Model clause

Termination for Greener Supplier

Agatha's Clause

The clause gives customers a right to switch supplier if the existing supplier is unable to match a ‘greener’ offer made by an alternative supplier.

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Why use this?

If this sort of clause can become the norm among customers, it will draw out greener suppliers that can do this and ensure that an assessment of green credentials is an important part of any procurement process.

How it promotes a net zero future

The clause should encourage existing suppliers to “up their climate change game”. A contractual right to switch to a greener supplier if the existing supplier cannot match the alternative offer enables companies to green their supply chains, encourages green competition between existing and prospective suppliers, and provides a strong incentive for appointed suppliers to continuously improve their green performance.

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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.

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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

Termination for Greener Supplier: Contractual Provisions

Additional recital

(A) The parties acknowledge their common intention in the fulfilment of their obligations under this agreement to minimise their impact on climate change [, 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 and to further achievement of their respective organisational targets to reduce GHG Emissions in alignment with the ultimate objectives of the Paris Agreement].

Insert into preliminary obligations:

The parties agree that the information provided by the Supplier before the start date of the agreement concerning measures of:

(a) [the impact on climate change by the Supplier’s operations [including value and supply chains], (“Supplier Green Baseline”); and]

(b) the impact on climate change of the products and services (“[Goods OR Service] Green Baseline”),

will form the baseline environmental credentials of the Supplier for the purpose of this agreement (together “Green Baseline”). The Green Baseline may be amended by written agreement or otherwise in accordance with this agreement. The Supplier will provide at the Customer’s request reasonable evidence of its compliance with the Green Baseline.*

* [Drafting Note: In the context of governance / transparency, the clause could be amended to include a requirement for the Supplier to report on implementing Green Improvements or their changing Green Baseline. Such information would be useful for the receiving customer’s reporting obligations regarding Net Zero targets through the supply chain to the extent that this information is required. In this case it may be more appropriate to consider one of TCLP’s other supply chain clauses as an alternative.]

 

Additional definitions

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), each expressed as a total in units of carbon dioxide equivalent (CO2e) and from all sources, categorised as Scope 1, 2 and 3 emissions by the Greenhouse Gas Protocol.

 

Additional clauses

In this clause, “equivalent” or “equivalence” means:

(a) If assessing the [goods OR services] of a Green Supplier, [goods OR services] that are [comparable OR identical or similar in all material respects] (including in terms of [scope,] complexity, specification, volume and quality [of performance], supporting technology, compliance with standards, and in terms of ancillary obligations such as delivery terms) to the [Goods OR Services] under this agreement.

(b) If assessing the pricing of a Green Supplier, pricing for equivalent [goods OR services] that is [within the lower quartile OR less than or equal to the mean price over a previous 12-month period] of the pricing for [Goods OR Services] under this agreement.

Termination for Greener Supplier

1.1 Without affecting any other right or remedy available to it, the Customer may serve written notice (“Notice of Greener Supplier”) to the Supplier that the Customer has identified a third party supplier (the “Greener Supplier”) that is able to provide [goods / services] at least equivalent to the [Goods / Services], except that the Green Supplier’s equivalent [Goods / Services] achieve:**

1.1.1 lower GHG Emissions relating to the production or delivery of the [goods OR services], as measured in accordance with [the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, Revised Edition 2015] or [the GHG Protocol Product Life Cycle Accounting and Reporting Standard] or [ISO 14064]] as compared to the Goods OR Service Green Baseline; or

1.1.2 reduced environmental impact or increased sustainability outcomes, as measured in accordance with [Insert appropriate standard for measuring environmental impacts or sustainability outcomes depending on the areas of concern to the business] as compared to the [Goods OR Service Green Baseline] or [Supplier Green Baseline]; or

1.1.3 [lower direct and indirect GHG Emissions originating from all of the Supplier’s operations [including value and supply chains], as measured in accordance with [the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, Revised Edition 2015] or [ISO 14064] as compared to the Supplier Green Baseline [and averaged per [insert measure of size/profit so that they cannot just choose a smaller supplier]; or]

1.1.4 [where the Customer has evidence that the Supplier [is consistently not meeting/for a period of [●] has not met] any of the [Goods OR Service] Green Baseline, Supplier Green Baseline or Green Baseline, any of the above as compared to such reduced performance levels][. or; or];

1.1.5 [other [as compared to the [Goods OR Service Green Baseline] or [Supplier Green Baseline]].

1.2 The extent to which a Greener Supplier exceeds the Supplier’s Green Baseline (using the measures described in this clause) is the “Green Improvement”. The Notice of Greener Supplier must reasonably demonstrate that the Greener Supplier’s alternative [goods/services] are at least equivalent to those of the Supplier (including written confirmation by the Customer of overall price equivalence) and set out the Green Improvement.

1.3 The Supplier shall, within [30] days of the Notice of Greener Supplier notify the Customer whether it is able to achieve the Green Improvement [on terms no worse for the Customer than those set out in the Notice of Greener Supplier and] within [NUMBER] months of the Notice of Greener Supplier. If:-

1.3.1 Supplier is able to demonstrate to the Customer’s reasonable satisfaction that it is able to match the Green Improvement within that period, the parties shall use all reasonable endeavours acting in good faith to agree within a further 30 days the amended terms on which the [Goods/Services] shall be provided incorporating the Green Improvement. Once an amendment is agreed, the relevant specifications of the [Goods/Services] will be deemed to incorporate a requirement to comply with the Green Improvement (and the Green Baseline will be replaced by the Green Improvement from the date of that amendment); or

1.3.2 the Supplier;

1.3.2.1 does not respond to the Notice of Greener Supplier within the required period; or

1.3.2.2 is unable to demonstrate to the Customer’s reasonable satisfaction that it is able to at least match the Green Improvement within the required period [on terms as good for the Customer as those set out in the Notice of Greener Supplier],

1.4 The Customer may terminate this agreement by giving the Supplier not less than [NUMBER] months’ notice. Other than the agreed consideration for [Goods/Services] provided in accordance with the agreement before the date of termination, and despite any conflicting provisions in this agreement, no payments will become due to the Supplier as a result of termination under this clause.

** [Drafting Note: this clause could also link to Net Zero Target not being met or, like the amended Annie’s Clause, allow for termination if the Supplier does not set a target aligned to Race to Zero or the Science Based Targets Initiative. However, drafters should be aware that, depending on the offsetting activity of the respective suppliers, this could be less ambitious than measuring absolute emissions as currently drafted. It may then also be necessary to include some terms around whether the respective suppliers follow the mitigation hierarchy of reducing absolute emissions before offsetting and the quality of the offsets purchased from a recognised supplier to achieve robust standards of additionality, permanence and verifiability. This may be too onerous for customers to easily determine which was the greener supplier.]

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