The potential of contractual assurances to advance supply chain due diligence

Abstract

On February 23, 2022, the European Commission’s adopted a proposal for a Directive on corporate sustainability due diligence. The proposed Directive requires companies to make their supply chains sustainable by obtaining contractual assurances from their suppliers. Noncompliance is met with administrative sanctions and civil liability. In this contribution, we question the ability of contractual assurances to sufficiently influence business conduct in the supply chain. Imposing sanctions and civil liability do not resolve the difficulties that may, in practice, impede the control of supply chains through contracts. Therefore, based on recent empirical research and existing general conditions used by twelve multinational companies, we offer recommendations that can help companies manage their supply chains contractually and thus contribute to the effectiveness of the proposed Directive.