Use contracts to achieve rapid decarbonisation
Contracts govern every aspect of our economy. They sit behind every transaction and write the rules for how an activity should be carried out. So what if each of those contracts included terms to tackle climate change and deliver decarbonisation targets?
The Chancery Lane Project (TCLP) is a global network of lawyers and business leaders, using the power of climate contracts to deliver rapid decarbonisation at scale. Over 100 climate clauses are now available, with no charge, that have been drafted and peer reviewed by lawyers from across the TCLP network. The clauses can be inserted into contracts immediately - providing solutions that enable you to pre-empt climate risks, reduce emissions and act on climate opportunities.
What is the business case for climate clauses?
Contracts are bespoke and comparatively nimble documents which can be changed quickly, implemented immediately and enforced using normal enforcement mechanisms. Climate clauses are a tailored solution to specific goals, industries and geographic locations, creating ambitious and culturally sensitive solutions.
The climate crisis is here now; it brings immediate threats, but also many commercial opportunities. How are you adapting your business model to take climate action? Is your corporate strategy rooted in the transition to net zero? Does your governance system empower you to green your business? These questions demand immediate attention: in the boardroom, in conversations with clients, and in meetings with suppliers. And contract negotiations can get the ball rolling.
How can I start conversations and lead contract negotiations?
TCLP materials are designed to start conversations around climate clauses, inspire, and to guide users through the complexities of using clauses in practice.
Vodafone is one organisation that has introduced TCLP’s climate clauses into its supply chain contracts. To assist with negotiations, Vodafone encourages those in the early stages of using climate clauses to get buy-in from senior colleagues, consult specialist departments across the organisation and consider advice from external stakeholders. They also advise you to discuss the value, challenges and feasibility of using climate clauses with colleagues.
Meanwhile, Foot Anstey uses TCLP’s clauses as a ‘hook’ to start climate conversations with built environment clients. In 2022, more and more Foot Anstey clients asked the firm about net zero contract strategies, supply chain issues, and contract due diligence. To answer these questions, Foot Anstey organised sessions with clients to explore options for using climate clauses to embed net zero strategies into their contracts.
How can I overcome barriers to using clauses?
Contract terms that address the climate are novel, although this is changing. The idea of doing something that is not currently market standard is often intimidating and can feel risky. However, it is far riskier to set climate targets and not have a tangible strategy to reach them. Upholding your climate intentions with legally enforceable terms can prevent the risk of greenwashing and helps to pass your climate action down your value and supply chains. TCLP’s best in class climate clauses turn climate pledges into hard targets in the same way that contract terms do with pricing, delivery times and service specifications.
Unfamiliarity may be another barrier to integrating climate clauses into contracts. With TCLP’s free, accessible resources you can explore each clause, understand their commercial and environmental contexts and prepare strategies to negotiate them into contracts. Many negotiations take longer than needed because people haven’t decided their negotiating strategy in advance. TCLP’s resources help you explain the benefits of adding these clauses to your agreements to the people you need to convince.
Cost is a barrier, especially for SMEs and industries with low profit margins. The hard reality is that decarbonising is going to cost someone something. TCLP’s clauses do, however, provide a means of ensuring that cost is accounted for in the negotiation of contracts.
Hear from Foot Anstey, one of TCLP’s long-term participants
Foot Anstey lawyers use TCLP clauses to help clients achieve their commercial goals while tackling the high climate impact of buildings. Read the full case study.
Foot Anstey has adapted climate clauses for use in its client transactions, including:
- Ayshe's Clause, which facilitates reporting and due diligence requirements increasingly favoured by renewable energy project funders. Foot Anstey has found that contractors want to see a price associated with these reporting requirements, so that there is a clear link between costs and reporting.
- Luna's Clause, which incentivises building contractors to propose 'Net Zero Modifications' to project works. Foot Anstey clients have found Luna’s Clause particularly relevant for projects with longer delivery schedules.
Suriya Edwards, a Partner in Foot Anstey's sustainability and net zero practice, considers that: "Use of climate-aligned clauses will develop over time. As the regulatory framework tightens up, and data collection and emissions reporting become the norm, there will be fewer amendments to TCLP provisions in client contracts. What we need is a regulatory landscape which has a carrot and stick approach to implementation.”
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