--- title: Gain-Share Incentive for Reducing GHG Emissions excerpt: date: 2024-03-27T14:16:42Z modified: 2025-10-09T11:08:59Z file_type: md permalink: clauses/gain-share-incentive-for-reducing-ghg-emissions.html wpid: 2115 status: publish type: clause jurisdiction: - England & Wales maintenance-status: - Maintained practice-area: - Commercial - Supply chain eleventyComputed: clause_child_name: "Jess and Rory's Clause" clause_summary: This clause incentivises a counterparty to reduce greenhouse gas emissions in exchange for a gain-share payment calculated by reference to the value of the goods or services it provides. clause_last_updated_date: 2025-02-17 layout: layouts/clause.njk --- # Gain-Share Incentive for Reducing GHG Emissions ## Child’s name Jess and Rory's Clause ## Summary This clause incentivises a counterparty to reduce greenhouse gas emissions in exchange for a gain-share payment calculated by reference to the value of the goods or services it provides. ## What this clause does This clause introduces a gain-share payment into a contract. Receiving a gain-share payment in exchange for reducing greenhouse gas emissions during the contract term is a powerful incentive for a party to decarbonise – especially in sectors that operate on narrow margins (like construction) or commercial environments undergoing aggressive cost savings. ## Clause Content \[*Drafting note: capitalised terms relate to a defined term in this clause or a defined term in the main agreement that this clause is designed to be inserted into.*\] **1. Measure, manage and report GHG Emissions** 1.1 From \[*insert date* OR the date of this Agreement\] and for the duration of the Term, Party B shall measure, manage and report its [GHG Emissions](https://chancerylaneproject.org/glossary/greenhouse-gas-emissions/) in accordance with the provisions of \[this clause \[ \] OR these clauses \[ \] to \[ \] \]. 1.2 \[From the date of this Agreement OR Within \[*number*\] days of the date of this Agreement\] Party B shall formally adopt and implement the Carbon Footprint Standards. 1.3 Party B’s board shall nominate 1 (one) of its directors to be responsible for ensuring that Party B complies with the Carbon Footprint Standards and requirements of this clause \[1\] during the Term. 1.4 Within 3 (three) months after each anniversary of the date of this Agreement, Party B shall submit a GHG Report to Party A. **2. Contents of GHG Report** 2.1 This clause \[2\] sets out the minimum requirements for the contents of the GHG Report. 2.2 The GHG Report shall report and \[where appropriate\] explain for the GHG Reporting Period: 2.2.1 the industry best practices on managing and reducing [GHG Emissions](https://chancerylaneproject.org/glossary/greenhouse-gas-emissions/) that Party B has applied, and how Party B has applied them; 2.2.2 Party B’s measured [Scope 1, 2 and 3 Emissions](https://chancerylaneproject.org/glossary/scope-1-2-and-3-emissions/); 2.2.3 the measured Services Carbon Footprint; 2.2.4 the measured Supply Chain Carbon Footprint; \[and\] 2.2.5 the reduction in [GHG Emissions](https://chancerylaneproject.org/glossary/greenhouse-gas-emissions/) achieved by Party B measured against the Scope 1, 2 and 3 Emissions stated in the GHG Report for each preceding GHG Reporting Period \[; and 2.2.6 \[*insert additional requirements*\]\]. **3. Verification** 3.1 In order to ensure the accuracy and reliability of the GHG Report, Party B shall cooperate and collaborate with Party A as reasonably required on: 3.1.1 how Party B measures, manages and reports on its [GHG Emissions](https://chancerylaneproject.org/glossary/greenhouse-gas-emissions/); 3.1.2 Party B’s preparation of each GHG Report; and 3.1.3 the other obligations on Party B under this clause. 3.2 If Party A reasonably requires it and notifies Party B within \[*number*\] days\] of the date of a GHG Report (and not more than once in relation to any GHG Reporting Period), Party B shall appoint an independent external auditor or verification authority (as agreed between the parties) to certify its GHG Report. 3.3 Party B shall meet all costs associated with the external auditing and verification of the GHG Reports commissioned in accordance with clause \[3.2\]. **4. Reduction of GHG Emissions** 4.1 Party B will reduce its [GHG Emissions](https://chancerylaneproject.org/glossary/greenhouse-gas-emissions/) by no less than the percentage shown in clause 4.2 in each GHG Reporting Period to which a GHG Report relates. 4.2 Party B will reduce the Services Carbon Footprint by \[●\] percent each GHG Reporting Period (when compared to the previous GHG Reporting Period) for the duration of the Term. **5. Gain-Share Mechanism** 5.1 Where Party B reduces the Services Carbon Footprint by more than the percentage stated in clause \[4.2\] in a GHG Reporting Period then the following gain-share mechanism shall apply (the **Gain-Share Mechanism**): **Total Reduction** = the absolute reduction in [Carbon Footprint](https://chancerylaneproject.org/glossary/carbon-footprint/) between \[year\] and \[the following year\] \[as stated in the GHG Report\] **Additional Reduction** = Total Reduction less the Agreed Reduction (as set out in clause 4.2) **Gain-Share Payment** = Additional Reduction x \[*insert agreed rate\**\] to offset 1 (one) tonne of [Carbon Dioxide Equivalent](https://chancerylaneproject.org/glossary/carbon-dioxide-equivalent-co2e-or-co2eq/) x 50 (fifty) percent. \[\**Drafting note: the rate should be in line with those for a high quality, verified project in accordance with the Oxford Principles for Net Zero Aligned Carbon Offsetting (as amended)*\] **6. The Gain-Share Payment** 6.1 The gain-share payment(s) shall be calculated in accordance with the Gain Share Mechanism described under clause \[5\] (the **Gain-Share Payment**). 6.2 Subject to clauses \[6.3 and 6.4\] the Gain Share Payment shall be paid by Party A to Party B in accordance with clause \[6.5\]. 6.3 The total Gain-Share Payment(s) due from Party A to Party B in a GHG Reporting Period shall not exceed \[●\] percent of the annual value of the Services provided by Party B to Party A during the same Contract Year to which the GHG Reporting Period relates. 6.4 If Party A requests certification of the relevant GHG Report by an external auditor or verification authority in accordance with clause \[3.2\], the Gain-Share Payment shall only become due for payment after any verification process pursuant to clause \[3.2\] is complete. 6.5 Party B shall invoice Party A for any Gain-Share Payment after it has become due for payment in accordance with this clause \[6\] and it shall be paid by Party A as if it were part of the payment for the Services \[in accordance with the terms of the \[Agreement OR *insert reference to relevant payment terms*\]. 6.6 Party B shall invest at least \[●\] percent of any Gain-Share Payment(s) received by Party A into green or sustainability initiatives (such initiatives to be agreed between the parties). Party A reserves the right to ask Party B for evidence that it is complying with this requirement and Party B shall provide such documentary evidence upon reasonable request without delay. 6.7 Any dispute arising out of or in connection with the Gain-Share Payment (including without limitation disputes relating to its calculation, payment, and application) shall be resolved in accordance with the \[Agreement OR *insert reference to Alternative Dispute Resolution Clause*\]. ## Updates **February 2025** This clause has been updated following a routine quality assurance review. Some wording was amended and some definitions were added to improve clarity. A drafting note was added about offset rates.