Supplier Environmental Threshold Obligations
Insert at purchase warranties for environmental performance and continuous improvement obligations. This will build in long term environmental improvements and transparency into supply agreements.
What this clause does
Incentivises the reduction of carbon emissions and creates legally enforceable standards in mainstream supply contracts.
Recitals
(A) The parties acknowledge:
(i) that the UK Government has committed to bring greenhouse gas emissions to net zero by 2050 pursuant to the Climate Change Act 2008 (2050 Amendment) Order 2019;
(ii) their common intentions to achieve their respective net zero targets and align with the ultimate objectives of the UNFCCC’s Paris Agreement, in particular pursuing efforts to limit global temperature increase to 1.5 degrees Celsius above pre-industrial levels and achieving net zero or net negative emissions by 2050 or sooner; and
(iii) that the continuous reduction of greenhouse gas emissions relating to the performance of this contract is necessary for the parties to meet their respective interim targets for immediate emissions reduction.
(B) The parties have carried out assessments of their respective organisational greenhouse gas emissions.
(C) The [Supplier][the parties] [has/have] carried out an assessment of the carbon footprint of [the goods/products/services] supplied pursuant to this Agreement.
Clauses
At Purchase Warranty
1. As a Condition of this Agreement the Supplier Warrants that:
1.1 it has undertaken an assessment of the Carbon Footprint;
1.2 the Carbon Footprint projected to be incurred as set out in [the Schedule] is true and accurate as at the date of this Agreement.
2. The Supplier Undertakes:
2.1 to develop and implement a plan of continuous improvement and quantifiable short, medium and long term interim targets, approved by [a director/committee of the directors/its board of directors], to reduce the Carbon Footprint by a minimum of [7%]* per Contract Year (being the minimum estimated percentage reduction required to halve emissions every decade to limit warming as described in the Recitals) and shall provide a copy of that plan to the [Customer];
2.2 to re-assess the Carbon Footprint and the plan referred to at clause [2.1] at least [annually/once per Contract Year];
2.3 to provide the [Customer] with a written confirmation of the results of each assessment within one month of the completion of each assessment under clause [2.2];
2.4 to [annually], or more often at the [Customer’s] request (the cost of such additional request to be paid for by the [Customer]) arrange for [the Carbon Trust/an independent, unconnected third party with no conflict of interest that is an appropriately qualified and experienced environmental, sustainability or climate professional] to carry out an independent assessment and verification of the Carbon Footprint and make a copy of the results of that assessment and verification available to the [Customer] as soon as reasonably practicable after receipt;
2.5 to ensure that clauses [2.1-2.4] will be copied into any and all of its supply chain contracts that relate to its obligations under this Agreement, and provide any support (financial or otherwise) required to its subcontractors to assist them in fulfilling those obligations[; and][.]
2.6 [not to undertake any direct or indirect climate policy engagement, lobbying activities, trade association memberships or public policy positions that may undermine the goals of the UNFCCC’s Paris Agreement].
* [Drafting note: this percentage should ideally be no lower than 7% and if possible, higher, to meet the target of halving absolute emissions every decade.]
Definitions
Carbon Dioxide Equivalent (CO2e or CO2eq) means the standard metric measure used by [the UN’s Intergovernmental Panel on Climate Change (IPCC)] to compare the emissions from various Greenhouse Gases (GHGs) on the basis of their global warming potential over a specified timescale in order to express a Carbon Footprint that consists of different GHGs as a single number.
Carbon Footprint means the total annual Scope 1, 2 and 3 Emissions as a result of the [manufacture/supply/use] of [the Product/Service/Business Operation/ Project], expressed as a Carbon Dioxide Equivalent (CO2e).
Greenhouse Gases (GHGs) means the natural and anthropogenic gases which trap thermal radiation in the earth’s atmosphere and are specified in Annex A to the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) [or otherwise specified by the UNFCCC at the date of this agreement], as may be amended from time to time[, which include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3),] each expressed as a total in units of Carbon Dioxide Equivalent (CO2e).
Scope 1, 2 and 3 Emissions means the three classifications of emissions in the The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition 2015 as updated from time to time [Drafting note: Scope 1, 2 and 3 emissions are defined on page 27 of the GHG Protocol].
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