2020 has been a year of pledges – in February, the oil giant BP set an ambitious target to achieve Net Zero by 2050 by cutting more greenhouse gas emissions in its operation every year than produced by the whole of the UK. In September 2020, PwC committed to decarbonise its operations and supply chains in an effort to achieve Net Zero by 2030. Microsoft has gone further pledging to become carbon negative by 2030, and by 2050 to remove from the environment all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975.
The challenges in meeting such commitments should not be underestimated. To meet their aims, companies may need to change or re-establish their supply chains, gradually reducing not only their own Scope 1 emissions (direct emissions from owned or controlled sources), but also their Scope 2 and Scope 3 emissions, both of which are produced indirectly either from generation of purchased energy or from performance of contracts into which the company has entered in its supply chain (including both upstream and downstream emissions).
Adoption of the Termination for Greener Supplier clause has the potential to help companies achieve their Net Zero/carbon negativity targets. Both long-from and short-from versions of the clause can be built into supply contracts at any level of the supply chain, and will give the client a right to switch suppliers if its existing supplier is unable to match a ‘greener’ offer made by an alternative supplier. Alternatively, clients who wish to preserve the contractual relationships with their supplier may, under Carbon Footprint Reduction clause request that the supplier reduces the carbon footprint associated with their performance of the contract.
Clyde & Co is proud to be assisting clients interested in adopting these clauses into their contracts. Please reach out to me or one of our climate change experts if these, or similar, clauses are of interest.
This post is part of a series of short updates summarising the precedent clauses drafted in the course of collaborative hackathons organised by The Chancery Lane Project. Clyde & Co held its own hackathon in partnership with The Chancery Lane Project in July 2020, and has taken a leading role in the Big Hack, another hackathon organised centrally by The Chancery Lane Project throughout autumn 2020.