Purpose of Sustainability Contractual Clauses

TATIONpRÆSEN

10/06/2011AARHUS SCHOOL OF BUSINESSAarhus University

Trends and Future of Sustainable Development9-10 June 2011, Tampere, Finland

Purpose of Sustainability Contractual Clauses

Katerina Peterkova

Purpose of Sustainability Contractual ClausesKaterina Peterkova

10/06/2011

AARHUS SCHOOL OF BUSINESSAarhus University

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.

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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.

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Agenda

1. Introduction to sustainability clauses.

2. Research methods.

3. Overview of a regulatory environment and how business contracts operate in it.

4. Summary of research findings.

5. Proposal of a conceptual framework.

6. Implications of the study.

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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. 5


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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.6


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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

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Findings – Analysis of regulations

› Identified legal purposes:› motivational;› enforcing;› regulatory.

› Focus on motivational and enforcing purposes.

› No unified approach towards regulatory purpose.

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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.

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Conceptual framework› Classification of sustainability clauses according to their legal purpose:1. Motivational

› Objective: positively influence suppliers’ approach towards sustainability

› Usual placement: interpretation clauses or recitals

2. Enforcing› Objective: enforce existing laws and ethical standards

› Usual placement: penalty clauses and provisions related to relational enforcement

3. Regulatory› Objective: introduce new rules

› Usual placement: main body of a contract stipulating rights and obligations of parties

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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.

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Thank you for attention!

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Purpose of Sustainability Contractual Clauses

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