Integrate climate obligations into contracts

Impose legally binding and enforceable obligations to help meet emissions-reduction targets

Updated:

16 December 2025

Published:

14 February 2024

Application:

Universal application

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This guide enables organisations to:

ensure that a requirement to set emissions-reduction targets and to develop and report on transition plans is integrated into contracts and legal documents
impose legally binding and enforceable climate obligations on contract counterparties that will help to achieve each party’s climate objectives.

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Commit counterparties to decarbonisation

Use supply contracts to require an organisation’s (Party A) counterparties (each Party B) to implement decarbonisation measures that align with the organisation’s own climate strategy and objectives.

Best practice is for counterparties to be required to reflect their climate obligations in their own value chain. This sets emissions-reduction targets as part of all contracts, helping the organisation meet its own targets.

Example wording

[Party B] shall do all of the following:

set public emissions-reduction targets [that are validated by the Science Based Targets initiative] within [3 (three) months] of entering into this agreement
develop and immediately implement a transition plan within [6 (six) months] of entering into this agreement. The transition plan will be:
- created with the assistance of and agreed with [Party A]
- reviewed and updated regularly with [Party A]
measure, calculate and report on its scope 1 and 2 [and 3] emissions and progress towards achieving emissions-reductions targets publicly [and annually]
include a copy of this clause in all of its [third party contracts OR subcontracts OR supply chain agreements].

Set emissions-reduction targets and reporting standards

Use supply contracts to require counterparties to measure, manage and report on their contract-related emissions. Read our guide Get information on contract emissions.

Organisations should specify the actual level of emissions reductions that counterparties must make under the contract during its term.

Ideally, the emissions-reduction targets set out in the contract will:

define the scope of emissions covered by the target. Best practice is to set absolute targets relating to an organisation’s own emissions (scope 1 and 2) and emissions from its value chain (scope 3) include short- (annual) and medium-term (2 to 5 years) interim targets
be validated by the Science Based Targets initiative
align with Paris Agreement goals and latest Intergovernmental Panel on Climate Change findings.

Example wording

[Party B] shall reduce the scope [1 and 2] [and 3] emissions relating to the activities governed by the agreement by [●] percent every year. Party B acknowledges that this required reduction:

is required in order to assist [Party A] to meet the emissions-reduction targets contained in its transition plan at the date of the contract
is intended to assist with achieving the Paris Agreement goal to limit global temperature increase to 1.5C above pre-industrial levels.

Require employee decarbonisation training in contracts

Use supply contracts to require the organisation’s counterparties to provide decarbonisation training for their employees and contractors.

Training should include training relating to the organisation’s decarbonisation strategy and objectives set out in the contract so that the counterparties’ employees know what is expected of them in fulfilling the contract terms.

This will help to:

empower individuals to participate and actively engage in the decarbonisation objectives in the contract
enhance climate and carbon literacy along the value chain, helping individuals and organisations make better and more informed decisions
promote a climate-conscious culture that improves the quality of climate-related policies, and supports their implementation.

Example wording

[Party B] shall provide [environmental and sustainability] training on a regular basis (at least annually) for [employees and contractors] during their usual working hours (and online as required).

At a minimum, the [environmental and sustainability] training will cover all of the following:

the latest climate science, including the projected impacts of global warming of 2C above pre-industrial levels versus 1.5C
climate policy and the relevant legal context, including core terms of the Paris Agreement and any national implementation measures
details of [Party B]’s public and contractual commitments, targets and governance in relation to climate and sustainability
the economic and social benefits (for example, health) to [Party B] in reducing the environmental impact of the workplace
sustainable lifestyle changes and issues relating to [Party B]’s workplace. For example: energy efficiency, digital meetings, food and travel choices, renewable energy and smart waste management.