1. Due diligence – checking which systems and processes are in place
2. Ongoing monitoring – checking that those systems and processes are being followed and adhered to
3. Contractual drafting – ensuring appropriate obligations are flowed down to the relevant parties to ensure they are abiding by the requirements.
Set out below is a brief overview of some of the protections which you might want to include in your commercial contracts:- A general obligation to have policies, procedures in place and to follow them in order to work towards net zero.
- Renewable energy requirements in supply contracts – this is a clause which requires the supplier to procure energy from renewable sources and could help to meet funder, customer or government procurement requirements and help achieve net zero targets
- Benchmarking mechanism which allows you to start a benchmarking exercise which benchmarks the contractor against their competitors in the market by their greenhouse gas emissions
- ‘Coolerplate’ clauses which are boilerplate clauses linked to climate issues and your net zero targets and allow your climate initiatives to flow down into the contract management and the commercial lifestyle.
- Creative late payment clauses which allow parties to consider payments are made either to a “green” cause or an off-setter.
- Usually a governing law clause is used to ensure that parties construe a contract in a particular law. A ‘Green’ governing law clause could be used to require that the contract is interpreted in a manner consistent with the objectives of the UNFCCC and the Paris Agreement (the Paris Agreement is a legally binding international treaty on climate change adopted by 196 parties at the COP21 in Paris in 2015).
- Termination rights – you may wish to include a right to extract yourself from the relationship if the environmental requirements are not being adhered to.
