Glossary entry

Environmental Performance

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Definitions

Contracts definitions

Option 1

Environmental Performance means the performance of the Company [and its Affiliates] against the following environmental key performance indicators:

The Company’s performance will be measured by an Independent Expert, appointed by the Parties in accordance with Clause [x], who will publish a report on the Company’s performance every [quarter/month].

Option 2 (Real Estate context)

Environmental Performance means all or any of the following in relation to the Premises, the Building and/or the Estate:

(i) the source of materials;

(ii) the use of materials;

(iii) energy sources and consumption;

(iv) water sources, consumption and discharge;

(v) flexibility, durability and resilience;

(vi) pollution and waste processing;

(vii) transport;

(viii) landscape and ecology;

(ix) deconstruction and disposal;

(x) waste generation and management;

(xi) Greenhouse Gas Emissions; and/or

(v) other adverse environmental impacts.

Model laws definition

Environmental Performance means the state of sustainability of a country as measured by the Yale Center for Environmental Law and Policy using 32 performance indicators across 11 issue categories covering environmental health and ecosystem vitality and set out in its Environmental Performance Index.

Drafting notes

Environmental Performance is a broad term that requires consideration of a number of factors. 

Option 1 provides some ideas for factors that could be taken into account. Drafters can add, remove or adapt them depending on the specific context.

Option 1 also provides some ideas for specific standards against which each factor can be measured. If the parties wish to determine their own metrics these could be set out in a Schedule. In this case, the metrics should be quantitative where possible and the Schedule should clearly set out how they are to be calculated.

Measuring environmental performance should not be a tick-box exercise and available budget and resources need to be considered when choosing the method of measurement. A relevant question is whether any financing needs to include the costs of such assessments.Consideration should also be given to any drafting necessary to deal with an Independent Expert e.g. how he/she should be appointed and how any disagreements about his/her appointment or findings will be dealt with.

Application

Company reports, financing agreements, supply chain contracts and other agreements where a certain level of environmental performance is required or environmental performance is to be monitored over time. 

This is likely to be found in situations where one party is providing finance or services to another on certain conditions (e.g. loan or lease agreements) or where one organisation is trying to maintain environmental performance throughout its branches or supply chain (e.g. franchising and IP licensing agreements and supply chain agreements).

Used in:

Emma’s Clause (Green Residential Lease)