Climate clause

SME’s Net Zero Objectives

David's Clause

A 'plug and play' clause for use by SMEs in a variety of contracts. Imposes mutual obligations on the parties to take steps towards net zero, with payment of a climate remediation fee for breach.

This is a net zero clause

This clause aligns with Paris Agreement goals, Race to Zero requirements and the Oxford Principles for Net Zero Aligned Carbon Offsetting. For tools and support to use this clause, use our toolkit or join one of our events.

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Why use this?

This clause can be used to add net zero obligations to a variety of contracts. This will help small and medium-sized enterprises (SMEs) to deliver their net zero targets. As the clause is designed to be ‘plug and play’ it requires little adaptation and will be quick and simple to use.

Disclaimer - please read

The clauses on this website 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 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.

The clauses on this website do not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and do 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.

The clause

Additional recitals

[Insert [Eddie’s Recitals] Climate Recitals.


Additional definitions 

Carbon Footprint means a Party’s total annual greenhouse gas emissions classified as scope 1, 2 and 3 emissions by [The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard] as updated periodically.

Net Zero Target means a target to reduce and remove a Party’s greenhouse gas emissions, including by offsetting Residual Emissions, to achieve a balance between the Party’s sources and sinks of GHGs. This must be achieved by [2050/ insert earlier date] and align with the goals of the Paris Agreement.

Net Zero Transition Plan means a plan to deliver the Net Zero Target that includes:

(a) interim GHG emissions reduction targets that align with the goals of the Paris Agreement;

(b) short, medium and long-term actions to achieve the emissions reduction targets, and a plan for how they will be financed;

(c) a strategy specifying the verified credits from a recognised offset provider that may be used by the Party to offset its Residual Emissions;

(d) governance and accountability mechanisms to support the plan, including annual reporting and linking executive remuneration to achieving the interim targets;

(e) measures to address risks to, and leverage opportunities for, stakeholders (such as workforce, supply chains, communities and customers) and the environment; and

(f) promoting a just transition to a low carbon economy.

Residual Emissions means a Party’s greenhouse gas emissions from all operations including its value chain that are emitted after all reasonable efforts have been made to reduce them.

[Drafting note: Capitalised terms relate to either a defined term in this clause or a defined term in the main agreement that this clause is designed to be inserted into.]


Additional clauses 

1. Climate obligations 

1.1 The Parties shall:

1.1.1 Set a public Net Zero Target and interim greenhouse gas (GHG) reduction targets [validated by the Science Based Targets initiative] within [3 months] of entering into this Agreement.  

1.1.2 Develop and implement a Net Zero Transition Plan within [6 months] of entering into this Agreement. The Net Zero Transition Plan will be reviewed and approved by the management team annually.

1.1.3 Measure and report annually and publicly on their Carbon Footprint and progress towards their Net Zero Target. This report shall be published within 30 days of the anniversary of the date that the Net Zero Target was published under clause 1.1.1.

1.1.4 Provide an environmental and sustainability training programme on a regular basis (at least annually) for employees, personnel and contractors during their usual working hours. As a minimum, the training will cover details of the relevant Party’s public and contractual commitments, targets and governance in relation to climate change and sustainability, and how these will be delivered.

2. Breach of climate obligations

2.1 If either Party breaches any of the obligations in clause 1.1, the breaching Party shall:

2.1.1 Within [30 days] of the breach, inform the innocent Party of its plans to remedy the breach.

2.1.2 Remedy the breach within [3 months] of the breach occuring.

2.1.3 If the breaching Party fails to remedy the breach [within 3 months of the breach], pay to a climate charity nominated by the innocent Party a sum of £[●] for each [day] that the breach continues [up to a maximum of £[●]].

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