JARGONFREE Compass for Sustainable Contracting

Key take-aways (Module II)

Contracts as drivers of sustainability

  1. Contracts are central to supply chain sustainability. International guidelines and principles, such as the UNGPs and the OECD Guidelines, as well as EU regulations such as the Corporate Sustainability Due Diligence Directive, the Battery Regulation, the Conflict Minerals Regulation, the Ecodesign for Sustainable Products Regulation, the Construction Products Regulation and the Forced Labour Regulation, all identify contracts as a key tool for managing supply chain sustainability.

  2. Contractual assurances are not just paperwork. Contractual assurances under EU regulation must be paired with verification, tailored to your company’s and supply chain’s risks, and fair to SME partners.

  3. Contract language matters. Clear and precise language is essential in contracts because shared understanding is required for true agreement. Overly abstract or vague language can lead to ambiguity and misinterpretation.

  4. Your contract stack matters. Sustainability requirements may appear across several documents within the contract stack, such as General Terms and Conditions, specifications, (Supplier) codes of conduct, Supplier Requirements, or policies. Make sure that all relevant sustainability content becomes part of the binding contract stack!

  5. Sustainability requirements can be paired with contractual remedies. A failure to comply with sustainability requirements set in the contract may lead to consequences for contract breach.

  6. Resources are available. Use existing clause libraries and model clauses as starting points, but tailor them to your specific needs and risks.

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What’s next?

In the next Module, we will explore why sustainable contracting often fails in practice – from missing, too generic, hidden, misaligned, or misplaced sustainability content to requirements that are complex or difficult to understand, and from unfeasible or unrealistic sustainability requirements to unassigned responsibility and contracts that are not embedded in practice. Understanding these problems will help you design more effective solutions.

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