Problem 4: Unfeasible or unrealistic requirements
Even when sustainability commitments are relevant, visible, and clearly expressed, they may still fail if they are not feasible or are disconnected from operational and commercial realities.
A party with stronger bargaining power (often the buyer) may impose requirements that appear formally acceptable but are difficult or impossible to fulfil.
A contract can include various sustainability requirements while simultaneously allowing for commercial practices that undermine their implementation.
For example:
- the buyer may require a price that makes it impossible to consider sustainability issues
- if the supplier does not receive payment within a reasonable timeframe, the arrangement may become economically unsustainable
- sustainability requirements may be passed on without corresponding commitments by the buyer
Contracts may focus primarily on sanctions and termination rights while providing little support for implementation, collaboration, or continuous improvement. This does not encourage collaboration and may lead to problems being hidden or left unaddressed, making disputes more likely.
If pricing, payment terms, lead times, termination rights, or other purchasing practices make it impossible for suppliers to meet sustainability requirements, contractual assurances may become ineffective.
When contractual expectations are not aligned with operational and commercial realities, commitments may become unworkable.
This highlights the need for coordination between:
- procurement
- contract management
- sustainability
- legal/compliance
- business teams
- product, technical, and quality colleagues
Rather than creating conflicting pressures, sustainability-related expectations, contractual wording, and commercial practices should support each other.
If you represent a large company operating in the EU, the CSDDD sets requirements when contractual assurances are sought from SMEs; they must be fair, reasonable, and non-discriminatory, taking into account the capacities and resources of smaller companies.
Diagnostic exercise: Are requirements realistic and feasible?
Take one sustainability-related requirement from your contract.
Ask:
- Is the requirement realistic, feasible, and actionable?
- How do pricing, payment terms, and lead times affect implementation?
- Are both parties expected to contribute to achieving sustainability outcomes?
- Does the contract include mechanisms that support implementation and continuous improvement, rather than relying primarily on sanctions?
- Does the contract include processes for monitoring, continuous improvement, and problem-solving?
If these questions are difficult to answer, the requirement may not be realistic, feasible, or sufficiently supportive of implementation.
Even when sustainability-related requirements are realistic and feasible, they may still fail if responsibility for their implementation is unclear.
The next problem focuses on who is responsible for ensuring that commitments are implemented in practice.
Problem 5. Unassigned responsibility next page