14 June 2021

Climate change: why include environmental clauses in contracts?


Environmental clauses in new contracts are becoming more and more common

With climate change awareness among the vast majority of firms in the legal sector, there are countless initiatives, led by law firms, which advocate for the creation of new contracts that are environmentally sustainable.

This is why the pro-bono The Chancery Lane Project (TCLP) platform has been creating clauses contributed by more than 700 collaborators, which can be used by other law firms when advising their clients on future transactions. 

At the moment, more than 70 clauses have been created by this platform. It has also created model laws. The main objective: to fight climate change and reduce carbon emissions as much as possible. 

But at the same time, TCLP has faced several obstacles. The additional costs that may be involved in complying with climate obligations, as well as the novelty of including these clauses in standard contracts, may be difficulties that firms face when drafting new contracts. 

Although not all the clauses created by the TCLP do not generate additional costs, they do imply a change of mentality in companies, since these clauses pursue full awareness and compliance with objectives that protect the environment

These clauses try to cover all branches of legal services. In particular, there are several clauses designed for commercial transactions, investments, mergers and acquisitions. On the other hand, there are clauses to be incorporated in the Articles of Association of companies. 

From a more commercial point of view, the TCLP has created clauses devised for such standardised contracts as supply contracts, with suppliers making a commitment to measure the carbon footprint throughout the commercial process. The same assessment also exists for freight transport contracts. 

In turn, these clauses affect the real estate market, advising new owners in a rental contract, for example, to be aware of climate change and to try to reduce harmful emissions to the environment. In this respect, the sustainable economy, whereby the parties can be obliged to reuse materials when renovating a property, becomes important. 



climate change firms clausesSource: Freepik


In the world of employment, the platform has developed clauses for a sustainable organisation of the working model: flexibility, sustainable commuting, environmental awareness of employees. 

Among the model laws published on the TCLP website, we can find the following: 

- Finance Act 2016 (Climate Investor Relief Amendment) Bill

- Income Tax Act 2007 (Seed Enterprise Investment Scheme Net Zero Amendment) Bill

- Companies Act 2006 (Amendment) Responsible Business Bill

- Data Protection Act 2018 (Amendment) Climate Data Bill

- Landlord and Tenant Act 1954 (Amendment) Green Leases Bill

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