A New Climate for Corporations

By Alan J. McDonald

By Alan J. McDonald

The case for a climate clause

The newly appointed Albanese Government has flagged the climate crisis as a priority concern going so far as to propose a net zero emission target by the year 2050.[1] Australia has recommitted to its obligations under the Paris Agreement – an international treaty designed to combat climate change at the global level.[2]

How does this affect small businesses? Climate conscious consumerism forms the backbone of modern society.

In 2021, the United Nation’s Intergovernmental Panel on Climate Change (‘IPCC’), released what is described as its ‘most assertive report in 30 years’.[3] The report found that in the last 2000 years, human influence has accelerated global warming at unprecedented and hazardous rates.[4]

In the private sphere, corporations attempt to align themselves with the current government by adapting and implementing meaningful climate protection practices. Growing businesses may seek to implement change by way of introducing climate conscious policies in the workplace. Larger corporations, however, may adopt a more robust approach such as including specific climate conscious provisions within their employment agreements.

The Chancery Lane Project (‘TCLP’) is a collaborative international initiative organised by legal professionals with a vision to ensure climate efficient contracting as a solution to climate change. TCLP provides an abundance of free and accessible draft contractual provisions that may be incorporated into employment agreements.

One such provision, is the Athena Clause, which requires an employee to participate in environmental educational programs as a condition of employment.[5] The theoretical foundation for the clause is well-founded, well-researched and closely aligned with existing government priorities. However, clauses mandating climate action may be perceived as ambitious, or even invasive in circumstances where an employee’s views conflict with that of the corporation.

Rather than mandating climate action in and outside of the workplace, a flexible alternative may be to encourage and incentivise employee compliance with such terms. Alternatively, a corporation may design a specifically tailored climate clause in order to evince its commitment to government priorities and simultaneously afford its employees the freedom of autonomy and expression.

The business case for climate action

Not only is it worth businesses considering the advancement of government initiatives, it may also ensure their business success. The business case is clear. Without effective climate policies, corporations will be perceived as disconnected from modern reality. A climate conscious clause symbolises to the public a corporation’s commitment to ethical trading and its long-term climate goals. The value of maintaining a positive public image should not be underestimated by businesses. The recent success of the Teal Independents evinces one way in which symbolism can influence the public perception. The candidates, by combining the colours of blue and green, represent the coming together of traditional Liberal values and climate action. This was perceived as in touch with the existing reality of the climate crisis, even in the eyes of the most conservative voter.[6]

Avoiding corporate greenwashing

In drafting climate clauses, businesses must live to the issue of greenwashing and its associated penalties. ‘Greenwashing’ broadly refers to an organisation’s willingness to spend copious amounts of time and money in marketing itself as sustainable, whilst failing to genuinely attempt to mitigate its adverse environmental impact.[7] By tailoring contractual provisions specifically to the businesses objectives whilst minimising its environmental footprint, corporations protect themselves from onerous ACCC and ASIC penalties. This is particularly pertinent as in early June 2022, both corporate watchdogs vowed to pursue corporations who actively overrepresented their environmental credentials, commitments, and policies.[8]

Navigating employment agreements in a sustainable world

Encouraging corporate responsibility, in alignment with governmental values, allows employees to retain a sense of individualism. By ensuring that the freedom of expression co-exists with progressive government policies, corporations are able to remove politics from this issue. If you are seeking to design and implement a progressive range of climate conscious clauses into your businesses employment agreements, the author can offer specifically tailored advice on this matter.

[1] Assistant Minister for Climate Change and Energy, Stronger action on climate change (Media Release, 16 June 2022), [4] https://www.minister.industry.gov.au/ministers/mcallister/media-releases/stronger-action-climate-change>.

[2] United Nations Climate Change, The Paris Agreement (Web Page, 2022) <https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement>; United Nations, Climate Action (Web Page) <https://www.un.org/en/climatechange/net-zero-coalition>.

[3] Torok, Goldie and Ashcroft, ‘Communicating climate change has never been so important, and this IPCC report pulls no punches’, The Conversation (online, 12 August 2021) [6]-[12] <https://theconversation.com/communicating-climate-change-has-never-been-so-important-and-this-ipcc-report-pulls-no-punches-165252>.

[4] Intergovernmental Panel on Climate Change, Summary for policymakers (Assessment Report Summary), 5 <https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM.pdf>; Torok, Goldie and Ashcroft (n 1).

[5] The Chancery Lane Project, Employee Climate Engagement Provisions (Web Page, 5 November 2021) <https://chancerylaneproject.org/climate-clauses/employee-climate-engagement-provisions/>.

[6] Wahlquist, ‘Teal Independents: who are they and how did they upend Australia’s election? The Guardian (online, 23 May 2022), [2] <https://www.theguardian.com/australia-news/2022/may/23/teal-independents-who-are-they-how-did-they-upend-australia-election>.

[7] Robinson, ‘What is Greenwashing?’ Earth.org (online, 23 July 2021), [2] <https://earth.org/what-is-greenwashing/>.

[8] Commissioner Armour, ‘What is ‘greenwashing’ and what are its potential threats?’ Australian Securities & Investments Commission (online, July 2021) <https://asic.gov.au/about-asic/news-centre/articles/what-is-greenwashing-and-what-are-its-potential-threats/>.