Incorporating environmental protection into commercial contracts

Rob Eakins

Concern for the environment is at an all-time high. There is greater awareness, both on an individual and corporate level, of the impact of our daily activities and choices on the environment. ‘Sustainability’, ‘carbon footprint’ and ‘environmental impact’ are topics that now regularly appear on company websites and on their meeting agendas.

Traditionally, commercial contracts have not explicitly addressed climate concerns. As companies work to both minimise their climate impact and encourage other companies to do the same, appropriate clauses can be inserted into commercial contracts to help further these aims.

With this in mind, The Chancery Lane Project (‘TCLP’) was established to provide resources to businesses to assist in the move towards decarbonisation and improve environmental performance. In addition to contract clauses, TCLP also provides case studies, a glossary of climate terms and toolkits relating to various sectors, contracts and climate solutions, all of which are available free of charge on TCLP’s website.

There are various different clauses available, including the following:

Renewable Energy Requirements in Supply Contracts

Contractual obligations may be placed on suppliers to procure the energy required to perform the contract from renewable sources. Clauses can be tailored to specify the minimum proportion of renewable energy to be used in the performance of the contract. They can also be adapted for use with larger suppliers that may run a formal bidding process when sourcing their electricity supply.

Termination for Greener Supplier

An environmentally-minded customer may wish to have the right to terminate its agreement with a supplier in cases where it can source the same products and services from a supplier with a lower environmental impact. The scope of the clauses may be widened to allow termination in various other circumstances, such as where the customer believes the supplier’s environmental practices may bring the customer’s reputation into disrepute. These are potentially onerous provisions for a supplier to agree to. Whilst the purpose behind this kind of contractual provision is clear, a supplier would want to be sure that such provisions could not be used inappropriately by a customer who simply wanted an excuse to terminate the relevant agreement.

Green Film Production Credits

Clauses of this sort can be used to oblige video and film production companies to publicly disclose the carbon footprint generated by their work on the production in question. Given that this disclosure may be required to be placed in the main titles of the relevant film or video, there is a clear incentive for the production company to take the steps necessary to reduce the environmental impact of the production.

Electronic Notices

Simple yet effective, this clause requires the provision of notices under the relevant agreement to be by electronic means. Where this is not possible (perhaps where electronic notices are prohibited by law), the parties must take practical steps to reduce the impact on the environment of the delivery of notices, such as by using recycled paper or a courier service that is certified as carbon neutral.

If you require any advice on incorporating green clauses into your commercial contracts, please contact Rob Eakins, Associate in our Commercial team.