In September 2020, the legal team at the Environment Agency (the Agency) started exploring the use of the Carbon Reduction Clauses and has since adopted them into a selection of key service contracts. The Agency was determined to set a standard not only as a regulator but also a leader in adopting ambitious environmental and carbon standards working towards its 2030 Net Zero commitment. Achieving that means bringing its suppliers along on its journey to Net Zero.
What do the Carbon Reduction Clauses deliver for the Agency?
- The Agency and its service provider must agree on an annual greenhouse gas (GHG) emission reduction goal.
- The service provider must make an annual GHG report to show progress on that goal.
- When a service provider goes beyond an agreed target goal, the provider and the Agency share the benefit of the additional GHG reductions achieved using a gain share mechanism.
How did The Chancery Lane Project (TCLP) help the Agency get here?
The Agency used TCLP’s provisions to drive its requirements through its supply chains. By making the clauses flexible the Agency set reduction goals and pathways that were tailored to the capacity of individual service providers, and therefore more likely to produce results. The ability of the providers to agree on the right starting point as well as a reduction goal has led to a positive and constructive reaction.
What changes have the Carbon Reduction Clauses made?
The Carbon Reduction Clauses have put sustainability requirements front and centre of each contract in which they are used and tied them to incentivisation mechanisms.
Although the Carbon Reduction Clauses have been specifically drafted by the Agency’s legal team, their wording has been inspired by parts of TCLP’s Zoë and Bea’s Clause, as well as the definitions in TCLP’s Glossary.
What are the key takeaways?
- TCLP clauses are a great starting point for your specific contract needs.
- Tailoring the clauses to your supplier’s capacity can get more results than rigid wording.
- Climate-conscious clauses have a greater impact when paired with traditional contractual enforcement/incentivisation mechanisms.