Can we actually measure emissions in contracts? Well… that’s complex

Overview

Embedding enforceable and measurable sustainability obligations in contracts is essential for meeting emissions targets. We conducted research into how organisations are measuring their emissions within contracts, drawing from literature reviews and expert interviews. The findings reveal a landscape filled with emerging best practices, ongoing challenges, and inconsistencies that hinder progress. Key highlights include:

• Lack of a single standard: Multiple emissions frameworks (e.g., Greenhouse Gas Protocol and ISO 14064) lead to fragmentation and inconsistencies.
• Weak enforcement: Contracts often set targets without discernible consequences for non-compliance.
• Standards dissonance: Misalignment in measurement methods, ambition levels, and timelines between counterparties creates negotiation challenges.
• Carbon pricing volatility: Price fluctuations and confusion between voluntary and compliance markets complicate contractual obligations.
• AI and contract innovation: Smart contract tools and AI analytics can enhance enforcement, improve transparency, and align counterparties.

How are organisations measuring their emissions?

As businesses race to meet sustainability commitments, they face significant challenges in aligning measurement standards and ensuring contractual enforceability.

1. Emissions measurement: The myth of a single standard

Without harmonised measurement standards, contracts struggle to reflect meaningful, enforceable climate commitments.

One might assume emissions measurement follows a clear, universally accepted methodology. In reality, organisations juggle multiple standards—choosing between Greenhouse Gas Protocol, ISO 14064, PAS 2050, and bespoke in-house methodologies, amongst the many on offer. While these frameworks provide structure, the lack of a single, binding approach leads to fragmentation and inconsistency in contractual commitments.

A Senior EU Climate & Sustainability Legal Specialist who participated in our research noted: “The CSRD and ESRS E1 define reporting requirements for emissions in Europe, but they do not prescribe a single measurement methodology. Companies are still working out how to translate these requirements into enforceable contract terms.“

2. Why contracts set targets but don’t always enforce them

Effective contracts must include enforceable clauses, clear accountability and real consequences for non-compliance.

Many contracts reference emissions measurement, but few have clear enforcement mechanisms. Compliance is often tied to external reporting frameworks rather than contractual obligations.

Such external frameworks come from organisations like the Science Based Targets initiative (SBTi) or the Global Reporting Initiative (GRI). These initiatives play an important role in goal-setting, providing organisations with a starting point for orienting their sustainability efforts. However, certification from SBTi requires only the creation of a concrete plan; the organisational scope does not cover confirmation of the fulfillment of those targets. 

Without enforcement, targets may be set but not achieved. The same mentality could sometimes filter down into contract drafting. 

A Senior Legal Counsel, ESG and Responsible Business Lead explained: “Contracts increasingly include broad commitments rather than strict measurable targets. Larger companies push for data collection and reporting, but specific environmental obligations vary.”

If contracts don’t drive compliance, what does? Often, it’s external pressures—from investors demanding transparency to regulatory bodies tightening disclosure requirements. Sometimes, it’s as simple as a company wanting to avoid allegations of “greenwashing”. In other cases, companies may genuinely wish to be industry leaders on sustainability. 

3. The “Standards Dissonance” problem

Even when organisations agree to measure emissions, their methods and timelines may be fundamentally misaligned, making enforcement difficult.

A major hurdle in contractual emissions measurement is misalignment between counterparties. Different organisations adopt different standards, ambition levels, and reporting timeframes, leading to negotiation bottlenecks and enforcement challenges.

One interviewee summed it up saying:

“Companies adopt different standards at different ambition levels and over different time periods. When these go into contracts, we see ‘standards dissonance’ that makes alignment across counterparties incredibly difficult.”

This issue is particularly pronounced in complex supply chains, where multinational corporations set sustainability expectations for suppliers, but those suppliers operate under entirely different regulatory or market conditions. The emissions associated with downstream and upstream actors on an individual company’s supply chain are termed Scope 3 emissions and they have proved particularly challenging for corporations to monitor and control. 

4. The carbon offset pricing puzzle 

The price of carbon is not a fixed commodity. Pricing and credibility vary significantly, creating risk for companies that rely on them in contracts.

Even when emissions are measured within contracts, another challenge emerges: the fluctuating value and credibility of carbon offsets. While international standards like ISO 14064 exist, the price of offsets varies wildly, creating difficulties in contractual agreements.

Additionally, there is often confusion between voluntary carbon markets (VCM), which deal with carbon offsetting, and compliance carbon markets, such as emissions trading schemes (ETS), which set regulated carbon pricing. Prices are set differently between the two “markets” and they are used for different purposes but sometimes by the same organisation, causing confusion. This volatility makes it challenging for companies to integrate carbon-related commitments into contracts in a predictable way.

5. How to design contracts that work 

So, how can organisations move beyond these challenges and create contracts that drive real change? Based on our research, here’s what can help:

• Encourage adaptable contract structures: One-size-fits-all clauses don’t work—contracts must align with specific industries and regulatory requirements.
• Strengthen enforcement mechanisms: Contracts should include penalties or incentives tied to emissions performance, making commitments meaningful.

• Improve clarity on carbon pricing: If contracts recommend offsetting or the use of cap-and-trade, they should define acceptable standards, pricing mechanisms and verification processes.
• Ensure early alignment between counterparties: Before signing, organisations should align on measurement methods, timelines, and reporting expectations to avoid “standards dissonance.”
• Integrate AI-driven contract analysis: Machine learning tools can help practitioners respond to these challenges by recommending relevant climate-related clauses for integration into their contracts, identifying where emissions-related commitments lack enforcement, and flagging mismatches in measurement standards between counterparties.

By embedding these principles into contracts, organisations can bridge the gap between ambition and action—ensuring that sustainability commitments aren’t just words on paper, but meaningful obligations with real-world impact.

Moving forward together: Legal, AI, and climate solutions must align

The way forward isn’t just about better contracts—it’s about reimagining the entire system of sustainable legal contracting. 

The Chancery Lane Project is positioning itself at the heart of this transformation. We believe that by creating novel, enforceable legal content, thinking holistically about user journeys and service design, and leveraging machine learning, we can revolutionise how environmental commitments are set and enforced.

For organisations, legal professionals, and policymakers, the opportunity is clear: support the integration of emissions accountability into contracts. And don’t be afraid to use innovative tools, like AI and adaptable contract structures, to do so. The future of sustainability isn’t just about making promises—it’s about building the legal infrastructure to ensure those promises are kept.

Are you tackling these challenges in your work? Join us in creating contracts that turn climate commitments into real action.