Introduce climate provisions to contract parties

Create the right conditions for using contracts to reduce emissions from the very beginning

Updated:

16 December 2025

Published:

9 April 2024

Application:

Universal application

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This guide enables organisations to:

make climate considerations part of the commercial rationale for transactions and contracts from the outset
collaborate with stakeholders and contract counterparties to ensure their buy-in to meeting climate targets
embed climate considerations in pre-contract documents (for example, heads of terms and requests for proposals)
write climate-aligned preambles (recitals) that lead to legally binding obligations to reduce greenhouse gas emissions and make climate considerations part of fulfilling a contract.

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Make climate considerations part of the commercial rationale

Obtain board approval on the climate terms of a contract at the earliest opportunity. For example, set a limit to greenhouse gas emissions associated with a contract. Read our guide Factor climate considerations into board decisions.

Climate issues are more likely to be addressed in the final contract that governs a transaction if they are raised at an early stage of commercial discussions and contract negotiations.

Collaborate early with counterparties and stakeholders

To embed meaningful climate action in contracts requires support from counterparties and other relevant stakeholders (for example, suppliers). Engaging early with these parties will be helpful in understanding and clarifying their climate ambitions and managing their expectations in commercial dealings.

Engage in early collaboration with counterparties and/or other relevant stakeholders before entering into a specific contract with them. This helps to create a mutually shared understanding among the parties on meaningful decarbonisation objectives, so as to increase the likelihood that those goals are included in the final contractual framework, rather than attempting to introduce additional climate change-related commitments as an afterthought.

Commit to climate considerations in pre-contract documents

Embed climate considerations in pre-contract documents, such as heads of terms, non-disclosure agreements, and requests for proposals, which often set the tone and expectations for the transactions. This sets a good context for formalising climate considerations in the commercial purpose of a transaction.

Use the following elements of contractual negotiations to further raise the profile of climate-related considerations at the pre-contract stage:

transaction financing
design and materials specifications
team appointments.

Example wording

The parties will do all of the following:

consider how to achieve the Climate-change Purpose as part of the Commercial Purpose within any future commercial relationship arising from those discussions and negotiations
[structure, deliver, design or finance] the [proposed transaction] in a manner that aligns with the Climate-change Purpose.

Climate-change Purpose means achieving the parties’ climate commitments and emissions-reduction targets which align with the Paris Agreement goal of limiting global temperature increase to 1.5C above pre-industrial levels.

Commercial Purpose means [insert commercial purpose].

Require counterparties to help achieve decarbonisation targets at pre-contract and contract stages

Use pre-contract and contract documents to embed:

collaboration between the parties in their commercial relationship
the parties’ expectations that the contract will help them meet their climate-related goals.

Write concrete emissions-reductions goals into pre-contract and contract documentation, as this will facilitate:

the reduction of transaction-related emissions

a setup of the necessary processes for gathering data on emissions. These processes will enable parties to report on and manage emissions reductions. Read our guide Get information on contract emissions.

Example wording

The parties shall work together to do all of the following:

identify and implement opportunities to reduce the greenhouse gas emissions relating to [the proposed transaction]
incorporate emissions-reduction targets and related financial incentives into the proposed transaction [and, where possible, involve other stakeholders in such emissions reductions]
measure and report on emissions relating to the proposed transaction.

Use preambles to frame the intention of the parties

Use preambles in pre-contract documentation (like heads of terms) and the contracts governing the transaction to make clear the parties’ climate ambitions for the commercial transaction.

Preambles, or recitals, explain the context, commercial rationale and intentions of the parties entering the contract. Preambles are non-operative and not binding. They are low-risk but highly influential, allowing organisations to align commercial relationships and contracts with decarbonisation objectives and Paris Agreement goals.

Example wording

The parties acknowledge their common intention to do all of the following:

achieve their respective emissions-reduction targets and [net zero or decarbonisation] transition plans
align with the Paris Agreement goal of limiting global temperature increase to 1.5C above pre-industrial levels.