09.01.2025
Sustainability and corporate social responsibility in contract law
By Ascensión Furió, an expert in corporate law and M&A with over 15 years of experience.
In recent years, the concepts of sustainability and corporate social responsibility (CSR) have evolved from being mere business trends to become determining factors in the drafting of business contracts. Companies not only seek to comply with legal provisions, but also to align their practices with values that have a positive impact on society and the environment. But how do these principles influence the field of contract law? In this article we will explore how sustainability and CSR are transforming the drafting, negotiation and enforcement of business contracts, as well as the opportunities this represents for responsible companies.
Sustainability and CSR as new contractual pillars
Sustainability and CSR are not only ethical principles; they are also factors that bring competitive value to companies. Today, customers, investors and partners increasingly demand transparency and measurable commitments in areas such as environmental impact, human rights and good corporate governance. In the context of contract law, these principles are gaining weight in the inclusion of specific clauses reflecting such commitments.
In business contracts, parties are seeking to set out concrete obligations related to sustainability, such as reducing carbon emissions in the supply chain, responsible use of natural resources, strict compliance with labour and human rights standards, promotion of diversity and inclusion in business relationships, and transparency and good practice in corporate governance.
This has led to the emergence of a new type of contract that is more committed and adapted to the demands of today’s world.
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Contract clauses: tools to ensure engagement
A contract that incorporates sustainability and CSR principles does not only state intentions; it also establishes clear and measurable mechanisms to ensure compliance. Below, we review some key clauses that are becoming increasingly common in business contracts:
Environmental impact clauses
These clauses specify measures that the parties must take to minimise their environmental footprint. For example, emissions commitments, whereby the parties agree to reduce their carbon emissions by a defined percentage over the life of the contract, sustainable sourcing, whereby they agree to use recycled or sustainably sourced materials, and waste management whereby suppliers or business partners must implement plans for waste management and reduction.
These provisions not only protect the environment, but also reinforce the image of companies as responsible actors.
Human rights clauses
Human rights clauses seek to ensure that business operations do not contribute to exploitative or discriminatory labour practices. Among the most common are labour clauses that require compliance with international standards on fair wages, working hours and occupational safety, commit parties to verify that their supply chains are free of child labour, and include rights of inspection and verification to ensure compliance with standards.
These clauses are especially relevant in contracts with international suppliers or in sectors where the risk of human rights violations is high.
Corporate governance clauses
Corporate governance is an essential pillar of CSR. In this sense, contracts can include clauses that promote financial transparency (parties agree to clearly and verifiably report financial results and investments made in sustainability initiatives), codes of conduct (ethical standards are established that the parties must respect during the execution of the contract) and conflict of interest management (provisions to prevent or mitigate conflicts that may affect the business relationship).
Benefits of including sustainability and CSR principles in contracts
Integrating sustainability and CSR into business contracts not only benefits society and the environment, but also brings competitive advantages for companies. The main benefits include
- Mitigation of legal and reputational risks: Meeting high ethical and environmental standards reduces exposure to litigation and improves public perception.
- Access to new markets: Many companies and institutions only work with partners that meet sustainability and CSR criteria.
- Customer and investor loyalty: Stakeholders value partnerships with companies committed to the common good.
- Improved operational efficiency: Sustainable practices, such as optimising resource use, can translate into significant savings.
- Attracting talent: More and more professionals prefer to work for companies with values aligned with sustainability.
Implementation challenges
Despite the benefits, incorporating sustainability and CSR principles into contracts is not without its challenges: establishing clear and measurable indicators to assess compliance with contractual clauses can be complex, ensuring that suppliers also comply with agreed standards requires rigorous auditing systems, and in some cases, contractual provisions may conflict with local or international regulations.
Conclusion
Sustainability and corporate social responsibility are redefining the way business contracts are drafted and negotiated. Including clauses related to environmental impact, human rights and corporate governance not only allows for compliance with societal demands, but also strengthens the competitive position of companies.
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