As the world becomes increasingly focused on mitigating climate change, the supply chain management industry is stepping up in bigger and broader ways to do its part. One of the latest examples is the growing use of climate-conscious clauses in contracts between partners. Existing in many forms and iterations, these clauses share the common thread of partnering to shrink a carbon footprint.
The practice of including these different climate change clauses is still new, but you can expect to see them with increasing frequency going forward. In general, a company will include clauses related to their specific environmental, social and governance (ESG) goals. Currently, you’ll find these clauses originating from large companies and passed along to their vendors. Expect provisions on fair and safe labor practices and environmental practices. These might include requirements to reduce greenhouse gas emissions, for instance, or when working with foreign suppliers, restrictions on forced or child labor. The clauses can be multi-layered and sometimes difficult to follow/understand, and enforceability will be a question, as well. No matter where your company falls in the supply chain, having counsel review requests to or from partners on these clauses is essential.
