Climate clause

Termination for Greener Supplier

Katie & Ben's Clause

Katie & Ben's Clause gives customers a right to switch suppliers if the existing supplier is unable to match a ‘greener’ offer from an alternative supplier.

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?

Ultimately, all economic activity creates emissions. A company’s carbon footprint is made up, in part, of the emissions generated in its supply chain. Being able to reduce those emissions through contractual means allows a company to reduce its own emissions and incentivises higher emitting participants in an industry to improve their practices. Katie & Ben’s Clause can be used in any supply agreement.

Katie & Ben’s Clause adapts [Annie's Clause] Green Termination Provision (Short Form) for use in Aotearoa New Zealand.

The clause

Additional definitions

Carbon Footprint means a party’s total annual GHGs from all sources, categorised as scope 1, 2 and 3 emissions by The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition 2015.

GHGs means the natural and anthropogenic gases which trap thermal radiation in the earth’s atmosphere. They are specified by the United Nations Framework Convention on Climate Change (UNFCCC) in Annex A to the Kyoto Protocol and may be updated periodically.

[Drafting note: Consider moving some or all of these definitions to the interpretation section, particularly if other TCLP clauses are used in the document that draws on them.]

 

Additional clauses 

1. Green termination

Without affecting any other right or remedy available to it, the [Customer] may terminate this [document] by giving [three months’] written notice to the [Supplier]: 

1.1 if the [Customer], acting in good faith and having made a reasonable comparison of the [Supplier] and other available suppliers of the same or similar [Services], has decided to switch to an alternate supplier to provide the [Services] (the New Supplier), and engaging the New Supplier will allow the [Customer] to reduce the [Customer]’s Carbon Footprint, provided: 

(a)  the potential reduction in the [Customer]’s Carbon Footprint will reduce the [Customer]’s overall Carbon Footprint, calculated at the time of the comparison, by at least [●]%;

(b) the [Customer]’s Carbon Footprint (including the proposed reduction in the [Customer]’s Carbon Footprint as a result of engaging the New Supplier) is calculated using a reputable, objective and reasonable measuring criteria [(with that calculation also meeting the requirements of the [Customer]’s usual methodology for determining its Carbon Footprint)] [Drafting note: Insert this language if the customer already has a methodology for calculating its carbon footprint. This language provides additional protection to the supplier];

(c) the calculated reduction in the [Customer’s] Carbon Footprint is based solely on the change of supplier and not on any other emissions reduction actions of the [Customer];

(d) the proposed contract with the New Supplier contains obligations that are no less onerous in all material respects to those of the [Supplier] under this [document]; and

(e) the [Supplier] has first been provided an opportunity by the [Customer] (for a period of at least [six] months to make changes to the Supplier’s systems, processes, procedures and activities to reduce[, or provide a pathway the [Customer] reasonably believes is capable of reducing (within [12] months),]* the [Customer’s] Carbon Footprint to a level that is equivalent to or greater than the reduction the [Customer] has assessed it can achieve with the New Supplier; 

* [Drafting note: This option allows for the supplier to demonstrate that it can reduce emissions, not that it has to have done within the original period. It, therefore, encourages and incentivises the supplier to embark on an emissions reduction journey, rather than punish it for not having acted sooner.]

1.2  if the [Supplier]’s environmental practices, negative environmental impacts, lobbying activities, partnerships, trade associations or public policy positions bring, or are reasonably likely to bring, the Customer’s reputation into disrepute; 

1.3 [if the [Supplier] acts [persistently and materially]* in a manner that [is][reasonably justifies the [Customer]’s opinion that the [Supplier]’s business operations or other conduct are]** inconsistent with good environmental practice and policy;]*** or 

* [Drafting note: Insert this language to provide supplier protection by requiring an ongoing course of bad conduct.]

** [Drafting note: Choose option as relevant. The second option provides supplier protection by requiring reasonable justification by the customer.]

*** [Drafting note: Where this is included, consider incorporating a clear termination framework based on environmental performance by reference to things that matter to the customer.]

1.4 if the [Supplier] fails within [30] Business Days to respond fully to a reasonable request for information made by the [Customer] to allow the [Customer] to assess the [Supplier]’s Carbon Footprint, environmental practices and policies that relate to the [Services]. The [Supplier] is only required to provide information under this paragraph if it has that information readily available at the time of the request, or it is required to keep that information under this [document].

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