How do you add environmental and social responsibility to your contracts?

1 Why add environmental and social responsibility?

Environmental and social responsibility, or ESR, refers to the voluntary actions that businesses take to reduce their negative impacts and increase their positive contributions to the environment and society. ESR can help you improve your reputation, reduce your risks, increase your efficiency, and create value for your stakeholders. Moreover, ESR can help you comply with the increasing regulations and standards that govern international trade, such as the UN Sustainable Development Goals, the OECD Guidelines for Multinational Enterprises, and the EU Green Deal.

2 How to assess your ESR performance?

Before you can add ESR to your contracts, you need to assess your current ESR performance and identify the areas where you can improve. You can use various tools and frameworks to measure and report your ESR performance, such as the Global Reporting Initiative (GRI), the Carbon Disclosure Project (CDP), the ISO 26000, and the B Corp Certification. These tools and frameworks can help you set your ESR goals, track your progress, and communicate your results to your stakeholders.

3 How to include ESR clauses in your contracts?

Once you have assessed your ESR performance, you can include ESR clauses in your contracts to formalize your commitments and expectations. ESR clauses are contractual provisions that specify the ESR obligations and responsibilities of the parties involved in a trade transaction. For example, you can include ESR clauses that require your suppliers to comply with certain environmental and social standards, such as the Fair Trade Principles, the ILO Core Conventions, or the ISO 14001. You can also include ESR clauses that incentivize or reward your customers for choosing more sustainable and ethical products or services, such as offering discounts, rebates, or certifications.

4 How to negotiate ESR clauses with your counterparts?

Negotiating ESR clauses with your counterparts can be a difficult task, particularly if their priorities, perspectives, or practices differ from yours. To navigate these challenges, you must take a collaborative and constructive approach that is founded on mutual trust and respect. You can use some of the following strategies to negotiate ESR clauses with your counterparts: conducting research on their ESR performance, goals, and expectations; explaining the advantages of adding ESR clauses to contracts; providing evidence and examples of how ESR clauses have been successful for other businesses in your industry or region; addressing any objections or concerns your counterparts may have; and seeking a win-win outcome that satisfies both parties' interests and needs. Ultimately, it is important to avoid imposing or compromising on your ESR values and principles.

5 How to monitor and enforce ESR clauses in your contracts?

In addition to adding ESR clauses to contracts, it's important to monitor and enforce them for effectiveness and compliance. To do this, you should establish clear and measurable ESR indicators and targets, assign roles and responsibilities for monitoring and enforcement, implement regular reviews and evaluations, apply sanctions or penalties for non-compliance or breach of ESR clauses, and recognize and reward good performance. Moreover, you should agree on the frequency and format of ESR reporting and auditing, designate a contact person or committee for ESR issues and disputes, provide feedback and recommendations for improvement, withhold payments or terminate contracts for non-compliance, and offer bonuses or renewals for good performance.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?