Climate clause

ESG Clauses for Rules of Procedure for Managing Directors of a German Limited Liability Company (GmbH)

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Clauses that set out ESG obligations for the management of private limited liability companies. These clauses are drafted to be flexible for parties to tailor to their requirements.

This is a climate clause

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Why use this?

To encourage managing directors to adopt ESG-oriented corporate governance and comply with fiduciary duties to take ESG into account. The clauses also helps German limited liability companies comply with their obligations under the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).

The clause

Example I: 

Management principles

1. The managing directors shall manage the affairs of the company 

1.1.1 In accordance with common corporate goals, 

1.1.2 In [the most environmentally conscious manner possible/ a manner that is consistent with the goals of the Paris Agreement/ accordance with the company’s sustainability policy], and 

1.1.3 In accordance with the plan for the allocation of duties among the managing directors attached hereto as Annex [●] [including, inter alia, the role of Chief Sustainability Officer (CSO)].

2. The managing directors shall discuss the sustainability policy and the allocation of duties among the [board of management/ managing directors] in their annual meeting.

Example II:

Environment-related duties of the managing directors

The managing directors shall [use their [best/ reasonable] endeavours to]:

1. Conduct the business of the company in [the most environmentally conscious manner possible/ a manner that is consistent with the goals of the Paris Agreement/ accordance with the company’s sustainability policy] and [to] reduce, to the fullest extent possible, the scope 1, 2 and 3 greenhouse gas emissions that arise as a consequence of the company’s business;

2. Reduce or avoid [●] tCO2e of scope [1/2/3] emissions of the company by [●];

3. Achieve [net] zero emissions across the global operations of the company by [●];

4. Reduce the company’s paper-based documents and correspondence where electronic versions offer a viable alternative;

5. Reduce their travel, as well as the travel of the company’s employees (e.g. by conducting meetings remotely), as far as practicable;

6. Power [●]% of the company’s global operations with renewable sources of energy by [●];

7. Achieve [●]% annual reduction in [electricity/ natural gas] consumed by the company;

8. Achieve [●]% of plastic packaging of the company to be free of PVC by [●];

9. Achieve [●]% of packaging of the company to be made of post-consumer recycled content by [●]%;

10. Achieve [●]% of packaging of the company to be recyclable, reusable or industrially compostable by [●];

11. [●]

Example III:

Approval of the [shareholders’ meeting/ advisory board]

The prior written approval of the [shareholder’s meeting/ advisory board] shall be required if the company wishes to do any of the following (as far as such transactions and measures are at all within the competence of the managing directors):

1. Enter into a transaction that may result in the emission of more than [●] tCO2e per year.

2. Change or amend the company’s sustainability policy.

3. [●]

Example IV:

ESG reporting

1. The managing directors will report [quarterly/ [at least] annually] to [the shareholders’ meeting/ the advisory board / the sustainability committee/ the public] on ESG matters in accordance with [international ESG reporting standards/ the company’s sustainability policy]. 

2. The managing directors will publish the company’s sustainability report on the company’s website within thirty (30) days following the annual report to [the shareholders’ meeting/ the advisory board/ the sustainability committee].

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