How the Model Contract Clauses Can Help B Corps Implement Responsible Sourcing Practices
A New Resource to Help Ensure Human Rights Due Diligence in Business Contracting
Supply chain disruptions caused by the ongoing pandemic have brought a renewed focus on how most products are manufactured through a web of international suppliers. This complicated international value chain brings with it the risk of serious human rights abuses.
The promise of multi-bottom-line business is incorporating social impact into your business model. Naturally, this must also mean ensuring that your business model does not contribute to human rights abuses. Certified B Corporations and other social impact companies can use the model contract clauses as a tool to help their company implement responsible sourcing practices in line with their mission and objectives.
What Are the MCCs
The model contract clauses (or “MCCs”) are a set of contract terms that firms can include in their supply contracts to help implement human rights policies and improve human rights in their supply chain. They were released in 2021 by a Working Group of the American Bar Association’s Business Law Section.
The MCCs 2.0 were designed to operationalize the best practices in responsible sourcing like those contained in the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. They include commitments by buyer and supplier to conduct human rights due diligence and provide victim-centered remedy for adverse human rights impacts, in proportion to their contribution to the impact. They also include obligations on the part of the buyer to ensure their purchasing practices do not contribute to human rights abuses.
Parties wanting to maximize the benefits of the MCCs may wish to engage in robust preliminary discussions about each sides’ key goals and constraints and how those might affect potential stakeholders. Having frank discussions early helps each side understand the type of practices that could lead to human rights abuses during their relationship. This effort also helps to ensure that the obligations are mutual, reasonable, and achievable.
After both sides have discussed their core issues, in my view they should write out their obligations using enforceable contractual language. This helps ensure that everyone maintains their commitments, even if circumstances change in the future. The MCCs are a template set of the most necessary contractual clauses and designed to be flexible enough to fit into most companies’ existing business practices.
Why the MCCs Are Particularly Relevant for B Corps
B Corps are particularly well-placed to take advantage of the MCCs by incorporating them into their supply contracts. In fact, some have even argued that B Corps would not be living up to their ideals if they do not have contracts that ensure they avoid contributing to human rights abuses.
The purpose of globalization should be to promote economic development by spreading prosperity and connecting disparate parts of the world through commerce. It is not an excuse for multinational companies to arbitrage their labor practices back to the 19th century.
Traditional companies often argue that they lack visibility into their supply chains and so are neither aware nor responsible for human rights abuses unfolding in their supply chains. But B Corps are leaders in the new movement of social impact companies. They must take the first steps to break the system of ignorance-by-design that has compromised the social performance of value chains.
The legal community appreciates that businesses require guidance on the best ways to implement responsible sourcing initiatives contractually — this is why the American Bar Association’s Working Group was convened. The MCCs represent a practical framework to operationalize concepts such as collaboration, due diligence, and transparency. These are necessary to break the pattern of abusive practices that have persisted in the global supply chain.
Next Steps
The Working Group, of which I am a member, is focused on promoting the MCCs over the course of 2022, and we look forward to more companies — particularly B Corps — incorporating them into their supply agreements.
My hope is to remind business leaders that ensuring your products are made without contributing to human rights abuses often requires that clear and effective contractual language be in place — this is why the Working Group has put so much care into drafting the MCCs.
U.S. mission-driven companies would do well to begin working with their suppliers to investigate their supply chains for potential human rights issues. There are several consulting companies that could assist with setting up a formalized human rights due diligence process.
The Working Group also hopes they discuss with their legal representatives whether they can incorporate the MCCs into their supply agreements. The Working Group can help firms explore how and why to incorporate the MCCs into their supply agreements, and currently is assisting one B Corp with implementation of the MCCs.
For more information, see this online resource that includes contact information for Working Group members.
B The Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
