David's Clause

SME’s Net Zero Objectives

A clause for use by small and medium-sized enterprises (SMEs) in a variety of contracts which imposes mutual obligations on the parties to take steps towards net zero, with payment of a climate remediation fee for breach. 

Jurisdiction: England & Wales

What this clause does

This clause can be used to add net zero obligations to a variety of contracts. This will help SMEs to deliver their net zero targets. As the clause is designed to be ‘plug and play’ it requires little adaptation and will be quick and simple to use.


[Insert [Eddie’s Recitals] Climate Recitals.


[Drafting note: capitalised terms relate to either a defined term in this clause or a defined term in the main agreement that this clause is designed to be inserted into.]

1. Climate obligations 

1.1 The Parties shall:

1.1.1 Set a public Net Zero Target and interim greenhouse gas (GHG) reduction targets [validated by the Science Based Targets initiative] within [3 (three) months] of entering into this Agreement.  

1.1.2 Develop and implement a Net Zero Transition Plan within [6 (six) months] of entering into this Agreement. The Net Zero Transition Plan will be reviewed and approved by the management team annually.

1.1.3 Measure and report annually and publicly on their Carbon Footprint and progress towards their Net Zero Target. This report shall be published within 30 (thirty) days of the anniversary of the date that the Net Zero Target was published under clause 1.1.1.

1.1.4 Provide an environmental and sustainability training programme on a regular basis (at least annually) for employees, personnel and contractors during their usual working hours. As a minimum, the training will cover details of the relevant Party’s public and contractual commitments, targets and governance in relation to climate change and sustainability, and how these will be delivered.

2. Breach of climate obligations

2.1 If either Party breaches any of the obligations in clause 1.1, the breaching Party shall:

2.1.1 Within [30 (thirty) days] of the breach, inform the innocent Party of its plans to remedy the breach.

2.1.2 Remedy the breach within [3 (three) months] of the breach occuring.

2.1.3 If the breaching Party fails to remedy the breach [within 3 (three) months of the breach], pay to a climate charity nominated by the innocent Party a sum of £[●] for each [day] that the breach continues [up to a maximum of £[●]].


Carbon Footprint means a Party’s total annual greenhouse gas emissions classified as scope 1, 2 and 3 emissions by [The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard] as updated periodically.

Net Zero Target means a target to reduce and remove a Party’s greenhouse gas emissions, including by offsetting Residual Emissions, to achieve a balance between the Party’s sources and sinks of GHGs. This must be achieved by [2050 OR insert earlier date] and align with the goals of the Paris Agreement.

Net Zero Transition Plan means a plan to deliver the Net Zero Target that includes:

(a) interim GHG emissions reduction targets that align with the goals of the Paris Agreement;

(b) short, medium and long-term actions to achieve the emissions reduction targets, and a plan for how they will be financed;

(c) a strategy specifying the verified credits from a recognised offset provider that may be used by the Party to offset its Residual Emissions;

(d) governance and accountability mechanisms to support the plan, including annual reporting and linking executive remuneration to achieving the interim targets;

(e) measures to address risks to, and leverage opportunities for, stakeholders (such as workforce, supply chains, communities and customers) and the environment; and

(f) promoting a just transition to a low carbon economy.

Residual Emissions means a Party’s greenhouse gas emissions from all operations including its value chain that are emitted after all reasonable efforts have been made to reduce them.

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