Climate clauses that survive a negotiation

Where the obligation comes from

Before drafting anything, establish which obligation you are giving effect to. Lender and investor conditions, customer procurement standards, exchange and regulator reporting expectations, and voluntary commitments already made by the board all produce different clauses. A clause written without a source tends to state an aspiration, and an aspiration is not enforceable by either party.

The anatomy of a workable clause

A climate clause that survives a negotiation has five parts, and the omission of any one of them is where most drafting fails. It defines its terms, including which emissions are in scope and by what standard they are measured. It sets a baseline against which performance is judged. It states the obligation, distinguishing an obligation to achieve an outcome from an obligation to use reasonable endeavours. It specifies the evidence that will demonstrate compliance, and who verifies it. Finally it provides a remedy, which may be a price adjustment, a right to audit, a step-in right, or termination.

Test any climate clause against these

• Is the scope of emissions defined, and by which standard?
• Is there a baseline, with a stated measurement date?
• Is the obligation absolute, or endeavours-based?
• What evidence is required, how often, and verified by whom?
• What happens if the obligation is missed?
• Who bears the cost of measurement and verification?
• Does the clause survive assignment and subcontracting?

Supply chain: the obligation you cannot perform alone

A commitment that depends on suppliers has to be capable of being passed down. That means flow-down obligations in subcontracts, a right to information rather than a hope of cooperation, and a realistic assessment of the leverage the organisation actually has. A clause requiring a supplier to deliver data it does not collect will be renegotiated the first time it is invoked.

Remedies proportionate to the breach

Termination for a missed emissions target is rarely credible in a contract both parties need. Graduated remedies are more likely to be agreed and more likely to be used: a remediation plan within a stated period, then a price adjustment, then a right to audit at the defaulting party's cost, with termination reserved for persistent failure. A remedy nobody would ever exercise gives the clause no weight in practice.

Where to find drafting precedents

The Village, the MZIZI climate network, supports the Chancery Lane Project and publishes a library of climate-conscious contract clauses without charge. Those clauses are drafting starting points rather than finished documents: each one still has to be reconciled with the governing law, the commercial bargain and the rest of the agreement it is dropped into.

This guide is general information about the law in Kenya and is not advice on your particular circumstances. Speak to an advocate about your own facts.