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The regulatory obligations on non-financial reporting have simultaneously raised the need to integrate resources and have systems in place that support environmental sustainability. As part of this development, significant changes are being implemented in the system of contract management.

Is it important to amend or create new contracts including clauses emphasizing environmental sustainability?

Contracts are a powerful tool to help deliver climate targets by amending the existing contractual frameworks with the new way of doing business. Needed from the very inception whether company formation, employment purposes, or supplier management, every aspect of a business life cycle by way of its contract management has the potential to wire climate-related goals and targets into their business operations.

The idea behind modifying existing contracts and creating new ones is to create a ripple effect that promotes positive and conscious sustainability-led behavior.

The supply chain aspect

Commitment to decarbonization and net zero targets is evolving at a rapid speed and over time, the change makers have grown to realize that while internal policy management is important, it is also crucial to get contractors and suppliers aligned with the company’s values and targets.

This has raised conscious awareness that is centered around the adoption of climate-conscious clauses in supply chain contracts. Examples of such clauses include

Incentivizing reductions in Scope 3 emissions and including warranties under which the supplier shall be obliged to comply with specified steps to reduce environmental harm.

Adding provisions for termination for an environmentally friendly supplier, which may be implemented if an existing supplier is unable to match a ‘greener’ offer available with a competitor supplier.

How can we help?

Integrating such climate-centric clauses requires creating awareness, applying the right negotiation skills, and encouraging concrete action. Whether in the form of a policy or a contractual clause, in order to achieve desired long-term sustainable growth targets, companies have to integrate substantial efforts at every stage of the business life cycle including imposing obligations on contracting parties to adopt sustainable practices.

Our diverse team of professionals helps review and rewire contracts in a manner that effectively integrates efforts aimed at addressing the climate crisis and promotes sustainability in a realistic and achievable manner. We help identify loopholes in existing contracts and thereby assist with incorporating clauses that are aimed at protecting businesses while supporting planet restoration.

Our endeavor of enhancing the system of contract management is driven by our vision to bring ESG (Environmental, Social, and Governance) to the forefront of all business operations. The contract amendment or creation of a new Clause is done with a lens of sustainability and climate action, which is customized to suit the business purposes of the transacting parties while contributing to sustainable development.

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