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Purpose of Sustainability Contractual Clauses. Katerina Peterkova. Sustainability contractual clauses. Can be defined as contractual provisions covering social and environmental obligations that: are not directly connected to the subject matter of an individual contract;
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Purpose of Sustainability Contractual Clauses Katerina Peterkova
Sustainability contractual clauses • Can be defined as contractual provisions covering social and environmental obligations that: • are not directly connected to the subject matter of an individual contract; • implement general public concerns instead of economic concerns of contractual parties; • are traditionally subject of government regulation.
Sustainability contractual clauses • Have a potential to be a powerful tool for enhancing global sustainable development. • BUT! Several barriers must be overcome: • unclear legal status; • insufficient legal framework; • vague character of ethical standards.
Agenda • Introduction to sustainability clauses. • Research methods. • Overview of a regulatory environment and how business contracts operate in it. • Summary of research findings. • Proposal of a conceptual framework. • Implications of the study.
Research methods • Textual analysis of existing regulations. • UN Global Compact; • OECD Guidelines for Multinational Enterprises; • ISO 26000; • UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights; • Business Social Compliance Initiative; • Social Accountability 8000; • EU Green Paper – Promoting a European framework for Corporate Social Responsibility; • US Foreign Corruption Practice Act; and • California Transparency in Supply Chains Act. • Literature review.
Regulatory environment • National and international law is insufficient – states fail in their regulatory role. • Other subjects incur this task and develop various types of transnational private regulations. • Deficiencies of transnational private regulations: • legitimacy; • effectiveness; • enforceability.
Regulatory environmentRole of contracts • Contracts help to cope with the deficiencies of private regulation, giving to a soft law a hard law edge. • Notion of contract is changing: Enforceable exchange of promises Relational self-regulatory tool
Findings – Analysis of regulations • Identified legal purposes: • motivational; • enforcing; • regulatory. • Focus on motivational and enforcing purposes. • No unified approach towards regulatory purpose.
Findings – Literature review • Identified legal purposes: • motivational; • enforcing; • regulatory. • Focus on regulatory purpose • typical features of regulation appears also in business contracts • rule takers’ accountability; • unilateral adoption; • third party’s damage.
Conceptual framework • Classification of sustainability clauses according to their legal purpose: • Motivational • Objective: positively influence suppliers’ approach towards sustainability • Usual placement: interpretation clauses or recitals • Enforcing • Objective: enforce existing laws and ethical standards • Usual placement: penalty clauses and provisions related to relational enforcement • Regulatory • Objective: introduce new rules • Usual placement: main body of a contract stipulating rights and obligations of parties
Implications • The proposed conceptual framework may: • help us to understand the role and potential of sustainable contracts; • serve as a starting point for future research in the area of law and sustainability; • help companies to optimize drafting of its contracts and targeting of complementary management activities; • help regulatory bodies to direct better their focus in the future regulations and enforcement activities.
