Climate clause

Sustainability Reporting Clause for the Constitution of a Private Limited Company

Éanna’s Clause

Éanna’s Clause is a set of draft clauses for a private limited company’s constitution. It ensures that sustainability performance is being regularly reported on, evaluated, and discussed by the board.

This is a climate clause

This clause brings climate considerations to your drafting. It is not yet net zero aligned. To align this clause with net zero, use our toolkit or join one of our events.

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Why use this?

In the changing landscape around sustainability reporting and sustainability due diligence, it is increasingly important for companies not only to ensure that they have corporate sustainability policies in place - but that these policies are being regularly discussed at board level and updated as necessary.

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.

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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 definitions

Affiliates means, in relation to any person, any other person which, directly or indirectly, controls, is controlled by, or is under common control with, the specified person. For the purposes of this definition, “control” means holding or controlling, directly or indirectly, the power to direct or cause the direction of the management or policies of that person, whether through the ownership of voting securities, rights to appoint board directors, by contract or otherwise, and related references to “control” will be construed accordingly.

Annual Sustainability Report means an independent sustainability report prepared every twelve (12) calendar months by [the Company’s in-house sustainability team]/[independent sustainability advisers]* which objectively reports on the Company’s performance in accordance with [sustainability reporting standards appropriate to the market in which the Company operates]/[the European Sustainability Reporting Standards (ESRS)]/[the Global Reporting Initiative]/[the IFRS Sustainability Disclosure Standards].**

* [Drafting note: The drafting team has included an option for the report to be prepared in-house for companies that have the in-house capabilities to do so and who might view independent consultancy fees as an obstacle to complying with the commitment to produce the report annually.]

** [Drafting note: The definition of Annual Sustainability Report provides four options for the reporting standards used. The first option gives the Company some flexibility to choose whichever standards are appropriate to that market, the second and third are globally accepted reporting standards, and the final set (the IFRS Sustainability Disclosure Standards) is still in draft form but once adopted will be used across the board in the European Union.]

Company means [●].

Corporate Sustainability Policy means the corporate sustainability policy in respect of the Company adopted by the Board of Directors from time to time. 

Group means the Company and any of its Affiliates.

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

 

Additional clauses 

1. Sustainability meetings

The Board of Directors shall meet every twelve (12) calendar months to discuss: 

(a) the Corporate Sustainability Policy, 

(b) the Annual Sustainability Report, and 

(c) the sustainability due diligence measures being implemented by the Company in respect of its own operations[,]/[and] those of the Group [and those of any entity with which the Company has an established business relationship].

[Drafting note: The concept of a company’s responsibility towards entities with which it has an established business relationship has appeared in draft forms of the Corporate Sustainability Due Diligence Directive (EU) (CSDDD) and has its origins in France’s loi de vigilance.

Drafts of the CSDDD envisage the concept including established business relationships with which a company expects to have a lasting relationship in view of its intensity and duration, and which does not form a negligible/ ancillary part of the company’s value chain. 

This part of the clause should be seen as an option for companies to go beyond merely complying with the law. It can allow companies to prepare themselves for changes in sustainability laws and due diligence obligations that could be coming in the near future.]

2. Annual Sustainability Report 

The Company shall produce an Annual Sustainability Report which shall be:

2.1 made available to the shareholders at least ten (10) business days following such Annual Sustainability Report being made available* to the Board; and 

2.2 published on the Company’s website within twenty (20) business days following such Annual Sustainability Report being made available to the Board. 

* [Drafting note: The drafting team deliberately included “made available” instead of “approved”, because the report should be completely independent and not subject to any Board approval which could impact its objectivity. The Board should have the opportunity to discuss the Annual Sustainability Report but it should not have the option to reject it or request that its contents be amended.]

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