Net Zero Target Supply Chain Cascade Clauses
Clauses that “back to back” or align a business’ net zero target with its supply chain and business partners, thus enabling the business to achieve its target or take control to achieve it.
What this clause does
Supporting parties to achieve net zero by setting emissions reductions to be achieved in relation to the contract, requiring emissions reporting and subcontractors to be similarly bound. If the obligations are not achieved the customer can terminate or offset the supplier’s carbon emissions at the supplier’s expense.
Recitals
(A) Insert Eddie’s Recitals (Climate Recitals) here.
Clauses
Supplier Net Zero Obligations
8.1 The [Supplier] acknowledges and understands the [Customer’s] Net Zero Target. Accordingly, the [Supplier] shall:
a) set its own [Net Zero/Gross Zero] target (the “Supplier NZ Target”) with a target achievement date the same as or earlier than the Net Zero Target Date (the “Supplier NZ Target Date”);
b) develop its own Net Zero Transition Plan (the “Supplier NZ Transition Plan”), such plan to be:
(i) created with the assistance of and agreed with the [Customer],
(ii) delivered according to the timescales within the Supplier NZ Transition Plan; and
(iii) reviewed and updated regularly in agreement with the [Customer];
c) agree the Contract Target with the [Customer];
d) achieve the Contract Target;
e) ensure that this clause [8] will be copied into any and all of its supply chain contracts that relate to its obligations under this agreement;
f) introduce emission reduction technologies, processes and policies as well as creating an Offsetting Strategy and, where technologically and commercially feasible, carbon removal initiatives, to achieve the Supplier NZ Target Date;
g) undertake and keep up to date full and complete records of Carbon Reporting activity and data and provide the same to the [Customer] each year and more frequently as the [Customer] may reasonably request;
h) attend, on reasonable notice, meetings with the [Customer]’s Sustainability Manager or other nominated representative to present the Supplier’s NZ Transition Plan to achieve the Supplier NZ Target, and current progress towards, the Supplier NZ Target Date;
i) not do or omit to do anything which could reasonably be expected to cause the [Customer] to miss its Net Zero Target Date, whether pursuant to this contract or otherwise;
j) within [insert time period] of entering into this contract have the Supplier NZ Target validated by the Science Based Targets initiative [[and] sign up to Race to Zero];
k) establish or have in place a sustainability committee as a committee of its board of directors which shall oversee the development, implementation and review of the Supplier NZ Transition Plan, 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 footprints;
l) report annually [and publicly] on:
(i) the climate risks and opportunities to the [Supplier] and its business in accordance with the recommendations of the International Financial Reporting Standards Foundation (IFRS);
(ii) an analysis of how the [Supplier’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 [Supplier] can help to improve their resilience; and
(iii) all climate policy engagement, climate leadership, lobbying activities, trade association memberships and public policy positions of the [Supplier] that may support or undermine the goals of the UNFCCC’s Paris Agreement; and
m) 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:
(i) the latest climate science;
(ii) climate change policy and relevant legal context (including core terms of the UNFCCC’s Paris Agreement and any national implementation measures);
(iii) the economic and social (e.g. health) benefits to the [Supplier] in reducing the workplace’s environmental impact;
(iv) sustainable lifestyle changes and issues relating to the workplace;
(v) details of the [Supplier’s] public and contractual commitments, targets and governance in relation to climate change and sustainability; and
(vi) other topical climate and sustainability issues.
8.2 If:
a) the [Supplier] fails to comply with any of the obligations in clause [8.1]; or
b) the [Customer], having reviewed the Carbon Reporting and discussed with the [Supplier] its progress to achieve the Supplier NZ Target Date, determines (acting reasonably) that the [Supplier] is making insufficient progress towards achieving the Supplier NZ Target Date; or
c) the [Supplier] fails to achieve the Supplier NZ Target by the Supplier NZ Target Date
the [Customer] may, without affecting any other right or remedy available to it:
(i) terminate this agreement by giving one month’s written notice to the [Supplier];
(ii) require the [Supplier] to plant a number of Native Trees in the UK sufficient to compensate for the [Customer’s] shortfall in progressing towards its [Net Zero/Gross Zero] Target Date or any milestone in the [Customer’s] Net Zero Transition Plan which is directly or indirectly affected by the action or inaction of the [Supplier]; and or
(iii) recover from the [Supplier] any costs reasonably incurred by the [Customer] in achieving the Contract Target to the extent by which the Contract Target is missed by the [Supplier] by:
(1) obtaining carbon credits to offset the [Supplier’s] net GHG Emissions [attributable to the [production of the Goods/ delivery of the Services]]; or
(2) planting, or arranging for the planting of, Native Trees to offset the [Supplier’s] net GHG Emissions attributable to the [production of the Goods/ delivery of the Services].
8.3 [The [Supplier] shall, at its own cost, submit a report to the [Customer] within 20 Business Days of each anniversary of the date of the agreement identifying the emergence of new and evolving relevant technologies and processes which could accelerate the achievement of the Supplier NZ Target Date. Such report shall provide sufficient detail to enable the [Customer] to evaluate properly the benefits of the new technology or process.]
8.4 The [Supplier] warrants to [Customer] that:
(i) it has sufficient resources, infrastructure and materials to achieve the Contract Target by the date of the expiry of the agreement;
(ii) none of the [Goods/Services] supplied under this agreement will be of lower quality as a result of working towards the Contract Target; and
(iii) it will not offer preferential terms to those other customers who do not require a Contract Target [, a Supplier Net Zero Target] or similar obligations in their contracts.
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.
Carbon Reporting means reporting of the [Supplier’s] GHG Emissions and extraction to a standard not less than that required by the UK government’s Streamlined Energy and Carbon Reporting (SECR) as verified by an impartial organisation not affiliated with either party providing climate impact assessment and emissions reporting services, of a standard at least equal to the Carbon Disclosure Project or the Carbon Trust.
Contract Target means the proportion of the [Customer’s] [Net Zero/Gross Zero] Target which will be achieved under this Contract.
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).
Greenhouse Gas (GHG) Emissions means [a party’s] emissions of GHGs from all sources [related to this agreement], categorised as scope 1, 2 and 3 emissions by 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].
[Gross Zero Target means an absolute reduction in GHG Emissions from all operations including value and supply chains to zero by a specified date and for each subsequent year thereafter.]
Native Trees means those species of trees that are native to the United Kingdom since the last ice age and listed as such on the Forestry Commission Website.
Net Negative means that the aggregate of [a party’s] actions to reduce [its] GHG Emissions and remove GHGs from the atmosphere exceeds [its] unabated GHG Emissions.
Net Zero means a state of balance by [2050/ Insert other date] between sources and sinks of GHGs [in each calendar year] achieved by both reducing GHG Emissions overall and removing GHGs [to achieve the goals of the UNFCCC’s Paris Agreement].
Net Zero Target means a Paris Aligned target to achieve by 2050 a balance between the sources and sinks of GHGs in a calendar year and for each subsequent year thereafter by both reducing GHGs overall and using Offsets to cancel out Residual Emissions.
[Net Zero/Gross Zero] Target Date means the first year by which the [Customer] aims to achieve the [Net Zero/Gross Zero Target], being 1 January [2050].
Net Zero Transition Plan means [a party’s] plan to deliver a Net Zero Target and to remain Net Negative thereafter that:
(i) includes an Offsetting Strategy;
(ii) sets interim reduction targets for the [party’s] GHG Emissions that are Paris Aligned;
(iii) links executive remuneration to the achievement of the interim targets; and
(iv) promotes a just transition to a low carbon economy.
Offsetting Strategy means a plan [agreed by the parties] specifying:
(i) the verified credits (the Offsets) from a recognised offset provider that may be used by [a party] to offset its Residual Emissions;
(ii) how [a party] will transition from using credits resulting from offsetting projects that avoid or reduce emissions of GHG to those from projects that remove emissions of GHG and involve long-term storage methods that have a low risk of reversal; [and]
(iii) how [a party] will [use best endeavours to] reduce its use of the Offsets by reducing its Residual Emissions [to zero/ by [x] %] by 2050[;] [and][.]
[(iv) the impact of the relevant offsetting projects on a just transition and wider social and ecological goals.]
Paris Alignment or Paris Aligned means alignment 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.
Residual Emissions means GHG Emissions that are emitted after all reasonable efforts have been made by [a party] to reduce GHG Emissions.
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