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The SMCs 1.0
The Supplier Model Contract Clauses 1.0, also known as the SMCs, are a set of model clauses that aim to improve human rights in the apparel and textiles industry. The apparel sector is vulnerable to human rights abuses and the SMCs are an innovative set of clauses designed to address these impacts.
Specifically, unfair contract terms and purchasing practices between buyers (e.g. brands and retailers) and their suppliers are key drivers of negative human rights outcomes in the apparel sector. This became abundantly clear during the COVID-19 pandemic when apparel brands and retailers canceled billions of dollars in clothing orders, causing layoffs and wage theft in the supply chain. These cancellations were often justified by contract terms that did not consider and thus undermined the human rights of supply chain workers. You can read more about these dynamics here and here.
The SMCs were drafted by RCP in collaboration with the Sustainable Terms of Trade Initiative (STTI), a consortium of apparel and textile suppliers and manufacturing associations that aims to drive better purchasing practices. They were developed in response to an express request from STTI members for sample or model clauses that they could bring into their negotiations and contracts with their buyer-clients. The initiative also benefits from generous pro bono counsel provided by Linklaters LLP.
The SMCs are additionally supported by the Initiative for Global Solidarity (IGS), which promotes the implementation of human rights and environmental due diligence (HREDD) in global supply chains, and FABRIC (Promotion of a Sustainable Textile and Clothing Industry in Asia), which brings together people from Asian industry, the public sector, NGOs and international buyers and promotes knowledge transfer and cooperation. IGS and FABRIC are working on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and are implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.
The SMCs 1.0 were released in September of 2023. We refer to them as version 1.0 to acknowledge that these clauses are an iterative product that is neither perfect nor complete as is. It is possible that, based on future feedback, a version 2.0 could be developed.
Overview of the RCP Core Principles, as reflected in the SMCs 1.0:
The SMCs draw on many of the principles contained within the Model Contract Clauses 2.0 (MCCs 2.0), including the three core Responsible Contracting Principles. The key difference between the MCCs 2.0 and the SMCs is that the SMCs are drafted specifically for the apparel sector and with apparel suppliers in mind. They contain a number of obligations, including, for example, obligations to set reasonable deadlines, pay prices high enough to cover the costs of responsible business conduct, and to exit contracts responsibly, even in the event of an unforeseen crisis like a pandemic. If readers are interested in clauses that contain more detailed ("buyer friendly") obligations for suppliers, please refer to the MCCs 2.0.
The RCP Core Principles, as reflected in the SMCs 1.0 are aligned with the UNGPs and the OECD Guidance on Due Diligence for Responsible Business Conduct and translate these guiding principles into due diligence-aligned contractual obligations.
The three RCP Core Principles are:
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.
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).
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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."