Model clause

Green Supplier Agreement Terms

Zoë and Bea’s Clause

Green procurement clauses and a checklist to make a standard supplier agreement focus on emissions across a value chain.

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Why use this?

Many companies such as Microsoft are pledging to be Carbon Negative by 2030. In order to achieve this, they will have to work across their value and supply chains to align them with this target.

How it promotes a net zero future

The clauses and checklist should encourage existing suppliers to “up their climate change game” and thus accelerate a greater number of businesses in their transition to net zero.

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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

Draft Clauses for Green Supplier Agreement: 

Additional Definitions

(It is assumed that Supplier, Principal and Supplied Products will already be defined in the contract)

Carbon Footprint Standards means, for Organisational Carbon Footprints and Supply Chain Carbon Footprints the GHG Protocol Corporate Accounting and Reporting Standard, or [The GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard] [or ISO 14064?], and for Product Carbon Footprints the GHG Protocol Product Life Cycle Accounting and Reporting Standard, or [ISO 14064] 

GHG Emissions means emissions of the greenhouse gases listed at Annex A of the 1998 Kyoto Protocol to The United Nations Framework Convention on Climate Change, as may be amended from time to time including: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), nitrogen trifluoride (NF3), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6) including Scope 1, 2, and 3 Emissions, in absolute value over a specified area and period of time, each expressed as a total in units of carbon dioxide equivalent (CO2e) and calculated in accordance with the Carbon Footprint Standards.

GHG Report means a report prepared by the Supplier in accordance with the requirements set out in Clause [3]

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

Net Zero Target means both a reduction of GHG Emissions from all operations including value and supply chains and a removal of GHG Emissions associated with carbon offsets acquired to address Residual Emissions of the parties by 2050 or sooner in order to achieve a balance between the parties’ sources and sinks of GHG in a calendar year and for each subsequent year thereafter and the goals of the Paris Agreement.

Offset means the purchase of the equivalent quantity of carbon credits from a project that has been verified in accordance with [insert name of voluntary standard] or from a United Nations Framework Convention on Climate Change (UNFCCC) clean development mechanism (CDM) [or [successor/ equivalent] UNFCCC mechanism] project, with a view to the offsets being additional, permanent and verifiable and shall, where possible, prioritise projects with long-lived storage methods which have low risk of reversal over centuries to millennia and that remove greenhouse gases from the atmosphere rather than avoid or reduce other parties’ emissions of greenhouse gases and that consider global equity and address wider social and ecological goals.

Organisational Carbon Footprint means total annual worldwide GHG Emissions from all the activities across the organisation, including energy used in buildings, industrial processes and company vehicles and including Scope 1, Scope 2, and Scope 3 Emissions. 

Product Carbon Footprint means total GHG Emissions over the whole life of the Supplied Products, from the extraction of raw materials and manufacturing through to its use and final re-use, recycling or disposal, including including those associated with the raw materials and services purchased by the Supplier in order to deliver the Supplied Products and Scope 1, Scope 2, and Scope 3 Emissions..

Residual Emissions means the GHG Emissions 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.

Scope 1, 2 and 3 Emissions means the three classifications of emissions in the GHG Protocol.

Scope 1 Emissions means all direct emissions from the activities of an organisation or under its control, including on site fuel combustion and emissions from chemical production in owned or controlled process equipment, refrigerant losses and company vehicles. 

Scope 2 Emissions means all indirect emissions from electricity purchased and used by an organisation where the emissions occur at sources owned or controlled by another company. 

Scope 3 Emissions means all indirect emissions other than Scope 2 Emissions, that are a consequence of the activities of an organisation, but occur from sources not owned or controlled by that organisation, including business travel, procurement, waste and water.

Supply Chain Carbon Footprint means total annual GHG Emissions associated with the raw materials and services purchased by the Supplier in order to deliver the Supplied Products 

 

Additional Recitals

(A) The parties [have signed up to the Race to Zero and] 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 Clauses

Greenhouse Gas and Carbon Emissions 

1. Measure, Manage, and Report GHG Emissions

1.1. The Supplier and the Principal shall each measure, manage and report their GHG Emissions in accordance with the provisions of this clause and the Carbon Footprint Standards.

1.2. The Supplier and the Principal shall each formally adopt the Carbon Footprint Standards and appoint an employee to the Greenhouse Gas and Carbon Emissions Group (the GHG Representative) who will be responsible to their board of directors for delivering compliance with such Carbon Footprint Standards and the requirements of this clause. Each Party shall have the right to substitute its GHG Representative on a temporary or permanent basis by giving the other Party written notice of the change for any reasons including planned and unplanned leave, sickness, parental leave or if the GHG Representative ceases to be employed by the relevant Party for any reason.

1.3 The Supplier and the Principal shall each publicly report their annual Organisational Carbon Footprint.

1.4 The Supplier and the Principal shall cooperate and collaborate on the reduction of the GHG Emissions associated with [the performance of the Services/supply of the Goods], the preparation of each GHG Report and other obligations under clause [2 to 6] and to identify appropriate strategies for the improvement of the Total Carbon Footprint and their respective Organisational Carbon Footprint, (the Cooperation Obligation).

1.5 Subject to the terms of this Agreement and Applicable Law, the Supplier and Principal [may][shall] share environmental data, best practices and industry know-how with the other Party for the purpose of reducing the Product Carbon Footprint and their respective Organisational Carbon Footprint.

2. Emission Reduction Targets

2.1. Commencing from the first anniversary of the date of this Agreement: 

2.1.1 the Supplier shall reduce the Product Carbon Footprint by no less than the percentages shown at Annex 1 to this Agreement in each period to which a GHG Report relates (the Product Emission Reduction Target); and 

2.1.2 the Supplier and the Principal shall each reduce its Organisational Carbon Footprint by no less than 7% per year, being the minimum estimated percentage reduction required to halve emissions every decade to limit warming as described in the Recitals.

2.2 [If, in accordance with clause 2.1.1, the Supplier does not meet the Product Emission Reduction Target, the Greenhouse Gas and Carbon Emissions Group will meet and review the Supplier’s practices as outlined in clause 3.1] 

[2.3 The Principal to consider the following options / consequences if the Supplier does not meet the Product Emission Reduction Target by reference to Schedule ⧫: (i) bare minimum % reduction in charges; (ii) graded bonus awarded to the Supplier for overachieving on percentage reduction of Product Emission Reduction Target; (iii) termination for greener alternative; or (iv) green service credits to the Principal or a nominated charity for failure to meet bare minimum reduction. See The Chancery Lane Project’s other supply chain clauses including Ming’s Clause, Agatha’s Clause and Jessica’s Clause for example drafting options.]

2.3 The Supplier shall ensure that each of its subcontractors shall be bound in writing by terms equivalent in all respects to those set out in clauses [1-6]. The Supplier shall provide evidence in writing of the Supplier’s compliance with this clause promptly on the Principal’s request.

3. Greenhouse Gas and Carbon Emissions Group

3.1 The Principal will provide a forum [annually] (the Greenhouse Gas and Carbon Emissions Group) to ensure strong communication is maintained regarding GHG Emissions, the Product Emission Reduction Target and the Cooperation Obligation. The GHG Representative of each Party will have the opportunity to: 

3.1.1 share data and best practices to reduce [their Organisational Carbon Footprint,] the Product Carbon Footprint and GHG Emissions; 

3.1.2 agree, discuss and review the Product Emission Reduction Target;

3.1.3 review the contents of the GHG Report; and

3.1.4 review the Product Carbon Footprint and Supply Chain Carbon Footprint  and strategies to improve them.

3.2 Where the Greenhouse Gas and Carbon Emissions Group agree an amendment to the Product Emission Reduction Target, such variation shall be documented and signed by both Parties.

4. GHG Report

4.1. Within [3]/[6] months after each anniversary of the date of this Agreement, the Supplier shall submit a GHG Report (in a format to be agreed between the Parties) to the Principal, detailing (and, where appropriate, explaining) as a minimum the following matters:

4.1.1. What industry best practices on managing and reducing GHG Emissions have been applied by the Supplier in the previous contract year, and how these have been applied;

4.1.2. the Supplier’s measured Scope 1, Scope 2 and Scope 3 Emissions;

4.1.3. the measured Product Carbon Footprint;

4.1.4. the measured Supply Chain Carbon Footprint;

4.1.5. the reduction in GHG Emissions achieved measured against the [Scope 1, Scope 2 and Scope 3 emissions] stated in the preceding reports and in accordance with clause 2.1;

4.1.6. [insert additional requirements].

5. Verification

5.1. The Supplier shall cooperate and collaborate with the Principal on its GHG Emissions, the preparation of each GHG Report and other obligations under this clause [●].

5.2. [Should the Principal at any time reasonably require it, the]/[The]* Supplier shall appoint an external auditor or verification authority [(such as the Carbon Trust)] to certify its GHG Report.

* [Drafting Note: consider making this routine as opposed to subject to request, to promote best practice of verification, accountability and transparency.]

5.3. The Supplier shall meet all costs associated with external auditing and verification of the GHG Reports that is required in accordance with this agreement.

6. Offsetting

6.1 [The Supplier shall/the parties shall agree to jointly] Offset any Residual Emissions relating to the Product Carbon Footprint and Supply Chain Carbon Footprint. 

6.2 Each party shall Offset its Residual Emissions relating to its Organisational Carbon Footprint.

7. Sustainability Leadership

7.1 The Supplier and the Principal shall each within [insert time period] of entering into this contract: 

7.1.1 either set a Net Zero Target or update their existing Net Zero Target, to be validated by the Science Based Target Initiative; and

7.1.2 sign up to Race to Zero.

7.2 The Supplier and the Principal shall each:

7.2.1 develop and take initial actions from a plan to deliver the Net Zero Target and remain Net Negative thereafter, including an Offset strategy, interim targets split into Scope 1, 2 and 3 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 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;

7.2.2 establish a sustainability committee as a committee of its board of directors 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;

7.2.3 report annually and publicly on:

7.2.3.1 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);

7.2.3.2 an analysis of how their 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

7.2.3.3 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

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

7.2.4.1 the latest climate science; 

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

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

7.2.4.4 sustainable lifestyle changes and issues relating to the workplace; 

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

7.2.4.6 other topical climate and sustainability issues.

7.3 [Consider adding other environmental, circular economy, waste management and biodiversity clauses here.]

 

Head of Terms for the drafting of other contracts:

Green Procurement Checklist

[Note: The following checklist contains heads of terms / bullet points for headline clauses to include in contracts mandating measurement of emissions, reductions, reporting.]

a) The Supplier will measure all carbon emissions associated with its delivery of [goods/services] under this agreement [in accordance with an internationally recognised standard] approved by the principal.

b) The Supplier will reduce its emissions by [10]% per year.

c) [Bare minimum % reduction plus graded bonus commensurate to percentage reduction. Termination tied to failure to meet bare minimum reduction]

d) [Best practice related to implementation]

e) [Reporting: timing, best practice reference standards, any other ESG reports]

f) [Audit: allocate responsibility and costs or tie audit to dispute over achievement of goals]

g) [Cooperate and collaborate: standard provisions]

h) Other elements applied from the Net Zero Drafting Checklist.

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