NEW YORK—EcoVadis, a leader in business sustainability ratings for global supply chains, recently announced the results of its study “Sustainability Clauses in Commercial Contracts: The Key to Corporate Responsibility,” finding that, while CSR clauses are widely used and have strong potential for improving supply chain sustainability performance, current practices need improvement to truly impact change.
Conducted in partnership with Affectio Mutandi, this landmark study of CSR contractual practices among buyers and suppliers sought to determine the effectiveness and impact of such contracts on sustainability practices. Examining current regulations, contract laws, and various clauses themselves, the report discusses the operational considerations and practical application of CSR clauses and uncovers current problems that limit the success of such clauses.
For instance, while 70 percent of buyers include a CSR clause in their contracts, more than 50 percent of suppliers say they have come across CSR requirements that were impossible to achieve, given the price and quantity of the product required, as well as the timing indicated in the contract. Additionally, the study found most CSR clauses are not sufficiently detailed, with 75 percent referencing generic regulations.
Four Criteria for Constructing More Effective CSR Clauses
The study also identified numerous clause types and found large discrepancies in how they are applied, indicating that the current state of CSR clauses is still opening many companies to risk. This led to the development of four key criteria for constructing more effective CSR clauses: precision, verifiability, enforceability and coverage depth.
“As regulatory pressure and demands for transparency continue increasing and businesses are being held accountable for the practices of their suppliers, this study shows the pressing need to rethink how we use contract clauses to support CSR and sustainability practices,” said Pierre-Francois Thaler, Co-Founder and Co-CEO of EcoVadis. “Our goal at EcoVadis is to make sustainability performance measurable and benchmarkable, which is the foundation of integrating specific and enforceable CSR criteria in contracts and serves as a motivator for suppliers to engage in improvements.”
Other Key Findings:
- Forty-one percent of suppliers say contractual CSR commitments have raised their awareness of environmental, social and ethical issues;
- Thirty-eight percent of clauses extend to tier two suppliers and beyond; and
- Only 25 percent of buyers adapt CSR clauses depending on the sector and size of the supplier.
Review the full report findings online or view the infographic. The quantitative study conducted online among 569 companies from November 2017 to January 2018 was supplemented by in-depth interviews with 20 stakeholders during the same time.
