Sustainability Clauses in International Business Contracts

Sustainable development is a globally recognized goal. However, governments are failing to reach agreement on how this should be achieved. Private actors that are under stakeholders’ pressure try to fill this regulatory gap by developing various types of transnational private regulation. However, transnational private regulation suffers from weak legitimacy, questionable effectiveness, and lack of credible enforcement. This book suggests that supply chain contracting may offer an alternative regulation that could lead us away from the current regulatory impasse or at least be one of the missing pieces in the puzzle.

Despite the traditionally primary goal of business – to make profit – companies are, under the imperative of corporate social responsibility (‘CSR’), engaging in activities pursuing public goals in the social and environmental spheres. This book studies one of the tools developed to implement CSR into the business operations, social and environmental clauses in international supply chain contracts (‘sustainability contractual clauses’, SCCs). Since there is a lack of literature and regulation on this topic, companies use SCCs without proper knowledge or guidance why and how this should be done and what legal consequences this may have. This publication fills this gap by discussing the use of the legal instrument of contract to pursue social and environmental goals, analyzing the legal framework of sustainability contractual clauses, examining what legal effects SCCs may have, and evaluating the contribution of this activity in terms of achieving sustainable development objectives. The aim is to explore both the potential and the limitations of contractual governance in achieving global sustainability and thus contribute to the current discussion on the development of new regulatory and governance designs in this area.