Sustainability Clauses in Commercial Contracts: The Key to Corporate Responsibility

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 is a purpose-driven company dedicated to embedding sustainability intelligence into every business decision worldwide. We offer a full range of solutions including IQ-Plus Risk & Compliance Management, EcoVadis Ratings, and Carbon Action Module for Scope 3 Decarbonization. Key features like 360/Live News Monitoring, Academy E-learning and Corrective action plans help companies comply with ESG regulations, reduce GHG emissions, and improve the sustainability performance of their business and value chain across 220 industries in 180 countries.

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