Has your client placed ESG obligations on you? This means they have certain environmental, social and governance expectations related to products or services they purchase from you. It is critical that you not only understand these imposed ESG obligations, but also integrate them into your own business processes, and push them on to your own suppliers. But how do you do that? In this article, we take a closer look at that.
Include in your terms and conditions
If you have your own terms and conditions, you can choose to add a provision to those terms and conditions that specifically addresses ESG obligations. This is the easiest way to ensure that all parties with whom you do business are obliged to comply with any ESG obligations that you yourself have. Of course, you then have to make sure that those terms and conditions apply to all contracts you enter into.
Supplementary conditions/PO/OC
Do you handle industry terms and conditions? These cannot be modified just like that. In that case, you can choose to add a separate set of conditions that apply specifically to your company. In that extra set you can also include the ESG obligations. The disadvantage is that you have to send your customer two sets of general conditions: the branch conditions and the separate extra set. Chances are that this will lead to additional discussions with your supplier, so perhaps this is the perfect time to have new purchase conditions drawn up that are specifically tailored to your company.
Framework agreement with supplier
Do you regularly purchase products or services from the same supplier? If so, it may be beneficial to enter into a framework agreement with that supplier. This is not only practical in the context of the ESG requirements, but you also regulate specific aspects such as delivery deadlines, packaging requirements, quality standards, conformity and so on. Two birds with one stone!
New contracts for suppliers
When drafting new agreements with suppliers, you have the opportunity to negotiate the inclusion of specific contract provisions. These provisions relate to obligations under the law or agreements you have made with your own customers, which you now pass on to your supplier.
Integrating such specific contract provisions is important because it ensures that your supplier is aware of and agrees to the legal or contractual obligations you have as a business owner. These range from legal standards to specific requirements your customers impose on you, such as ESG requirements, quality standards, or other requirements that affect your business processes.
Most suppliers are generally willing to cooperate with such contract provisions, as it is a way to provide a clear framework and smooth cooperation. By being transparent about your obligations and expectations, you lay a strong foundation for a long-term and constructive relationship with your supplier.
Loose appointment
You can of course also simply approach your supplier and indicate that, for the continuation of your relationship because of the ESG rules to which you are bound, it is important that additional agreements be made about cooperating with audits and possible other ESG obligations. It is good to realize that ESG legislation is designed to take into account the fact that other requirements apply in other countries. Legislation on working conditions, for example, is different in many countries and often worse. However, minimum requirements can be set for worker safety. And if your supplier does not meet even that, it is time to seriously question whether this is the right business partner.
Need help?
Need help updating your terms and conditions, your contracts or want to know how to implement ESG obligations in a specific relationship? Then contact Esther Tromp, (E: esthertromp@law-firm.international, T: +31655741267)