Climate Contract Playbook Edition 3
22
[Teddy’s clause]
The Origin Story
Child’s name
Teddy’s clause
Full name
Supplier Environmental Threshold Obligations
Practice Area / Sector
Commercial
Lack of legally enforceable environmental improvement standard in mainstream supply contracts, particularly in government procurement contracts.
Issue
Insert at purchase warranties for environmental performance and continuous improvement obligations. This will build in long term environmental improvements and transparency into supply agreements.
Solution
Currently the carbon costs of producing goods or delivering services are not internalised to the contract and therefore there is no incentive to reduce carbon emissions. Government is unable to use its own procurement levers to decarbonise the economy. Development of a wider market for new carbon reducing technologies, as well as accreditation/audit companies. Auditable transparency of an organisation’s environmental impact, emissions and supply chain. Ultimately to filter down from Government, and to/through local authorities and the private sector contractual obligations to achieve the net zero target(s).
Context
Impact
1. Public sector procurers 2. Trade (standards) bodies 3. Contractors 4. Investors 5. Precedent and know how providers 6. Professional Support lawyers 7. Private practice firms
Stakeholders
From the recitals, to contract terms and conditions and remedies, supply contracts will become a vehicle for setting environmental performance and helping drive the transition to net zero emissions.
Application
The incentives on a Supplier to comply with the requirements may be enhanced by varying clause 3 such that the Supplier must publicly disclose the emissions reductions and reports to an external public-interest third party such as CDP (formerly the Carbon Disclosure Project https://www.cdp.net/en). Users may also wish to use this clause in conjunction with green liquidated damages in [Jessica’s Clause] as a remedy for non-compliance.
Notes for users
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