1. Causes of Action

7. POTENTIAL FUTURE APPLICATIONS

Future litigation may arise from breaches of contractual obligations to accurately represent environmental impact and comply with other climate-related clauses.

(a) Breach of Contractual Obligation to Accurately Represent Environmental Impact

The issue of accurately representing environmental impacts is critically important, especially given the rise of greenwashing. In today's environment, where political, social, and business spheres are increasingly focused on sustainability, companies recognise the power of environmental sustainability as a promotional tool in their advertising and marketing campaigns, often referred to as "green claims". However, issues arise when these green claims do not accurately reflect the environmental attributes of the products or services being marketed. This constitutes an illicit practice, particularly when advertisements contain false information, suggest that a product is more sustainable or less harmful to the environment than it truly is, lack sufficient scientific evidence, or are overly vague or generic (as seen in the case of Eni Diesel+ in Italy).

Contract law plays a crucial role in addressing greenwashing. Relevant laws include liability for breach of contract (e.g., Article 6:74, Dutch Civil Code), annulment due to misrepresentation (e.g., Article 6:228, Dutch Civil Code), and termination for breach of contract (e.g., Article 6:265, Dutch Civil Code). Discussions in the literature also extend to the responsibilities of financial institutions regarding the implementation of contractual conditions related to sustainability. These discussions include whether financial institutions should terminate contracts when sustainability conditions are not met and whether there should be an obligation to avoid contracts with entities that fail to align with European and/or international climate change objectives, such as the Paris Agreement.

(b) Breach of Other Climate-Related Clauses

The enforceability of 'climate'-related clauses remains uncertain, which may lead to them being the subject of future climate litigation. These clauses include:

• Clauses Addressing Climate Mitigation Goals and Policy Standards

Various agreements are crafted to support climate mitigation goals or to meet legislative and policy standards. This includes 'forest carbon contracts', which are agreements involving the management of forest areas to enhance carbon sequestration. If the distribution of economic benefits from these contracts is perceived to be unfair, they may face enforcement challenges or legal scrutiny as part of 'just transition litigation.'

Moreover, in countries where regulatory ambitions may not fully align with climate goals, contracts often attempt to exceed regulations. This includes efforts to reduce embodied carbon in long-term projects, which carry the risk of 'asset stranding',[4]  in anticipation that the proposed development may not meet future standards and requirements.

• Clauses Promoting Climate-Friendly Commercial Practices in the Supply Chain

Integrating climate-related clauses into supply agreements represents a strategic effort by companies to align their entire supply chain with their climate goals and commitments. This strategy has led businesses to adopt 'generic compliance clauses' aimed at ensuring adherence to environmental regulations. Moreover, contracts are increasingly incorporating commitments to sustainability, net-zero goals, and 'Green Modifications'' for climate resilience, among other eco-conscious provisions. A notable innovation is the 'green termination' clause, allowing contract dissolution over unsustainable practices.

The Chancery Lane Project (TCLP) has developed a comprehensive set of clauses that extend beyond risk management to include explicit mitigation objectives. Recently, TCLP has also introduced a new set of clauses designed to help organisations align their corporate practices with the upcoming Corporate Sustainability Due Diligence Directive (CSDDD). The practical enforceability and the impact of TCLP's clauses may be tested in court in the future.

[4] Stranded assets are "assets that have suffered from unanticipated or premature write-downs, devaluations, or conversion to liabilities." (Caldecott, B., Howarth, N., & McSharry, P. (2013). Stranded Assets in Agriculture: Protecting Value from Environment-Related Risks. Smith School of Enterprise and the Environment, University of Oxford. Available at: http://www.smithschool.ox.ac.uk/research-programmes/stranded-assets/StrandedAssetsAgricultureReportFinal.pdf .)