Responsible
Contracting
Project
Core RCP Principles
The core RCP Principles outline three shifts that are essential for moving from traditional contracting to responsible contracting in order to effectively carry out human rights and environmental due diligence (HREDD) and to better support workers' human rights in supply chains: 1) From representations and warranties to human rights and environmental due diligence (HREDD), 2) from supplier-only responsibility to shared responsibility for HREDD, and 3) from traditional contract remedies to human rights remediation.
These responsible contracting principles are crucial, as many contracts for the manufacturing and supply of goods (e.g., clothing, electronics, agricultural products) do not include human rights-related obligations. When buyers (e.g. brands, retailers) do include such obligations in their agreements with suppliers, they tend to employ traditional contracting techniques that are not fit for purpose when it comes to upholding human rights. While traditional contracting techniques may be logical and effective for managing company risk, they are not effective for managing complex human rights risks in dynamic supply chains.
Traditional Contracting
Representations and Warranties
Whereby the supplier must make an unrealistic and static promise that it is and will always be in perfect compliance with the buyer’s human rights standards, as set out in the buyer’s human rights policies and supplier code of conduct (the so-called "tickbox" approach).
Responsible Contracting
Human Rights Due Diligence
Whereby both parties commit to take, in cooperation with one another, proactive and ongoing measures to identify, prevent, mitigate, account for and, where appropriate, remedy potential and actual adverse impacts in the supply chain. Human rights due diligence (HRDD) is dynamic, risk-based, and stakeholder-focused.
The three key distinctions between traditional contracting and responsible contracting can be summarized as follows:
The shortcomings of traditional contracting include:
Representations and warranties whereby the supplier promises that it is and will remain in compliance with the buyer’s human rights standards, as set out in the buyer’s human rights policies and supplier code of conduct.
Representations and warranties are static promises made by the supplier that there are not and never will be any adverse human rights impacts in their facility or supply chain. In other words, once this passive commitment is made, no further monitoring or measures are required. Given that it is virtually impossible for a supply chain to be entirely free of human rights issues, such promises are fictitious and may even place the supplier in breach of the contract on day one.
Supplier-only responsibility whereby the supplier alone is responsible for the human rights outcomes in its facility and supply chain.
Supplier-only responsibility clauses do not reflect the reality of the supply chain relationship, whereby the buyer’s own behavior and actions – in particular their purchasing practices – can influence (negatively or positively) the supplier’s ability to meet the buyer’s own human rights standards.
Remedies (“damages”) flowing only between the contracting parties whereby remedies only flow from the breaching party (which, in traditional contracts, tends to be the supplier) to the non-breaching party (which, in traditional contracts, tends to be the buyer).
Traditional contract remedies flow between the parties and not to the victims of human rights-related breaches – workers and community members. As such, they fail to account for harms to stakeholders beyond the contracting parties. In some cases, traditional contract remedies could even result in the buyer benefiting commercially from the breach.
Traditional Contracting
Supplier-Only Responsibilities
Whereby only the supplier is responsible for upholding human rights standards and, if anything goes wrong, only the supplier will be to blame and in breach. The buyer will (often) have the right to immediately terminate the contract and sue the supplier for damages.
Responsible Contracting
Shared Responsibility
Whereby the buyer and the supplier share responsibility for upholding human rights standards and both commit to avoid causing or contributing to adverse human rights impacts. The buyer commits to supporting the supplier's human rights performance, including through its purchasing practices (e.g., responsible pricing, assistance, changes, and exit).
Traditional Contracting
Traditional Contract Remedies
Whereby, if an adverse human rights impact is discovered, the buyer can immediately suspend payments, terminate the contract, and sue the supplier for breach, without giving the supplier an opportunity to cure or fix the problem, even when the buyer contributed to the impact through, for example, its purchasing practices.
Responsible Contracting
Human Rights Remediation First
Whereby, human rights remediation, designed to ensure that the adversely impacted stakeholders are, to the extent possible, restored to the position they would have been in without the impact, comes ahead of traditional contract remedies. The buyer must collaborate in providing remedy to victims, especially if it contributed to the adverse impact. If either party wishes to exit the contract for whatever reason, they must do so responsibly by identifying and mitigating the adverse human rights impacts of their exit." Please also add this same language to the SMC box on remediation first