A standardised green supplier contract or clause that can assist organisations in incentivising their supply chain to adopt environmental targets that reduce their Scope 3 emissions.
Why use this?
To introduce an incentives based model into supply agreements to ensure that sustainability objectives agreed between supplier and purchaser are adhered to and maintained.
How to use this clause
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.
1. Additional Definitions
In this Schedule unless the context otherwise requires:
Achieved Target means an Agreed Environmental Target of the Supplier that is the subject of written acceptance by the Company under paragraph 3.3 and in respect of which the Supplier has not provided (and is not required to provide) notification under paragraph 2.3.
Adjustment Value has the meaning given in the mechanism set out in paragraph 4.
Agreed Environmental Targets means the objectives of the Supplier listed in paragraph 2.1.
Carbon Footprint means the total lifecycle greenhouse gas emissions of the [party’s operations relating (directly or indirectly) to this agreement OR goods and/ or services provided commercially by a party under this agreement], measured in CO2e using the calculations and complete methodology set out in the PAS 2050:2011 Carbon Footprint Standard.
Carbon Footprint Data means the full figures and detail of the measurement and calculations carried out by a party in the assessment of their Carbon Footprint at any point in time.
[Carbon Reduction means the reduction in a party’s Carbon Footprint specified in paragraph [2.1.1x]as an Agreed Environmental Target and verified by Carbon Footprint Data.] [To be inserted where this obligation is being used.]
CO2e means the standard metric measure used [by [the UN’s Intergovernmental Panel on Climate Change (IPCC)] [in industry] [for vehicles] to compare the emissions from various Greenhouse Gases (GHGs) on the basis of their global warming potential over a specified timescale in order to express a Carbon Footprint that consists of different GHGs as a single number].
[Goods has the meaning given to it in the agreement.]
[Party-led Advocacy means a programme put in place by a party to encourage its employees to utilise schemes such as, but not limited to, carpooling and cycling to work, and to provide its employees with training in order to achieve the Agreed Environmental Targets.] [Drafting note: This definition must be tailored to the nature and specific terminology of the Agreement.]
Price has the meaning given to it in the agreement.
[Services has the meaning given to it in the agreement.]
Term has the meaning given to it in the agreement.
Verified Net Zero means, in relation to a party, that the party has been certified as having reached carbon neutrality in compliance with the internationally recognised PAS 2060 Standard with respect to the Company’s Scope 1, Scope 2 and Scope 3 emissions (as these terms are defined within PAS 2060:2014), either:
(i) by a qualified professional body such as, but not limited to, [the Carbon Trust or NQA Certification Ltd]*; or
(ii) by sufficient self-certification by way of a declaration of achievement through the set of explanatory statements and publicly disclosed documentation which are described and required by PAS 2060:2014.
* [Drafting note: Here the Company may wish to designate an exclusive certification provider or to include it as an indicated option.]
2. SUPPLIER OBLIGATIONS
[Drafting note: When drafting, parties need to consider whether to include a dispute resolution provision or to link to a disputes clause elsewhere in the Agreement. This should involve assessment by a technically qualified expert appropriate to the circumstances of the Agreement.]
a) In cases where the Supplier/ party is likely to have resource limitations or differentiated national circumstances that create barriers to compliance with these obligations, this clause should be combined with additional drafting detailing the support or resources that will be provided by the Company to assist compliance, and in the event of breach, the requirement that the Company work with the Supplier/ party to rectify breach.
b) Consider combining this with provisions imposing minimum standards on manufacturing parties to implement ethical working practices and minimum wages for workers (specific to national circumstances of Supplier/ party) to avoid negative unintentional consequences of compliance with this clause.]
The Supplier shall:
2.1 meet the following sustainability objectives:
A. [No later than six months after the date of this agreement, the Supplier will sign up to the Carbon Trust Standard for Supply Chain (as published from time to time) which the Supplier will demonstrate by providing the Company with a copy of the relevant declaration signed by the Managing Director of the Supplier.]
B. [a party making the delivery of the entirety of the Goods, during the [Measurement Period], exclusively using [a fleet of electric vehicles or equivalents][other low carbon delivery systems], to be regarded as achieved if this has been the case over a period exceeding three (3) calendar months;
C. [a party exclusively utilising a fleet of electric vehicles in the provision of the Services, to be regarded as achieved if this has been the case over a period exceeding three (3) calendar months]
D. [a party reducing their Carbon Footprint, as originally assessed within three (3) calendar months of the signing of this Agreement, by the amount of % of this initial total, as reasonably demonstrated by Carbon Footprint Data]
E. [the purchase by a party of electricity for all of their offices [and factories/ production facilities on a green tariff that uses % renewable energy;]
F. [a party having signed up to the accreditation scheme known as [the Global Organic Textile Standard];] [Drafting note: This is just an example, this should either be a broadly applicable sustainability accreditation or an industry specific scheme like the given example.]
G. [a party committing to a board-approved programme of Party-led Advocacy and achieving and maintaining a [15%] take-up by employees of that behaviour change;]
H. [a party reducing (and maintaining that reduction of) their [[water usage][waste to landfill][single use plastic usage]], as originally assessed within three (3) calendar months of the signing of this Agreement, by the amount of [15%] of this initial total;]
I. [a party including in all of their contracts, other than with the other party to this Agreement, which relate to the [Goods][Services] which are the subject of this Agreement an identical or substantially similar and similarly onerous set of obligations to those they have accepted under this Schedule. This shall only count as an Agreed Environmental Target where at the date of this Agreement and, if applicable, at the date of any notification in respect of this Target [J] under paragraph 2.2, there are three (3) or more relevant contracts which relate to the [Goods][Services] which are the subject of this Agreement;]
J. [any other measures specific to the delivery of the Agreement]
2.2 notify the Company if at any point during the Term, they have achieved any of the Agreed Environmental Targets.
2.3 notify the Company promptly if at any point during the Term the Supplier becomes aware, or should reasonably have become aware, that they no longer meet the criteria of an Achieved Target. The parties agree that if the Supplier fails to comply with this paragraph 2.3, then paragraph 4 of this Schedule will not apply.
2.4 provide regular updates on the Supplier’s progress towards achieving the Agreed Environmental Targets in writing to the Company at least twice per calendar year, once in [October] and once in [April].
2.5 at the Company’s request, provide reasonable evidence (including, without limitation, any evidence specified in the relevant Agreed Environmental Target) to support any notifications regarding the Agreed Environmental Targets under paragraph 2.2. (If the achievement of an Agreed Environmental Target includes a Carbon Reduction, then the Supplier will provide all Carbon Footprint Data with any related notification under paragraph 2.2.) Paragraph 4 will not apply until such evidence (as requested in this paragraph 2.5) is provided to the Company’s reasonable satisfaction.
2.6 unless the parties agree otherwise, carry out an assessment of the Supplier’s Carbon Footprint at least twice per calendar year (at the Supplier’s cost), once in [September] and once in [March], and notify the Company of the results of each assessment in CO2e and provide the associated Carbon Footprint Data.
2.7 at the Company’s request following reasonable notice, attend a meeting to negotiate in good faith any additions or amendments to the Agreed Environmental Targets listed at paragraph 2.1 reflecting the Company’s sustainability objectives.
2.8 if, at the date falling one (1) calendar year from the date of this Agreement, and then on that same date in each following year of the Term, the Supplier has made and maintained no Achieved Targets, then the Supplier shall within thirty (30) days rebate to the Company (by paying a credit against future purchases under this agreement) a sum equal to % of the total sum of all Payments made by the Company to the Supplier during the preceding calendar year.
3. COMPANY OBLIGATIONS
The Company shall:
3.1 use reasonable efforts to provide any information, support or approvals that is reasonably requested by the Supplier to assist the Supplier to meet its Agreed Environmental Targets or is otherwise required under this Schedule [x].
3.2 specify in reasonable detail the information required when requesting Carbon Footprint Data or other supporting information from the Supplier under paragraph 2.5.
3.3 review any notification of achievement and maintenance of an Agreed Environmental Target from the Supplier under paragraph 2.2 and promptly (taking in consideration any need to request and review supporting evidence), and acting reasonably, provide either written acceptance so that it shall constitute an Achieved Target, or a refusal to accept the achievement, accompanied by reasons for such refusal [and reasonable directions on the remedial action that the Company expects the Supplier to take to demonstrate achievement].
4. PAYMENT AND PRICE ADJUSTMENTS
If the Supplier meets its obligations in paragraph 2 during a calendar year of the Term, then the Company shall multiply the Price applicable during the next calendar year by the relevant one of the following adjustment factors:
4.1 if the Supplier has not achieved Verified Net Zero or there are less than three (3) Achieved Targets, then the Price will not be adjusted under this Schedule;
4.2 if the Supplier has achieved Verified Net Zero or there are three (3) Achieved Targets, then the Price will be adjusted by a factor of [x];
4.3 if the Supplier has achieved Verified Net Zero and there are three (3) Achieved Targets, or the Supplier has not achieved Verified Net Zero but there are six (6) Achieved Targets, then the Price will be adjusted by a factor of [x];
4.4 if the Supplier has achieved Verified Net Zero and there are six (6) Achieved Targets, or the Supplier has not achieved Verified Net Zero but there are nine (9) or more Achieved Targets, then the Price will be adjusted by a factor of [x];
4.5 if the Supplier has achieved Verified Net Zero and there are nine (9) or more Achieved Targets, then the Price will be adjusted by a factor of [x],
(the applicable adjustment factor is referred to as the Adjustment Value).
The Adjustment Value applies to the Price that was applicable on 31 December of the preceding year ([including OR excluding] any Adjustment Value that was applied in that year). If an Adjustment Value has been applied, its application will cease on the date of any [material] breach of the Supplier’s obligations in paragraph 2.