Model clause

The ‘Green Supplier’ Contract – A Standardised Contractual Pricing Model

Luke's Clause

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.

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Why use this?

If organisations are to include the climate impact of their supply chain in their assessments of their own credentials it is important to provide mechanisms to require suppliers to reduce their emissions. An incentive mechanism will also increase the visibility of the objectives within the supply relationship and lead to improved efforts to attain them.

Through incorporating the template wording for the price alteration mechanism and rebate/termination rights (or alternative wording as appropriate to cater for different parties and scenarios), use of the proposed drafting will assist organisations that have made a commitment to reduce Scope 3 emissions to meet such targets.

Potential indirect impacts include greater client/customer faith in an organisation's contribution to addressing climate change and continued viability in the net zero transition.

How it promotes a net zero future

The aim is for major organisations to include a Green Supplier clause as a standard clause within all supplier agreements, with the details and targets agreed on a case by case basis. The direct impacts of the clause are more accurate and transparent reporting and a reduction in Scope 3 emissions.

Disclaimer - please read

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.

This website (and the Climate Contract Playbook) does not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and does not contain legal or financial advice. The clauses are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.

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

1. 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 3.5 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 2.1.1.

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 Partyunder 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.]

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:

(a) by a qualified professional body such as, but not limited to, [the Carbon Trust or NQA Certification Ltd] ; or

(b) 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.

2. SUPPLIER OBLIGATIONS

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 [15]% 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 [100]% renewable energy;] 

F. [a Party having signed up to the accreditation scheme known as [the Global Organic Textile Standard];] 

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) 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;][and]

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 and the 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 [5]% 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.

Glossary references: Carbon Footprint

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