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Sustainability Clauses in Commercial Contracts: The Key to Corporate Responsibility

April 4, 2019 EcoVadis ‏‏‎

New regulations - such as the German Supply Chain Act ("LkSG"), Modern Slavery laws, and coming EU Directives such as Corporate Sustainability Reporting (CSRD) and Due Diligence (CSDDD) --  as well as consumer and stakeholder pressure regarding sustainability issues have made it crucial for businesses to manage and demonstrate their due diligence on environmental, social and ethical risks in their business relationships, especially in their value chain. As a result, companies, now more than ever, are including Sustainability requirements or 'clauses' in their contracts. This practice can significantly contribute to supplier performance improvement and prove highly effective for sustainability strategy.

This study provides a practical overview of how companies can integrate sustainability criteria into contracts with trading partners, with a framework covering 6 best practice areas, and feedback from 100's of suppliers and buyers. Studies on sustainability clauses are scarce, and one of this scale is unprecedented.  Sustainability practices are constantly evolving to respond to changing social and legal pressures. The aim of this study is to give a practical, reality-based overview of current practices. It discusses both, formal considerations, e.g. what should be included in a sustainability clause, and operational considerations, e.g. practical consequences of these sustainability clauses.

EcoVadis partnered with Affectio Mutandi to ensure the study reflects real-life practice and provides expert legal analysis for the study.

About the Author

EcoVadis ‏‏‎

EcoVadis is a purpose-driven company whose mission is to provide the world's most trusted business sustainability ratings. Businesses of all sizes rely on EcoVadis’ expert intelligence and evidence-based ratings to manage risk and compliance, drive decarbonization, and improve the sustainability performance of their business and value chain. Its AI-powered risk mapping, actionable scorecards, benchmarks, carbon action tools, and insights guide a resilience and improvement journey for environmental, social and ethical practices across 200 industry categories and 175 countries.

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