UNGC Toolkit for Sustainable Procurement
Chapter on Responsible Contracting
RCP contributed a chapter on Responsible Contracting to the UN Global Compact (UNGC)’s Decent Work Toolkit for Sustainable Procurement, which enables action to improve labor conditions for supply chain workers. RCP’s chapter outlines the why and how of Responsible Contracting, outlining the business case for Responsible Contracting, explaining how it supports transparency and compliance with key human rights and environmental due diligence (HREDD) laws like the EU Corporate Sustainability Due Diligence Directive (CSDDD) and trade sanction laws like the US Uyghur Forced Labor Prevention Act (UFLPA), and provides practical tools from our Toolkit as well as real-world case studies from sectors like apparel, agriculture, and tech.
Read the UNGC Toolkit chapter on Responsible Contracting in Sustainable Procurement.
UNGC Sustainable Procurement Toolkit:
Chapter on Responsible Contracting
UPCOMING CONSULTATION EVENT ALERTS: We have two upcoming consultation events taking place around the UN Business & Human Rights Forum in Geneva
Tuesday November 26, 2024, 5:10pm - 5:35pm CET, United Nations, Room XXIV (open to BHR Forum registrants) -
Snapshots series on practical approaches and tools on HRDD for business: The European Model Clauses and Responsible Contracting in Supply Chains
Speakers: Zsofia Kerecsen, Team Leader Corporate Governance Policy, DG JUST, European Commission and Martijn Scheltema, Attorney-at-law and Partner, Pels Rijcken & Droogleever Fortuijn N.V and head of the Working Group for the EMCs.
Click here for more information
Wednesday, November 27, 2024, 4:00m - 5:30pm CET (light reception to follow until 6:30pm)
Address: White & Case, Geneva, 3rd floor, 3 Quai du Mont-Blanc, 1201 Geneva
Please register here, note that space is limited to 25 participants.
This session will be dedicated to receiving feedback on the Zero Draft of the EMCs from participants. We will begin with a short presentation of the EMCs by members of the European Working Group, followed by a group discussion on the EMCs.
TKTK
The EMCs seek to improve the effectiveness of contracts as tools for preventing and addressing adverse HRE impacts**, as required by the new mHREDD laws. As traditionally used, contracts tend to undermine the effectiveness of companies’ HREDD processes by transferring both the contractual and the financial responsibility for upholding HRE standards to other actors in the supply chain, namely their suppliers (e.g. manufacturers).
Traditional, one-sided contracts that place the entire responsibility for upholding HRE standards on suppliers and allow the buyer to exit the contract immediately in the event of--even small--deviations from the supplier code of conduct, are ineffective for avoiding adverse HRE impacts. By extension, traditional contracts are not fit for purpose when it comes to carrying out effective HREDD, as required by the new laws**.
The EMCs move away from the traditional, one-sided model of contracting towards a model of shared-responsibility contracting where both parties to the contract, the buyer (e.g. brands and retailers) and the supplier, contractually commit to carry out on-going and risk-based HREDD in cooperation with one another.
For a brief intro to the EMCs from several members of the European Working Group, including Martijn Scheltema, Co-Chair of the Working Group, Beata Faracik, Co-Founder, Polish Institute for Human Rights, and RCP Director, Sarah Dadush, check out this video and accompanying slides.
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** For analysis of the content of mandatory due diligence laws with respect to contracts, see the RCP Policy Brief: What the EU CSDDD Says About Contracts (July 2024) and Sarah Dadush, Daniel Schönfelder & Bettina Braun, Complying with Mandatory Human Rights Due Diligence Legislation through Shared-Responsibility Contracting: The Example of Germany’s Supply Chain Act (LkSG), Chapter 14, Contracts for Responsible and Sustainable Supply Chains: Model Contract Clauses, Legal Analysis, and Practical Perspectives, (Susan Maslow & David Snyder eds., ABA Business Law Section, 2023) (Book available here).
***Article 18 on Model Contractual Clauses and the accompanying Recital 66 contemplate the development of guidance on contracting by the European Commission and clarify that this guidance "should aim to facilitate a clear allocation of tasks between contracting parties and ongoing cooperation, in a way that avoids the transfer of the obligations provided for in this Directive to a business partner and automatically rendering the contract void in case of a breach. The guidance should reflect the principle that the mere use of contractual assurances cannot, on its own, satisfy the due diligence standards provided for in this Directive.".
The EMCs reflect the 3 "Rs" of responsible contracting:
1. Responsible allocation of risks and responsibilities: Set aside supplier-only guaranties of perfect compliance in favor of a joint commitment to cooperate in carrying out human rights and environmental due diligence (HREDD)
2. Responsible purchasing practices: Commit the buyer to engage in purchasing practices that can support effective HREDD
3. Remediation first and responsible exit: If an adverse impact happens, provide remedy to victims and take measures to ensure the harm stops and does not reoccur before turning to traditional contract remedies (e.g., suspending payment and canceling orders). Exit should only be pursued as a last resort, taking measures to mitigate the impact.
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