild which is often viewed as the norm, the report calls for re-use of existing buildings and materials to become typical practice. At the outset of a project, construction professionals should therefore consider viable existing buildings in the area before creating new structures.

Mission four – Changes to procurement

The final Mission calls for a change of approach to procurement to reflect whole life carbon performance. The report encourages inspiration to be taken from the energy sector, where the National Grid requires its supply chain to explain the carbon intensity of their materials and processes, which is priced into the bidding structure so that selection is based on carbon performance, rather than purely on price.

Whilst a few months old, the report conveniently sets out four core elements that impact the construction industry and all “types” of construction, whether warehousing, offices, industrial, commercial or otherwise. Following the recent COP 26 it will be interesting to see whether actions following discussion.

For further guidance on green warehousing or other energy-related issues, contact our market-leading energy solicitors.