Commercial contracts and climate change: Time to think differently
There are many ways to get involved in fighting climate change, but it can feel overwhelming not knowing where to start, as climate issues can touch every aspect of our lives. For evolving businesses and individuals, the variety of options available are expanding.
The legal framework for fighting climate change started with the 2015 Paris Agreement, a legally binding international treaty. The goal was to limit global warming to well below two degrees compared to pre-industrial levels. To date, 192 parties have joined, with each country setting their own emission reduction targets, which are reviewed every five years with the aim of continually raising ambition.
In New Zealand, the Climate Change Response (Zero Carbon) Amendment Act 2019 outlines our framework to align with the Paris Agreement; setting a target to reduce our net emission of greenhouses gases (except biogenic methane) to zero by 2050. The Climate Change Commission was then established to provide expert advice to government; their goal being to keep them on track to meet the new targets.
Most recently, New Zealand made an announcement at COP26 of a new more ambitious target, to reduce net emissions by 50% below 2005 levels by 2030. The plan outlining how New Zealand will achieve this target is set to be released in May 2022. New Zealand did, however, receive the Fossil Award during COP26 from the Climate Action Network due to the fact that the Government refused to update the National Determined Contribution to constraining global temperatures. This may have an adverse effect on New Zealand’s touted “green” reputation as the award is given to countries who are “doing the most to achieve the least” and “doing their best to be the worst” in terms of climate change progress/action.
Also recently, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill is currently in its third reading. New Zealand will be the first in the world to require mandatory reporting of, predominantly, large listed companies, banks, insurers and investment managers; to ensure climate change is routinely considered.
Of the many layers to fighting climate change, one that may not commonly be considered, is that your lawyer can help by taking action via your legal drafting.
The Chancery Lane Project is a collective of lawyers from around the globe that have focused their efforts on developing contractual clauses to help fight climate change – enter the Climate Contract Playbook (3rd Edition); delivering climate action via legal drafting. The Playbook provides model clauses for climate solutions by incorporating climate change thinking into legal drafting. Draft clauses for a variety of documents are publicly available online for anybody to download. The clauses are drafted in the context of English law; however, a lawyer with expertise in the area of law specific to your needs would be able to assist you with the conversion process to fit within New Zealand’s jurisdiction.
Areas where these draft clauses can potentially be used are commercial, corporate, construction, finance and capital markets, insurance, planning, real estate, employment, energy and transport, litigation and arbitration. There are over 70 drafted climate change clauses (which have been rigorously peer reviewed) with a user manual that provides context to the clause. Each clause is named after children as a reminder that the use of these clauses will have an impact on future generations; following are two examples.
Annie’s clause (commercial) – a carbon termination clause, which provides a customer with a right of termination so that they can change to a greener supplier to ensure they meet their own sustainability or other climate objectives.
Eric’s clause (employment) – an employer-employee environmental obligation clause, which provides that where garden leave is given under a notice of termination of employment, the employee can (with approval) utilise that garden leave period to undertake volunteer activities at an environmental organisation; allowing a sense of purpose via engagement with local community in the fight against climate change.