Five steps to a sustainable contract: how to do it?
The moment you have made the decision to contract sustainably, the question is of course: where do you start? There is no set roadmap for sustainable and conscious contracting. There are some standard steps to get you started, though.
The right mindset
It may be stating the obvious: sustainable contracting requires a sustainable mindset. So, start by establishing your company's sustainability vision and goals. This involves thinking about what sustainability means for your company, which ESG aspects are relevant and which concrete goals you want to achieve in the short and long term. For example, ask yourself the following questions:
- With whom or with what type of organisations do you want to have business relationships?
- How do you want to measure and improve your sustainability performance and impact?
- And how do you want to shape this in the contract?
- What international standards, guidelines or principles do you want to follow or apply?
- What fits your company's identity and values?
- What image do you want to project?
- Do you want to treat your employees sustainably?
These are all relevant questions!
When drafting the contract and the associated sustainability ambitions, it is important to also consider the interests of stakeholders. Who are the key stakeholders and what are their sustainability interests and expectations? Think employees, customers, investors and regulators.
Determining what is important and what sustainability goals you want to pursue will give you a clear picture of your company's strengths and areas for improvement. This insight is the basis for sustainable contracting.
Reviewing (existing and new) contracts
Now that you are looking at things with a sustainable mindset, it is important to (continue to) review your future and current contracts against your sustainability vision and goals. Not every contract qualifies for this, so consider which contracts you want to conclude sustainably. Contracts with employees, self-employed workers, suppliers, distributors, customers and consumers? For instance, you could consider including sustainable working conditions in contracts with employees.
You can also be sustainable in your articles of association and shareholder agreements. In that case, make sure you start from the right goal. For example, keep the description in the articles of association general and go into more detail in your shareholder and management agreement about what you intend to do with the sustainable objectives for your company.
In addition, of course, there are contracts with suppliers, distributors, customers and consumers. Investigate whether agreements with them emphasise sustainable production and logistics processes. If necessary, add clauses that encourage sustainability. Make sure your contracts with customers and consumers reflect sustainability too. This can range from packaging guidelines to return logistics guidelines.
Examine the agreement closely and ask yourself: to what extent does the contract match what I expect from my contract partner(s)? And what can my contract partner expect from me?
Asking this question will give you some insight into any differences between what is on paper and the current expectations of both parties. This is an excellent basis for making the necessary adjustments.
Not all contracts are equally suited to sustainable adjustments. It is therefore important to take a close look at the nature of each contract and determine which ones could have the biggest impact on achieving your sustainability goals.
"As an employer today, you can no longer avoid sustainable HR. The labour market is changing at a rapid pace and new employees increasingly value green working conditions. For example, consider including sustainable working conditions in contracts with employees, such as flexible working hours, a focus on inclusivity, health and safety or perhaps even a budget for energy improvements in people's homes. Ultimately, this will kill two birds with one stone, as it also establishes your business as being environmentally and socially aware!"
Anne Hofman
senior manager arbeidsrecht praktijk
Open communication with stakeholders
Besides a sustainable mindset and analysis of existing and new contracts, it is important to involve your stakeholders in the process. Stakeholders include shareholders, customers, the people with whom you have a contractual relationship, etc. So, talk to your stakeholders about what sustainability means for your business. It is important that they understand why these changes are important for your business and for you. Show how these adjustments can lead to common goals. Explain how the proposed changes are good for your collaboration and the future of both parties and how this fits in with the corporate social responsibility you envisage.
A good contract requires that both parties not only are clear about their own goals, but also understand those of the other. What exactly do your partners want to get out of this relationship? Have they thought about sustainability? What is important to them? This helps set realistic expectations and prevents misunderstandings in the future.
Often, differences between parties are not insurmountable. Make sure you get clarity regarding the reasons behind a position. If a difference turns out to be significant anyway, it is good that both parties are clear about this. This helps avoid disappointments and conflicts afterwards.
The ultimate goal is to form a partnership in which both parties achieve their sustainability goals. By working together and communicating openly, you can not only achieve your own goals but also contribute to the sustainable development of your partners and the wider community.
Adjust language and length
Contracts are often long with a lot of legal jargon that is unclear and incomprehensible to many people. This is inconvenient and leads to confusion, miscommunication, dissatisfaction among contracting parties and eventually even disputes. Therefore, (re)write the contract so that it is easy for everyone to read and understand. When drafting or revising a sustainable contract, an important consideration is whether parties can work with it in practice. As a starting point, you should draft contract provisions as clearly as possible. With clear wording, less explanation is needed to reflect the intention of all parties.
So, use short and clear sentences, avoid jargon and abbreviations and explain any technical terms. Make sure the contract has a logical structure. It is important that both the text and layout of the contract are in line with the culture of the company. This means that the tone and style of the contract match the company's identity and values, and that the layout and design are attractive and professional. This way, you not only make the content of the contract understandable, but you also increase the commitment and acceptance of the contracting parties.
When the content of the contract is intelligible, it promotes transparency regarding the rights and obligations of all parties involved. Thus, you reduce the risk of misunderstandings and differences in interpretation, leading to a better performance of the contract and limiting the risk of disputes, costs and legal proceedings in the future.
Also consider the length of the contract. In the Netherlands, we have a system where rights and duties are well regulated by law. This makes it possible to limit the number of terms, resulting in a contract of just a few pages with clear and simple wording. It also gives you a unique opportunity as an entrepreneur to promote yourself in the market. It is efficient (as it results in quicker decision-making) and not only saves time in the negotiation process and smooth execution of the agreement, but also makes the contractual relationship between parties completely transparent. This in turn has a positive effect on the relationship between all parties and may lead to a healthier and more productive relationship between parties in the longer term. Finally, it also prevents unintentional deviation of the burden of proof or risk allocation from the law.
Monitoring and evaluation
As an entrepreneur, it is important to continuously work on improving sustainability within your business. This will ensure that you achieve the goals you have set:
- Review existing arrangements and ongoing processes regularly and adjust them if necessary.
- Are there any new risks around the corner?
- Is something not right? Take action on time!
- Consult with your partners/stakeholders and take action or maybe even adjust your goals.
- Provide regular feedback on how things are going.
- Does your performance match the goals you set earlier? If not, determine what you need to adjust to achieve your sustainability ambitions.
- Discuss any bottlenecks or areas for improvement with all parties involved. This may mean changing the contract or the methodology.
Constant evaluation and consultation provides new insights and offers opportunities for further improvement and innovation. This makes your business even more sustainable and opens up new opportunities.
Conclusion
Sustainable contracting is a crucial step to achieve sustainability goals within your company. Consciously consider which contracts have the greatest impact and assess with a clear mind where adjustments are needed. This is how you effectively implement change. It not only helps your company but also your partners in jointly realising a sustainable future.
Besides, sustainable contracting goes beyond just a legal agreement: it requires a change in mindset and offers the chance to make a real impact! It creates a strong basis for long-term and reliable relationships and ensures that sustainability really is an integral part of every collaboration.
Simplifying contracts and promoting open collaboration minimises the risk of disputes. This contributes to a positive reputation in line with stakeholders' expectations. It also enables you to actually put concrete sustainability goals, such as ESG criteria, into practice.
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