Green Contracting 101: How Small Businesses Can Embed Climate Action Into their Agreements.
At As Your Counsel, we believe contracts are more than just paperwork; they’re powerful tools for shaping the kind of future we want to live in. If you're a small business owner who cares about sustainability or wants to access the green market space, green contracting provides a clear and actionable way to align your day-to-day operations with your climate values.
Whether you’re hiring a vendor, leasing office space, or forming a new entity, every contract you sign is an opportunity for climate action.
What is Green Contracting?
100% of contracts involve emissions. By rewriting how we contract, we help shift economic activity toward a decarbonized world. Green contracting means embedding climate-conscious terms into your legal agreements. This can include:
Using low-emissions materials or services
Setting emissions reduction or energy usage targets
Requiring environmental certifications or disclosures from vendors
Committing to sustainable sourcing, packaging, or transportation
At its core, green contracting transforms legal language into a vehicle for environmental stewardship, doing so in real, immediate ways.
Why Embed Climate Clauses in Contracts?
Contracts are one of the fastest and most scalable levers for reducing emissions. Unlike complex legislation or massive infrastructure overhauls, contract changes can:
Be implemented quickly
Apply to everyday operations (e.g., waste removal, HVAC use, office supply sourcing)
Encourage vendors and clients to meet your climate goals
Set expectations early to reduce conflict, risk, or compliance issues later
Every contract is an opportunity for climate action, and small changes, especially in recurring contracts, add up.
Why Small & Medium-Sized Enterprises (SMEs) Should Lead the Way
SMEs (businesses with fewer than 500 employees) make up 90% of all businesses worldwide, and collectively, they have a significant carbon footprint. But they also have a unique advantage:
Agility: SMEs can often implement change more quickly than large corporations.
Market access: Sustainability opens doors to green markets and climate-conscious clients.
Resilience: Sustainability planning protects against environmental, legal, and supply chain risks.
Businesses that take climate action early enjoy long-term gains in efficiency, reputation, and resilience.
What Climate Clauses Address
Green clauses aren’t just good policy; they’re strong legal risk management tools. Well-drafted clauses can address:
Physical Risks: Floods, wildfires, and other climate-driven disasters can’t always be insured or litigated. Reducing emissions helps reduce their frequency and severity, reducing the chance your business is impacted by natural disasters.
Transition Risk: New laws and shifting regulations can catch businesses off-guard. Climate clauses help you stay ahead of the curve and reduce disruption.
Liability Risk: Avoid claims of greenwashing, breaches of fiduciary duty, or failing to comply with sustainability disclosures and ESG reporting requirements.
What Can You Address in a Green Contract?
Emissions categories:
Scope 1: Direct emissions from owned/controlled sources (e.g., fuel, materials)
Scope 2: Offsite emissions from purchased electricity/heating
Scope 3: Indirect emissions from your supply chain (e.g., packaging, logistics)
Nature-based dependencies: look at how your business interacts with
Water systems
Forests and biodiversity
Coastal and urban infrastructure
Vulnerable communities
Even simple actions, such as reducing water use in kitchens or switching to non-toxic cleaning products, can be built into contracts to protect these dependencies.
Types of Climate Clauses to Consider
There’s no one-size-fits-all approach. Here are some examples:
Intentions: State your environmental goals clearly
Covenants: Binding promises to meet sustainability targets
Cooperation: Agree to work with vendors on shared goals
Disclosure: Require reporting on emissions or energy use
Regulatory: Commit to staying compliant with local and global sustainability laws
Incentives/Penalties: Reward good behavior—or build in consequences
Audit/Termination: Keep contracts flexible and enforceable
Specific Actions: Set measurable expectations for waste removal, transport, lighting, HVAC use, and more
For example, instead of a flat fee for waste removal, tie payment to volume to incentivize waste reduction.
Getting Started: Climate Transition Planning
You don’t need to overhaul everything at once. Start with:
1. A basic understanding of your current operations
2. Identification of your assets, risks, stakeholders, and potential leverage points
3. A review of existing contracts, especially those up for renewal
4. Use tools like the SME Climate Hub Measurement Tool to map your baseline
From there, you can start inserting clauses at natural checkpoints and slowly build a legal ecosystem aligned with your climate goals.
How We Can Help
At As Your Counsel, we work with climate-conscious entrepreneurs, nonprofits, and small businesses to:
Draft or revise contracts with green clauses tailored to your industry
Incorporate environmental commitments into business formation and governance
Evaluate supply chain risks and emissions exposure
Help you stay compliant while aligning with evolving climate regulations
Climate leadership starts with everyday decisions. If you’re ready to build sustainability into your business agreements, we’re here to help.