In a world grappling with the imminent challenges of climate change, the European Union (EU) is boldly leading the way with a robust set of climate laws and regulations. These laws are not just limited to environmental sectors but are set to impact businesses across the board, making it imperative for companies to adapt and align their legal contracts with these new expectations. In this blog post, we'll delve into the key insights from the recent developments in the climate business space that shed light on the EU's groundbreaking climate laws and explore how companies can transition smoothly into this new landscape, and more specifically, through their contracts.The European Climate Law, an integral part of the European Green Deal, has set a remarkable precedent. It binds the EU to the legally binding target of achieving climate neutrality by 20501. This monumental legislation also includes an interim goal of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. But what sets it apart is its ambition to integrate climate goals into every facet of EU policies, ensuring that the entire society plays a part in this transition.
The main objectives of the Regulation are:
- “To reduce greenhouse gas emissions within the European Union, after deduction of removals, by at least 55% by 2030 compared to 1990 levels;”
- “To limit the contribution of net removals to the Union 2030 climate target to 225 million tonnes of CO2 equivalent;”
- “To achieve climate neutrality in the European Union by 2050, i.e. to reduce greenhouse gas emissions to zero by 2050;”
- “To establish a system allowing the European Commission to monitor and review the progress in legislative work aimed at counteracting climate change, including the assessment of Union and national measures;”
- “To establish a European Scientific Advisory Board on Climate Change that will (i) provide independent scientific advice and (ii) report on Union measures, climate targets and indicative greenhouse gas budgets, as well as their consistency with the European Climate Law and international obligations of the European Union under the Paris Agreement.”
The corporate sector is at the forefront of these changes. Energy production and use, responsible for 75% of EU greenhouse gas emissions are undergoing transformation. Companies are encouraged to renovate buildings, improve energy efficiency, transition to greener transportation options, shift to a circular-economy model by recycling and reusing materials, and consider offsetting measures to compensate for emissions. Reining in this new era of climate regulation begs the question of how businesses can successfully navigate these new climate laws in the context of legal contracts. Companies should take the following steps to ensure a smooth transition.
- Legal Compliance Audits: Start with a comprehensive legal compliance audit. Evaluate your existing contractual obligations and identify areas that need adjustment to align with the new climate laws.
- Contractual Provisions: Review and revise your current contracts. Integrate environmental sustainability clauses, clearly articulating your commitment to reducing emissions, adopting green technologies, and complying with the EU's climate targets.
- Transparency: Enhance transparency within contracts. Clearly outline climate-related commitments, reporting requirements, and mechanisms for dispute resolution.
- Supply Chain Assessment: Assess the impact of climate regulations on your entire supply chain. Ensure that your suppliers and partners are also aligned with the new expectations.
In conclusion, the EU's new climate laws and regulations are ushering in a transformative era for businesses. By proactively adjusting legal contracts to align with climate goals, companies can not only comply with the law but also play a vital role in shaping a greener and more sustainable future. This is where Advocat comes in. With our user-friendly platform businesses can easily insert sustainability clauses into their contracts, ensuring that environmental considerations are woven into their agreements. Example of commonly used climate clauses include requiring the use of green energy in supply chains, promoting regenerative farming in pasturage agreements, and integrating environmental targets in limited partnership agreements.3 The Chancery Lane Project provides numerous case studies showing how these clauses have been implemented – highlighting their use by public organizations such as the Environment Agency and New Zealand Green Investment Finance, as well as companies and law firms.Furthermore, Advocat offers environmental evaluations of contracts, allowing companies to assess the ecological impact of their agreements. By leveraging Advocat's tools, companies are empowered to embrace the changes driven by the EU's climate regulations. They can make sustainability an integral part of their business operations and contractual commitments. By doing so, these businesses become active contributors to addressing the pressing climate challenges of our time. In essence, Advocat facilitates the transition towards a more eco-conscious and responsible corporate landscape, where businesses actively participate in building a sustainable future."