Going green from a transactional perspective

Going green from a transactional perspective
I confess, I have at times struggled to believe the whole “green” movement on the part of big business was anything more than a marketing opportunity for many. Frankly, I’m still not convinced that many companies that claim to be green really are, but there are companies taking big steps forward and interesting projects are afoot that might make being green a lot more than just a publicity stunt. Not that being green doesn’t come with challenges, but my hope is that it will bring awareness and accountability together in a positive way that helps us sustain our most precious resources — well before it is too late.
So how does “green” intersect with outsourcing and mainstream business transactions? As I recently learned in greater depth, being green is about being efficient, not just in our consumption of energy, but in our consumption of water as well, for a start. This doesn’t mean each new building is going to come equipped with its very own windmill (though I would never say never), but it does mean research is being done and new and innovative ways of utilizing, managing, and protecting precious resources are underway (and have been for some time) and hopefully going to become mainstream sooner rather than later.

In the meantime, one of the important discussions taking place relates to outsourcing and data centres. A company outsources a business unit to a service provider that has a data centre, in India or the Philippines for example, and there is a resulting impact to the environment by virtue of shifting the business from Manitoba to somewhere overseas. One of the business drivers for outsourcing is cost savings, also a business driver for being green. So both parties in the transaction can benefit. There are many good reasons to do your due diligence when looking to outsource, and increasingly companies are looking at how sophisticated the vendor is with respect to clean or green tech.

Indeed, whether you are the client or the vendor, it can pay to be green. For instance, if the information is properly gathered and the data analyzed in a meaningful way, smart grids for metering and managing energy and water consumption should be able to save money and have a positive impact on the environment. Where it becomes challenging from a transactional standpoint is ensuring that rights and obligations are clearly defined, and benefits derived are carved out.

The term “boilerplate” in association with agreements sets my hair alight at the best of times, and this is definitely an instance where one size most definitely does not fit all. A few things to consider when drafting agreements from a clean-tech perspective:

•    Where the parties intend to be collaborative in their relationship and there is even a remote chance that inventions will result (whether they are green or not), ownership of intellectual property rights in and the obligations relating to jointly developed IP needs to be clearly defined in the agreement. Companies are filing patent applications for innovative green solutions, be they business methods or otherwise, that could end up being the next industry “gold” standard, so being proactive about asserting one’s interests needs to be done upfront.

•    Rights in pre-existing materials, whether they are going to be embedded in deliverables or not, need to be clearly called out.

•    What the data is and how it is managed and protected needs to be clearly spelled out — whether the relationship involves a government entity or has an international component, or otherwise.

•    Don’t represent or warrant compliance with environmental standards if you aren’t complying. Don’t laugh, it happens.
•    Calling out the allocation of rights and interests (i.e. ownership, assignment, right to trade or sell) in carbon and water credits.
•    Gain share (i.e. government credits/incentives) by the parties in relation to sustainability practices.

•    Proportionate allocation of risk in relation to sustainability expectations and practices.
•    Compliance obligations with respect to laws and regulatory requirements related to environmental protection should be attributable to each party, as it relates to their business. Taking on liability for the other party’s compliance is just plain foolish, even if it is possible.

Whether and how the financial benefit of being green is apportioned between client and vendor is negotiable, just like the credits and ownership rights in innovative developments are. How companies leverage each against other “wants” and “must haves” is simply part of the strategic play. It will be very interesting to see how the relationship between clean tech and mainstream business evolves over time — and it will more and more as the financial (if not also the environmental, regulatory, and public perception) benefits become more apparent in good economic times and bad.

On a lighter note, I have been informed that reusing plastic bags from the grocery store is greener than using paper bags, and that my car being dirty is green, too. Go figure. Apparently it is more aerodynamic when it’s dirty than when it’s clean, and so better for the environment in terms of fuel consumption, so no rationalization needed for my not-so-clean car: I’m just doing my part in being green. Except of course that I have a car. . . .

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