Model clause

Circular Economy Product Design Obligation

Alex's Clause

Embeds ‘Repair, Reuse and Recycle’ concepts in procurement / supply agreements for the benefit of the client, end consumer and environment.

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Why use this?

This clause will encourage suppliers to use recyclable/reusable materials in products, and to consider the entire lifecycle of the product (including end of life) from the design stage.

How it promotes a net zero future

This will ultimately help to reduce the amount of waste going to landfill, and reduce the reliance on natural resources thereby reducing the Carbon Footprint of the products.

One of the UN's Sustainable Development Goals is that of ‘responsible consumption and production’. A clause obliging suppliers to consider circular design will help to meet this goal. This clause will also bridge the gap between the aspirations for a circular economy and legislative initiatives by the EU and national governments being introduced.

Disclaimer - please read

The clauses on this website (and published in our Climate Contract Playbook) have been prepared in good faith on a pro bono basis and are free to download and use. The clauses have been drafted and edited by a variety of lawyers and, as such, the approaches to drafting may not conform to any particular drafting norms. We acknowledge this as a consequence of the collaborative drafting process.

The clauses on this website (and published in our Climate Contract Playbook) are provided on an ‘as is’ basis and without any representation or warranty as to accuracy or that the clauses will achieve the relevant climate goal or any other outcome.

This website (and the Climate Contract Playbook) does not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and does not contain legal or financial advice. The clauses are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.

While care has been taken in the drafting of these clauses, neither The Chancery Lane Project nor any of its contributors owe a duty of care to any party in relation to their preparation and do not accept any liability for any errors or omissions, nor for any loss incurred by any person relying on or using these clauses or any other person. Users should use their own professional judgement in the application of these clauses to any particular circumstance or jurisdiction or seek independent legal advice.

At present, all the clauses are based on the laws of England and Wales. We encourage the conversion of these precedent clauses for use in other jurisdictions.

The clause

Additional Recitals

(A) The Parties hereby acknowledge that a primary considerations for the design and manufacture of the Product are to ensure, as far as possible, that the Product can be Reused, repaired and/or Recycled at the end of its life and to reduce its Carbon Footprint.

(B) The parties acknowledge their common intention in furthering  achievement of their respective [organisational Net Zero Targets] and alignment with the ultimate objectives of the Paris Agreement and related agreements, 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.

 

Additional Definitions 

Carbon Dioxide Equivalent (CO2e or CO2eq) means the standard metric measure used by the UN’s Intergovernmental Panel on Climate Change (IPCC) and in industry 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 amount in tonnes of Carbon Dioxide Equivalent of Greenhouse Gas Emissions that will be released into the atmosphere as a result of the development, manufacture, supply, use and disposal of the Product;

Circular Design Requirements means the requirements at clause 1.2; 

Circular Manufacturing Requirements means the requirements at clause 2.3;

Climate Professional means an appropriately qualified [environmental, sustainability consultant/ net zero consultant] who has the fundamental skills and experience to diligently, competently and professionally prepare the Carbon Footprint report as required by clause 2.3.4;

Design IP means the Product, the Final Design, any previous drafts or versions of the Final Design and any other documents, materials or information created by the Manufacturer in connection with its obligations under clause 1;

End of Life Product means a Product which is irreparably faulty and can no longer be used by the end customer, and/or has performed its intended purpose, and/or is not receiving continuing support, either because existing marketing, support and other processes are terminated, and/or it is at the end of its useful life and/or is no longer desired by the end customer;

Final Design means the final design of the Product, as determined by clause 1.4;

Greenhouse Gases (GHGs) means gases that contribute to or accelerate the greenhouse effect by absorbing infrared radiation, including but not limited to: carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, nitrogen trifluoride, hydrofluorocarbons, perfluorocarbons and chlorofluorocarbons;

Greenhouse Gas Emissions means emissions of Greenhouse Gases, each expressed as a total in units of carbon dioxide equivalent (CO2e) and from all sources, categorised as Scope 1, 2 and 3 emissions by the GHG Protocol.

Manufacturer is [X], being the person who designs and manufactures the Product in accordance with the Final Design for the Client;

Net Negative means the Manufacturer has achieved a Net Zero Target but has also created an environmental benefit by removing Greenhouse Gases from the atmosphere or reducing its Greenhouse Gas Emissions to the atmosphere such that the aggregated reductions and removals exceed the unabated emissions.

Net Zero Target means both a reduction of Greenhouse Gas Emissions from all operations including value and supply chains and a removal of Greenhouse Gas Emissions associated with carbon offsets acquired to address Residual Emissions of a party by a specified date in order to achieve a balance between the party’s sources and sinks of Greenhouse Gas Emissions in a calendar year and for each subsequent year thereafter and the goals of the Paris Agreement;

Offsetting Strategy means a detailed plan for the Manufacturer to gradually reduce its offsetting of Residual Emissions to reach its Net Zero Target as it reduces it absolute Greenhouse Gas Emissions, including choice of a recognised provider of offset credits through a project that has been verified in accordance with [insert name of voluntary standard] (with a view to the offsets being additional, permanent and verifiable), considering the implications of the offsets purchased on global equity and wider social and ecological goals and to gradually transition the underlying offsetting projects to long lived storage methods which have low risk of reversal over centuries to millennia and purely offsets that remove emissions, rather than avoid or reduce others’ emissions.

Product means the [insert description of product]; and

Residual Emissions means the Greenhouse Gas (GHG) emissions, measured in Carbon Dioxide Equivalent, that are emitted after all reasonable efforts have been made by a party to reduce GHG Emissions from all operations including value and supply chains;.

Recycle(d) means a recovery operation by which waste materials are reprocessed into products, materials or substances whether for the original or other purposes;

Reuse(d) means the use of materials, products or components that are not waste again on [one or more] subsequent occasions [for the same purpose for which they were conceived];

Specification means the description and proposed use of the Product, including the intended customer base of the Product and any specific requirements of the Product, as outlined in Schedule [X].

 

1 Design obligations

1.1 The Manufacturer will prepare a design of the Product to deliver the Specification for the Client by [insert timings]. In creating the design for the Product, the Manufacturer shall use all reasonable endeavours to satisfy the Circular Design Requirements.

1.2 The Circular Design Requirements are:

1.2.1 the Manufacturer shall minimise the volume of resources and GHG emissions that will be needed to manufacture the Product [and shall design the product with the aim of reducing its Carbon Footprint];

1.2.2 the Manufacturer shall maximise the volume of materials derived from Recycled sources used to manufacture the Product;

1.2.3 the Product is not coated with, does not contain or is not otherwise treated with chemicals or treatments which prevent the Product from being Recycled when it becomes an End of Life Product;

1.2.4 the Product shall not contain any micro-plastics (or plastics which are capable of degrading to form microplastics), glitter, [insert other harmful/banned materials], and/or any other harmful materials made known to the Manufacturer by the Client and specified in Schedule [X];

1.2.5 the Manufacturer must affix any branding of the Client onto the Product in such manner that the Client’s branding can be easily removed, so that the Product can be repaired, refurbished, Reused or Recycled;

1.2.6 the Product shall contain a minimum [insert number]% constituent components and constituent parts that can be easily, and at economically viable cost, disassembled, removed, refurbished, replaced and/or repaired; and

1.2.7 the Manufacturer shall document any know how and learnings which it creates during the design process of the Product, and the rights in such documents, know how and learnings shall be owned by the Client pursuant to clause 1.5.

1.3 To the extent that the Manufacturer determines that it cannot fulfil the Circular Design Requirements because either the Circular Design Requirements jeopardise the Specification or the Specification prevents the Circular Design Requirements from being fulfilled, the Manufacturer shall promptly make this known to the Client and identify which particular Circular Design Requirements are an issue. The Client shall then decide whether to:

1.3.1 proceed with the Specification, acknowledging that those identified Circular Design Requirements will not be fulfilled; or

1.3.2 amend the Specification, and request that the Designer attempts again to fulfil all of the Circular Design Requirements against the amended specification.

This process shall be repeated until the Final Design is achieved in accordance with clause 1.4.

1.4 The Final Design of the Product shall be that design which either:

1.4.1 satisfies the Circular Design Requirements and the Specification; or

1.4.2 does not satisfy all of the Circular Design Requirements but which the Client has approved pursuant to clause 1.3.1 and satisfies the Specification.

1.5 All rights anywhere in the world (including all intellectual property rights, copyright, design rights and know-how rights) in the Design IP shall immediately vest in the Client and the Manufacturer shall promptly provide to the Client all copies in its possession of the Design IP. To the extent that such rights in the Design IP do not vest in the Client, the Manufacturer hereby assigns such rights to the Client with full title guarantee.

1.6 The Manufacturer shall, and shall use all reasonable endeavours to, procure that any third party shall promptly execute and deliver such documents and perform such acts as may be required to assist the Client in registering any Design IP.

2 Manufacturing obligations*

* [Drafting Notes: (a) In cases where the manufacturer is likely to have resource limitations or differentiated national circumstances that create barriers to compliance with these obligations, this clause should be combined with additional drafting detailing the support or resources that will be provided by the Client to assist compliance, and in the event of breach, the requirement that the Client work with the Manufacturer to rectify breach. (b) Consider combining this with provisions imposing minimum standards on manufacturing parties to implement ethical working practices and minimum wages for workers (specific to national circumstances of Manufacturer) to avoid negative unintentional consequences of compliance with this clause.]

2.1 The Client hereby grants to the Manufacturer a non-exclusive, royalty free, non-transferable, non-assignable [worldwide] licence to use the intellectual property rights in the Final Design to perform its obligations under this clause 2.

2.2 The Manufacturer shall manufacture the Product in accordance with the Final Design. In manufacturing the Product, the Manufacturer shall satisfy the Circular Manufacturing Requirements.**

** [Drafting Note: The clause should, if relevant, address any subcontracting conducted by the Manufacturer and ensure similar terms are contained in that subcontract (as in Owen’s clause).]

2.3 The Circular Manufacturing Requirements are:***

*** [Drafting Note: consider adding provisions to address the water-intensiveness of production, the distance which different raw materials are transported and the environmental costs of different components.]

2.3.1 the Manufacturer keeps accurate records of the origin and volume of raw materials which it uses, and will make these records available to the Client on request;

2.3.2 the Manufacturer can accurately demonstrate and trace the origin and journey of the raw materials which it uses to manufacture the Product through the supply chain of such raw materials, and will provide this demonstration to the Client on request;

2.3.3 the Manufacturer shall take steps [and report in writing [quarterly] to the Client on steps taken] to minimise the volume of resources which it requires to manufacture the Product and the volume of GHGs emitted during its manufacture of the Product;****

**** [Drafting Note: Please consider adding here more specific detail on the types of resources used to manufacture a particular product or impose thresholds that manufacturing parties should aim to stay below.]

2.3.4 the Manufacturer shall [within []/by [DATE] and [annually] thereafter] provide the Client with a report prepared by a Climate Professional to [internationally recognised standards to measure, manage and demonstrate carbon credentials/the GHG Protocol Product Life Cycle/the BSI PAS 2050:2011] detailing the Carbon Footprint of the Product and confirming the impact that adherence to these Circular Manufacturing Requirements [and the steps and interim targets outlined in clause 2.3.3 and 2.3.11] have made on the Carbon Footprint of the Product;

2.3.5 the Manufacturer shall take steps to maximise the volume of materials derived from Recycled sources which it requires to manufacture the Product;

2.3.6 the Manufacturer shall take steps to minimise the loss through disposal or destruction of raw materials during the manufacturing of the Product;

2.3.7 the Manufacturer shall take steps to first Recycle or Reuse any waste materials created from the manufacturing of the Product and, only having done so, proceed with any other form of disposal;

2.3.8 the Client has the right to inspect the Manufacturer’s premises and records to ensure that the Manufacturer is complying with the Circular Manufacturing Requirements and to verify the amount of any bonus payable to the Manufacturer pursuant to clause 2.6;

2.3.9 within [X] days of [request by the Client / first supply of the Product to the Client], the Manufacturer shall issue a declaration to the Client confirming that the Circular Manufacturing Requirements have been fulfilled for the Product; [and]

2.3.10 the Manufacturer shall document, and explain to the Client, any know how and learnings which it creates during the manufacturing of the Product, and the rights in such documents, know how and learnings shall be owned by the Client[.][; and]

2.3.11 [the Manufacturer shall [within [] of the report described in clause 2.3.4] provide the Client with a [quarterly] action plan listing any opportunities identified as a result of the report to reduce the Carbon Footprint [with the accompanying cost of each] and [the parties shall agree on] a set of interim targets towards such reduction][; and]

2.3.12 [the Client shall/the Manufacturer shall/the parties shall jointly agree to]***** purchase a quantity of carbon credits equal to the amount of [annual/quarterly] Residual Emissions associated with the Carbon Footprint from a project that has been verified in accordance with [insert name of voluntary standard].

***** [Drafting Note: responsibility to be agreed by parties]

2.4 Breach by the Manufacturer of clause 2.3 shall be a material breach of this Agreement and permit the Client to terminate the Agreement in accordance with clause [X]. This is without prejudice to any other termination rights of the Client under this Agreement.

2.5 Following the sale of the Product by the Client to its customers, the Manufacturer shall provide the following after sales assistance to the end customers of the Product for [insert term]. The Manufacturer shall: [Drafting note: the costs of the schemes and any fee payable to the Manufacturer for providing them will need to be dealt with in the Agreement]

2.5.1 operate a ‘take back and treatment’ scheme, whereby it will ensure that end customers can easily return to it End of Life Products. As part of the ‘take back and treatment’ scheme, the Manufacturer shall receive the End of Life Products, remove (insofar as is possible) those constituent components and constituent parts from the End of Life Products that can be Reused or Recycled and Reuse or Recycle the removed components and parts accordingly; [and/or]

2.5.2 operate a repair scheme, whereby it uses all reasonable endeavours to repair any faulty Product (or component or part thereof) prior to the Product becoming an End of Life Product. Where the Manufacturer reasonably considers that a faulty Product (or component or part thereof) is irreparable and during the period prior to the Product becoming an End of Life Product, it will replace the faulty Product (or component or part thereof).

2.6 The Client will pay to the Manufacturer a bonus equal to the following amounts for the volume of [materials derived from recycled sources which the Manufacturer uses to manufacture the Product/the GHG reductions made as a result of adopting the Circular Manufacturing Requirements]:

2.6.1 [X] tonnes to [X] tonnes, £[X];

2.6.2 [X] tonnes to [X] tonnes, £[X]; and

2.6.3 more than [X] tonnes, £[X].

  1. [Manufacturer Sustainability]

3.1 The Manufacturer shall:

3.1.1 within [insert time period] of entering into this agreement publicly set an organisational Net Zero Target [validated by the Science Based Target Initiative][and sign up to Race to Zero]; 

3.1.2 develop and take initial actions from a plan to deliver the Net Zero Target and remain Net Negative thereafter, including an Offsetting Strategy, interim targets split into Scope 1, 2 and 3 (as defined by the GHG Protocol) emission reduction targets, continuous measured reduction and identifying a year on year percentage decarbonisation aligned with the Paris Agreement goal of pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels which shall be, at a minimum, a 7% year on year reduction of absolute emissions, a procedure that links executive remuneration to the achievement of the interim targets and an evaluation of how the Net Zero Target can be delivered in a way that promotes a just transition to a low carbon economy;

3.1.3 establish a sustainability committee as a committee of its board of directors which shall oversee the development, implementation and review of the plan referred to above, either chaired by a [non-executive] director with experience of improving sustainability and mitigating carbon footprints, or advised by an appropriately qualified climate, sustainability or environmental consultant who has the fundamental skills and experience to diligently, competently and professionally advise on improving sustainability and mitigating carbon footprint;

3.1.4 report annually and publicly on:

3.1.4.1 the climate risks and opportunities to the Manufacturer and its business in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD);

3.1.4.2 an analysis of how the Manufacturer’s wider local and global stakeholders (including employees, clients, end customers and supply chain partners) are affected by both climate risk and the transition to a low carbon economy and how the Manufacturer can help to improve their resilience; and

3.1.4.3 all climate policy engagement, climate leadership, lobbying activities, trade association memberships and public policy positions of the Manufacturer that may support or undermine the goals of the UNFCCC’s Paris Agreement; and

3.1.5 provide an environmental and sustainability training programme on a regular basis (at least annually) for employees, personnel and contractors during their usual working hours (and online as required) which will cover, as a minimum:

3.1.5.1 the latest climate science; 

3.1.5.2 climate change policy and relevant legal context (including core terms of the Paris Agreement and any national implementation measures);

3.1.5.3 the economic and social (e.g. health) benefits to the Manufacturer in reducing the workplace’s environmental impact;

3.1.5.4 sustainable lifestyle changes and issues relating to the workplace; 

3.1.5.5 details of the Manufacturer’s public and contractual commitments, targets and governance in relation to climate change and sustainability; and

3.1.5.6 other topical climate and sustainability issues.]

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