How lawyers can translate climate goals into enforceable contracts

As the climate crisis accelerates, legal professionals are emerging as key enablers in the shift towards low-carbon business practices. With growing investor scrutiny and evolving regulations, organisations can no longer rely on vague climate pledges. To meet the moment, they must develop transition plans that are not only credible, but also legally binding, transforming ambition into enforceable action.

Contracts are at the heart of this transformation. They form the foundation of business relationships and can be instrumental in embedding climate objectives. A well-crafted contract has the potential to translate a company’s climate commitments into enforceable obligations.

Aligning contracts with transition plan targets

Climate transition plans are essential roadmaps for achieving decarbonisation. However, without mechanisms for accountability, they risk becoming little more than good intentions. Lawyers have a critical role to play in embedding these plans into contracts.

Effective contracts will align with an organisation’s transition plan. For example, a supplier agreement might mandate the use of renewable energy or require a set percentage reduction in emissions within a defined timeframe. Including regular reporting requirements can further enhance transparency and keep all parties aligned. When challenges emerge, tools such as renegotiation clauses or corrective actions create space for open dialogue and collaborative solutions, ensuring all parties remain aligned and committed to their climate objectives.

One example of this in action is NatWest, which has embedded climate clauses into its supplier contracts to support its net-zero strategy. The bank requires suppliers to improve their sustainability scores and demonstrate measurable emissions reductions. If suppliers fail to make progress, NatWest has the option to renegotiate the contract, ensuring that its supply chain aligns with its broader climate commitments. This approach highlights how contracts can be leveraged as accountability tools to drive sustainability performance across business relationships.

By embedding these elements into contracts, legal professionals can ensure that climate transition plans become practical frameworks that drive real-world action.

Mitigating risk

Beyond mere compliance, businesses recognise that climate change presents material risks, and that taking proactive steps to meet climate goals helps mitigate these risks. Climate-aligned contracting offers a strategic approach to embedding sustainability commitments directly into business operations. Integrating climate goals into contracts allows companies to safeguard against financial, operational and environmental risks, while reinforcing their leadership in the transition to a low-carbon economy. Crucially, aligning contractual obligations with the Paris Agreement’s 1.5°C target enables businesses to actively contribute to limiting the global temperature rise and enhancing long-term resilience.

The Chancery Lane Project’s Deliver a Climate Transition Plan guide offers organisations a structured and practical approach to developing and implementing climate transition plans. It provides a clear, step-by-step process that helps businesses systematically enable decarbonisation, while ensuring they comply with evolving regulations. One of the guide’s key features is its focus on embedding climate goals within legal frameworks. It assists organisations in incorporating climate clauses into contracts, making these commitments enforceable.

Overcoming barriers to climate-aligned contracting

Adopting climate-aligned contracts is not without its challenges. Resistance to change, unclear climate objectives, and difficulties in tracking progress can all pose obstacles. However, legal professionals are well-placed to address these issues and drive meaningful change.

Educating business stakeholders about the importance of integrating climate goals into contracts is a key starting point. Lawyers can highlight the long-term value of these measures, not only in terms of regulatory compliance, but also in fostering resilience, mitigating risk and enhancing reputations. Tailoring contract provisions to suit specific needs ensures that climate commitments are both realistic and achievable. Furthermore, contracts can foster collaboration across value chains, encouraging suppliers, partners and other stakeholders to actively support shared climate objectives.

Key takeaway

Climate contracts empower organisations to contribute meaningfully to global decarbonisation efforts.

Embedding clear targets, accountability mechanisms and enforcement provisions into contracts is an essential step in delivering effective climate transition plans. In doing so, legal professionals become vital agents of change, helping to shape a sustainable future, one contract at a time.

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