Verité’s CEO Shawn MacDonald, who has spent more than 25 years advocating for effective labor policies and practices through civil society advocacy, contributed to the Model Contract Clauses Project with the book chapter A Supply Chain Accountability Practitioner’s Perspective on the Model Contract Clauses Project. The chapter is part of the newly published American Bar Association (ABA) book Contracts for Responsible and Sustainable Supply Chains: Model Contract Clauses, Legal Analysis, and Practical Perspectives. The book is a practical and comprehensive guide for all businesses and counsel who want to reduce adverse human rights impacts and environmental risks in their supply chains. Containing the Model Contract Clauses (MCCs) from the ABA Business Law Section’s working group, this unique book is much more than an explanation of model contract clauses. It is a tool that will help companies implement healthy corporate policies in a way that is legally effective and can help reduce disruption in the supply chain.
The book includes:
- MCCs and explanatory annotations so counsel can make informed decisions
- An overview of the MCCs: their genesis and development, strategies and choices, legal underpinnings and drafting alternatives, current use, and likely future
- Perspectives of authors from large and small law firms, in-house counsel, academia, NGOs, civil society, and labor
- Chapters on legal issues from antitrust, commercial law, and corporate law to US international trade law as well as foreign law that reaches US companies
The following text is an excerpt from Dr. MacDonald’s chapter on practitioners’ perspectives on supply chain accountability. To access the full book publication visit the ABA website.
A Supply Chain Accountability Practitioner’s Perspective on the Model Contract Clauses Project
As a practitioner in the field of supply chain labor rights, I have long advocated for a shift in the calculus of supply chain accountability that would result in more leverage to confront the relative impunity companies face for flouting labor laws. I am now cautiously optimistic that we are moving into a new era of more robust accountability. There are several regulatory and policy innovations that compel action from a larger, more diverse set of companies and from governments themselves as significant buyers in global markets. These recent and emerging regulatory approaches share an emphasis on requiring or promoting supply chain due diligence in one form or another. Due diligence obligations are defined, in part, by contracts between buyers and suppliers and, therefore, both the content and use of contractual mechanisms are worthy of more scrutiny as we enter a new era where due diligence is the central conceptual and practical framework for accountability.
Efforts to compel new and improved due diligence processes to meet labor standards must be rooted in more transparent, measurable, and impact-oriented contractual processes. Currently, contractual practices are opaque and poorly understood by those not directly involved, so it behooves those seeking to promote more impactful labor outcomes via due diligence to focus intently on contracts and their practical use as a core mechanism of accountability. A good place to start is to examine how the contractual terms and practices advocated in the Model Contract Clauses (MCCs) project described in this book might be utilized synergistically by buyers, suppliers, and a broader range of stakeholders (not customary parties to contracts) to achieve a race to the top in terms of labor outcomes. Can contracts be genuinely reimagined and implemented to serve the goals of the emerging regulatory regime and of workers, or will most contracts remain secret and obscure mechanisms that largely favor buyers and perpetuate the failed compliance approaches of the past?
Before looking at contracts more directly, it is worth noting that until recently, only a small percentage of the largest and most visible brands in a few sectors (such as apparel and electronics) received sustained scrutiny for labor problems in their vast global supply chains. Even those usual suspects (think Nike, Walmart, and Apple) faced some reputational damage, but no meaningful financial or legal consequences. Governments in both producer and consumer countries were barely paying attention. Overstretched civil society organizations and unions could only investigate and push a certain number of companies to change. This is one of many reasons why most companies have not developed truly impactful due diligence systems or have not felt compelled to use contracts to drive meaningful change from and with suppliers. Yet, now that we are seeing new and potentially transformative levers in trade bans, government procurement standards, impact litigation, mandatory human rights due diligence (mHRDD) in major markets, and investor action, there is a real possibility that the spotlight of accountability will fall on more companies and the penalties for inaction will be financially and legally costly, with damage far beyond a temporary hit to reputation. This means that the millions of contracts up and down vast, complex global supply chains are suddenly up for direct and indirect scrutiny as the basis of the due diligence efforts that will increasingly be the framework of accountability in supply chains.
For the MCCs to move from the drafting page and serve as a force for genuine change in the conventional dynamics of supply chains, they must be embedded in or otherwise link themselves to several important trends in the larger supply chain arena. The MCCs are an important start, yet their currently recommended clauses will have impact only when the lawyers and compliance professionals involved in counseling both buyers and suppliers come to see them as requirements rather than suggestions; face public and regulatory scrutiny of heretofore private contracts; and suffer consequences for failing to achieve defined impacts. The potential of the MCCs lies in opening the world of contracts not only to more transparency and scrutiny, but also to new ways of conceptualizing, measuring, and reporting on the due diligence expectations enshrined in meaningful contracts between buyers and suppliers.
To access the book publication visit the ABA Book site.