Sep 14, 2022 |

Creating obligations to combat climate change through climate clauses

Brandon Moss, Senior Legal Editor, Litigation, Practical Law

Recent climate-related emergencies are changing the perception of climate change from a predicted problem for future generations to an immediate concern that requires prompt action. For example, the National Oceanic and Atmospheric Administration (NOAA) reported June 2022 as the Earth’s sixth-warmest June on record. In many areas, such as parts of California, ongoing, years-long drought conditions have become the norm and exacerbate the risk of wildfires. In coastal areas — which face rising sea levels — storms batter communities with greater strength and more intense flooding.

These are only a few of the tangible effects of climate change.

With adverse, diverse outcomes from climate change becoming the new norm, fighting and mitigating climate change has become more urgent than ever before. Nearly 200 countries joined the Paris Agreement, an international treaty that aims to limit greenhouse gas emissions and restrict global warming to below 2 degrees Celsius — and ideally 1.5 degrees Celsius — over pre-industrial levels.

However, more needs to be done at the organizational and individual levels to mitigate or prevent the consequences of climate change. One significant and effective way to do so is through climate-aligned clauses, where individuals, law firms, companies, and governments incorporate climate-conscious “green” provisions in their contracts, policies, practices, and procedures.

Climate-aligned clauses serve many purposes. First and foremost, they provide a real, meaningful opportunity to implement sustainable practices and accomplish measurable progress towards reducing greenhouse gas (GHG) emissions and achieve a net zero future — that is, a future where the amount of GHGs produced and removed from the atmosphere is in a state of balance.

Climate-aligned clauses also demonstrate an individual’s or organization’s commitment to combating climate change. Moreover, the clauses encourage other parties to do the same by fulfilling sustainability objectives as contracting parties and in their own practices.

The Chancery Lane Project (TCLP), a United Kingdom-based pro bono collaborative initiative supported by Thomson Reuters, brings together legal and industry professionals worldwide to develop, embed, and promote climate solutions into commercial agreements, policies, procedures, and law firm precedents through model climate-aligned clauses. Practical Law has expanded TCLP’s reach by integrating these model clauses into Practical Law’s global content. Practical Law resources reference, analyze, and build upon the content of TCLP’s model clauses.

The opportunity to help counteract climate change through these climate-aligned clauses is vast. Climate-aligned clauses can be used by individuals and organizations at any level of sophistication, within any industry or practice area, across public and private sectors, and in different types of documents. Here are some ways that parties can adopt these climate-aligned clauses:

  • Governments, which often establish mandatory terms for government contracts, can require that a selected contractor adhere to net zero practices if selected in response to a procurement for a construction project.
  • Businesses can require that vendors within their supply chain follow sustainability objectives, such as by reducing and monitoring their energy consumption or eliminating the use of single-use plastics.
  • Landlords can require that their commercial or residential tenants maximize usage of any energy efficient improvements and fixtures within their rental premises.
  • Individuals and businesses can agree to go paperless and reduce unnecessary travel when implementing or enforcing the terms of a contract or in the event of a dispute.
  • Parties can agree to offset any climate-averse conduct, such as by making monetary contributions to green causes or offsetting their consumption in other areas, or to provide financial incentives to opposing parties when they accomplish net zero objectives.

Once climate-aligned clauses become part of a contract or transaction, it is incumbent on the parties to monitor performance and enforce compliance. Doing so is necessary to ensure that adopting these clauses reflects a binding, mutual commitment to help counteract climate change and is not merely window dressing or a superficial objective. Monitoring performance also provides an opportunity for parties to adjust and expand on their commitments to tackling climate change in future contracts or transactions.

As more individuals and organizations adopt and use climate-aligned clauses, these clauses can become a standard and routine part of a contract or transaction. Compliance can become easier to monitor and enforce, and the efforts can help achieve real, overall progress to counteract climate change. The starting point is ensuring that individuals and organizations recognize how they can do their part towards accomplishing climate-conscious objectives through using climate-aligned clauses.

If you’re a legal industry professional concerned about climate change, you can get involved with the Chancery Lane Project.