Model clause

Benchmarking of Project Greenhouse Gas (GHG) Emissions

Izzy's Clause

A mechanism that benchmarks the contractor's carbon footprint against the market.

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Why use this?

A benchmarking mechanism is used in supply agreements to test the price in a market after the date of a contract. This mechanism may enable the price to be automatically adjusted into the contract to match the market price.

This same concept can be transferred to other commercial agreements, such as construction, with respect to benchmarking a contractor's GHG emissions against its competitor's GHG emissions.

The benchmarking mechanism is only triggered if the contractor does not meet their forecasted assessment of emissions that they submitted as part of their tender.

How it promotes a net zero future

The contractor is incentivised to monitor their offering throughout the project to deliver their services in a manner that minimises greenhouse gas emissions, in a manner that is possible within the market. If the benchmarking mechanism is triggered the contractor will learn how they can further reduce their emissions.

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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.

The clauses on this website (and published in our Climate Contract Playbook) 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.

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

Additional Definitions

In this clause: 

Commencing Date means the date on which the Contractor is obliged to commence the works, or the date on which the works were commenced, whichever is the earlier.

Completion Date means the date specified in the agreement.

Climate Professional means an independent third party who is a suitably qualified and experienced [environmental or sustainability [or climate] consultant / analyst] capable of diligently, competently and professionally, benchmarking all or any part of the items or components set out in the EmissionsGreen Scorecard, in accordance with clause [1.2] of this agreement.

Emissions means the Greenhouse Gases emitted directly and indirectly by the Contractor in carrying out the [project], as set out in an Emissions Scorecard.

Emissions Scorecard means the scorecard in the form attached to Schedule [insert] which sets out the Emissions for a specified Year (or part of a Year where relevant) issued in accordance with clause [1.1(a)(i)]. [User Note: Insert the emissions scorecard used in Maria’s Scorecard in the applicable Schedule]

Green Baseline means the total forecasted Emissions in carrying out the [project], itemized for each Year (or part of a year where relevant) of the [project] as set out in the Emissions Scorecard submitted by the Contractor as part of its tender prior to the Commencing Date as may be adjusted in accordance with the terms of this agreement.

Green Incentive means [£[insert].

Green Target means the Green Baseline for the applicable Year (or part Year) of the [project] reduced by [insert]%, as may be adjusted in accordance with the terms of this agreement. 

Greenhouse Gases (GHGs) means the natural and anthropogenic gases which trap thermal radiation in the earth’s atmosphere and as specified in Annex A to the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) [or otherwise specified by the UNFCCC at the date of this agreement]. [These GHGs are currently: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).]

Year means the annual period between each anniversary of the Commencing Date.

 

Additional Clauses

1. Green Target and Benchmarking

1.1 Green Target

(a) Within [30 days] after each anniversary of the Commencing Date and on the Completion Date [Drafting Note: you may wish to use the end of the defects liability period here], the Contractor must provide the Principal with an:

(i) accurate Emissions Scorecard for the preceding Year (or part of a Year where relevant); and

(ii) accurate report that indicates whether the:

(A) Green Target has been met; or

(B) Green Target has not been met but the Emissions for the specified Year are less than the Green Baseline for the applicable Year; or

(C) Emissions for the specified Year are equal to the Green Baseline for the applicable Year; or

(D) Emissions for the specified Year exceed the Green Baseline for the applicable Year. 

(b) Subject to clause 1.1(c), if the report issued in accordance with [1.1(a)] has been approved by the Employer (such approval not to be unreasonably withheld or delayed) and indicates that the:

(i) Green Target has been met then, 100% of the Green Incentive is payable to the Contractor; or  [in accordance with the payment terms at clause [●];

(ii) Green Target has not been met, but the Emissions for the specified Year are less than the Green Baseline for the applicable year, then 75% of the Green Incentive is payable to the Contractor  [in accordance with the payment terms at clause [●]; or

(iii) Emissions for the specified Year are equal to the Green Baseline for the applicable Year, then 50% of the Green Incentive is payable to the Contractor  [in accordance with the payment terms at clause [●]; or

(iv) Emissions for the specified Year exceed the Green Baseline for the applicable Year, then clause [1.2 to 1.7] applies. 

(c) Should the Employer acting reasonably dispute the contents of a report provided under clause 1.1(a), it may undertake its own assessment and the result of the Employer’s assessment shall replace the Contractor’s report.

(d) Should the Contractor dispute the Employer’s findings under clause 1.1(c) then a Dispute shall arise triggering the provisions in [INSERT CROSS REFERENCE TO DISPUTE RESOLUTION PROVISIONS].

1.2 Right to conduct a benchmark

The Principal may, by using a Climate Professional, initiate a benchmarking exercise of all or any part of the items or components set out in the Emissions Scorecard by giving a notice to the Contractor, specifying the item or component of the Emissions Scorecard against which the benchmark is to be conducted (Benchmarked Items).  The Principal undertakes to engage any Climate Professional on the terms specified in Schedule [●] subject to any amendments that may be requested by the Climate Professional and approved by the Contractor (not to be unreasonably withheld or delayed).

1.3 Comparative benchmark

The benchmarking exercise will compare the Emissions for the Benchmarked Items against the Greenhouse Gases emissions for items or components that are the same as, or substitutable for, the Benchmarked Items (Comparable Items) based on data or information from:

(a) other contractors, suppliers, or service providers of deliverables or services that are similar to the Benchmarked Items and that are available in a comparable market and for a comparable project to the [project]; 

(b) any information from a reasonably reputable source, which provides the same or similar benchmarking services as contemplated under this clause 1;

(c) testing the market; or

(d) any combination of the sources in clauses 1.3(a) to 1.3(c), 

and so determine a market benchmark (Market Benchmark). 

1.4 Assistance

The Contractor must: 

(a) give the Principal, any Climate Professional and their respective [personnel]:

(i) access to the site, the Contractor’s personnel, information or documents; and

(ii) any other assistance,

reasonably required by the Principal and/or any Climate Professional to conduct the benchmarking exercise, excluding information relating to the Contractor’s costs and margins in providing the Benchmarked Items; and

(b) give the Principal and any Climate Professional a copy of all reports from benchmarking carried out by (or at the request of) the Contractor and relating to the Benchmarked Items (which may be modified so that they do not identify the Contractor’s customers or its internal costs and margins) promptly after a request by the Principal or any Climate Professional, if any exist.

1.5 Copy of report to be provided

(a) The Principal shall provide the Contractor with a copy of the benchmark report within 20 [business days] after the report is completed (Benchmark Report). 

(b) The Benchmark Report:

(i) must:

(A) itemise the Greenhouse Gas emissions of the Comparable Items; 

(B) specify the data and information relied upon by the Principal to support the findings of [1.5(b)(i)(A)]; 

(C) specify the methodology relied upon by the Principal to support the calculation of the Market Benchmark; and

(D) recommend alternative suppliers or service providers of the Comparable Items, if the reported greenhouse gas emissions are less than the Emissions; and

(ii) may be modified so that it does not identify the entity used for comparative purposes, such the entity’s confidential information. 

1.6 Consequence of benchmark

(a) If the Benchmark Report shows that the:

(i) the Market Benchmark exceeds the Emissions of the Benchmarked Items,  then 25% of the Green Incentive is payable to the Contractor [in accordance with the payment terms at clause [●]. 

(ii) the Market Benchmark is less than the Emissions of the Benchmarked Items, then the Principal may, by notice to the Contractor: 

(A) require the Contractor to develop a plan to reduce the Emissions of  the Benchmarked Items to the levels specified for the Comparable Items in the Benchmark Report; and/or

(B) require the Contractor to use its best endeavors to procure the Benchmarked Items from the alternative suppliers or service providers recommended pursuant to [1.5(b)(i)(D)]; and

(C) any other actions reasonably required by the Principal.

(b) If the Principal issues a notice under clause [1.6(a)(ii)], the Contractor must, within [30] business days of such notice from the Principal:

(i) provide a copy of the plan in clause (1.6(a)(ii)(A) for the approval of the Principal (not to be unreasonably withheld or delayed);

(ii) put the approved plan into operation;

(iii) do all things necessary, to implement the Principal’s requirements set out in the notice; and

(iv) provide the Principal with notice on or before the 30th business day that confirms the requirements have been implemented.

(c) If the Contractor fails to comply with any part of clause [1.6(b)] then the Principal may choose to either:

(i) deduct the Green Incentive from the [contract sum];

(ii) or be immediately deemed as a debt due and payable from the Contractor to the Principal [Drafting Note: you may wish to amend the clause earlier in the agreement on final payments to incorporate reference to the last benchmarking exercise being completed first]; and

(iii) within [30] days of receiving payment of the Green Incentive, the Principal must pay the Green Incentive to [insert environmental / sustainability organization] [Drafting Note: This has been drafted to somewhat ‘set off’ the emissions caused by the Contractor].

(d) The Contractor shall not be entitled to make any [claim] whatsoever, against the Principal arising from the Principal exercising its rights under clause [1.6(c)]. 

1.7 Costs

The parties agree to:

(a) share equally the cost of engaging a Climate Professional to conduct the benchmarking exercise; and 

(b) otherwise, bear their own respective costs incurred under this clause 1.

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