Session 8

Question 1

What are some of the limitations of traditional contractual practices in terms of sustainable due diligence?

Answer 1

They…
- focused on safeguarding the rights of the party with greater bargaining power
- emphasize dispute resolution through identifying breaches and seeking damages.

Question 2

To what negative things can traditional contractual practices lead to?

Answer 2

These practices can lead to suppliers covering up issues, inadequate human rights remediation, and hinder collaboration and trust.

Question 3

How can proactive contract theory serve as a solution to enhance corporate sustainability due diligence?

Answer 3

Proactive contract theory…

• offers a multidisciplinary approach to address these challenges, viewing contracts not just as legal instruments but also as “economic, managerial and social artefacts” with multiple functions beyond legal enforceability.
• emphasizes setting “relational or prosocial values” and supporting policy goals like the UN’s sustainable development goals in contracts.
• incorporates both preventive (e.g. to prevent disputes) and promotive dimensions (e.g. to incentivize ambitious sustainability work and foster trust)
• is ongoing and an evolving process throughout the business relationship
• is user-centric, where the needs of different stakeholders, including vulnerable parties in the upstream value chain are taken into account.

Question 4

How should large companies extend SDD requirements down its value chain through contractual means according to the CSDDD?

Answer 4

Through “contractual cascading”, where companies are required to seek contractual assurances from a direct partner - that it will ensure compliance with the code of conduct and, as necessary, a preventive/corrective action plan.

Question 5

What is problematic about unilateral actions like termination for contractual breaches RE HR-/SDD?

Answer 5

Termination could easily result in adverse impacts itself.

Question 6

Provide examples of promotive contract clauses.

Answer 6

Bonus systems for exceeding sustainability goals.

Unilateral renewal clauses based on good sustainability performance.