In the run up to the COP26 conference on climate change, many organisations are setting ambitious targets to achieve net zero and their ESG objectives. While many organisations will focus on their operational arrangements and internal policies, it is also possible to use climate and net zero drafting in commercial contracts to ensure that your supply chain and partners help your organisation to achieve its targets.
While questions on ESG and the environment are now a standard part of many invitations to tender, net zero and climate conscious clauses are still a long way from becoming part of the standard boilerplate of a commercial contract. Often this means that statements or commitments made during the procurement process are not contractualised or monitored during the term of the contract.
However, an initiative called The Chancery Lane Project is seeking to change that by promoting "climate conscious drafting" and helping organisations leverage their contracts to help deliver on net zero and climate objectives.
What is The Chancery Lane Project?
The Chancery Lane Project is a collaborative project involving lawyers from over 200 organisations with expertise across a range of sectors and industries. Through a series of working groups, The Chancery Lane Project is developing model climate and net zero clauses and templates to incorporate into a wide variety of contracts and other legal documents.
The Chancery Lane Project clauses cover a wide range of topics, including Real Estate and Buildings, Heavy Industry and Transport, Insurance, Finance, Corporate (including clauses to use in M&A and model articles for company incorporation) and Employment (even including an example clause for "green" gardening leave).
Climate and net zero clauses for commercial contracts
Earlier this year, The Chancery Lane Project launched a number of new clauses designed to be used in commercial contracts and supply chain arrangements to help organisations embed net zero and climate objectives in their supply chain arrangements. These include:
- Climate aligned boilerplate clauses
- Supply chain sustainability clauses
- Net zero supply chain cascade clauses to use in multi-tiered supply chain arrangements
- Climate and greenhouse gas emission monitoring and reporting obligations
- Contract clauses to incentivise "greener" performance
- Clauses to encourage suppliers to embed repair, reuse and recycle concepts into their processes
- Greener dispute resolution procedures
- Climate change benchmarking
- Green termination rights
The clauses are also accompanied by guidance notes and tools to help organisations use them and tweak them to meet their requirements as they progress towards their net zero target. Not every clause will be relevant to every organisation and every contract, but the toolkit provides a framework to help identify what works best for each organisation, given where they are on their journey.
Building a net zero procurement into your ESG strategy
In addition to example contract clauses, the toolkit also provides example questionnaire and checklists that can be built into your procurement processes and supply chain management, including:
- Supplier due diligence questions on net zero and climate change
- Supply chain questionnaires; and
- Example green procurement checklists to help an organisation set and manage its net zero targets within its supply chain
How will suppliers manage compliance with net zero obligations?
As net zero and climate drafting becomes more common, suppliers will need to think about how they respond to these clauses and manage compliance.
This might include developing standard positions and responses based on that supplier's own net zero targets and ESG policies, and managing the flow down of specific obligations and targets onto subcontractors and suppliers.
Where can I find out more information on net zero drafting?
If you'd like to discuss how your organisation can use climate and net zero clauses in its commercial contracts, template agreements, and supply chain arrangements, or you'd like to find out more about what else you can do to incorporate net zero into your procurement and supply chain diligence processes, please get in touch or visit The Chancery Lane Project website.
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