Sarah Dadush

Episode 47    18 October 2021

The power of contracts to impact human rights

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The power of contracts to impact human rightsSarah Dadush
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Sarah Dadush

Professor of Law, Rutgers University

Business & human rights, consumer law and social enterprise law

Sarah Dadush is a professor with Rutgers University in the US. She writes and teaches in the areas of business and human rights, consumer law, and social enterprise law. 

Sarah is a member of the American Bar Association's project to develop Model Contract Clauses for human rights due diligence for business. We discuss how these clauses adopt a revolutionary approach to contracting, one of shared responsibility and collaboration to achieve meaningful change in human rights including modern slavery. 

 

** The ABA's project on model contract clauses can be found here.  **

Bio

Show notes

Links

Transcript

Comments

Bio:

Sarah Dadush is a professor with Rutgers University in the US. She writes and teaches in the areas of business and human rights, consumer law, and social enterprise law.

Her research lies at the intersection of business and human rights. She explores various innovative legal mechanisms for improving the social and environmental performance of multinational corporations.

 

Before joining the Rutgers faculty, Sarah served as Legal Counsel and Partnership Officer for the International Fund for Agricultural Development (IFAD), a specialized agency of the United Nations based in Rome.

Prior to that, she was a Fellow at NYU’s Institute for International Law and Justice, where she administered the Institute’s research program on Financing for Development. She also worked as an Associate Attorney at the global law firm, Allen & Overy L.L.P.

She received her J.D. and LL.M. in International and Comparative Law from Duke University School of Law in 2004.

 

She teaches Contracts, Consumer Law, Global Business Regulation, Corporate Social Responsibility, and International Development Law & Finance.

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Show notes:

  • [2:17] Sarah explains the background of the American Bar Association's Business Law Section's working group Contractual Clauses Project.   

  • [6:11] I share the Australian experience with contract clauses when our Modern Slavery Act was introduced.

  • [9:01] Contracts can be used to implement the spirit of legislation intended to improve corporate responsibility.

  • [13:13] Sarah shares her insight in how contracts are powerful vessels for norms in law and society, because of their flexibility.  

  • [17:56] Contracts can be a way of resetting the transactional nature of relationships, from corporates to government institutions to international agencies.

  • [20:26] When an entity has a powerful environmental or social purpose, if its contracts are drafted in a transactional way, this can undermine the purpose.

  • [23:41] Sarah explains how the ABA's Model Contractual Clauses follow a shared responsibility model to address human rights issues.

  • [27:57] We discuss how the Model Contractual Clauses translate the UN Guiding Principles for Business and Human Rights into contractual terms. 

  • [35:45] The Model Contractual Clauses can also be scaled to any company, of any size, in any industry and are entirely customisable.

  • [41:09] Sarah describes the response the ABA has had to its initiative - which has been positive - from companies, industry associations, international groups like the OECD, and law firms. 

Links:

Sarah's bio at the Rutgers University website

The American Bar Association's Contractual Clauses Project

Australia's Modern Slavery Unit's resources site, which includes a Procurement Toolkit with Model Contract Clauses

The British Academy's Principles for Purposeful Business Report

The UN Guiding Principles for Business and Human Rights 

Conscious Contracts® website

 

 
 
 
Sarah Dadush Image Quote IG.jpg
 

Transcript: 

Geraldine  0:12  
Hello everyone and welcome to the New Earth lawyer podcast. My name is Geraldine Johns-Putra. I'm your host. I'm a lawyer based in Melbourne, Australia. I am coming to you from Boonwurrung country and I wish to pay my respects to their Elders past, present and emerging. Today we're very fortunate to have with us Sarah Dadush. She is with the Rutgers Law School. She writes and teaches in the areas of business and human rights, consumer law and social enterprise law. As a professor there, her research lies at the intersection of business and human rights and she's exploring innovative legal mechanisms to improve the social and environmental performance of multinational corporations. And anyone who watches this podcast knows that that's a particular interest of mine. So I'm very excited about talking to Sarah. Before joining the Rutgers faculty, Sarah also served as legal counsel, and a partnership officer for the International Fund for Agricultural Development, that's a UN agency. She was also a fellow at NYU's Institute for International Law and Justice. And previous to that she was an attorney at Allen and Overy in New York. She has a JD and an LLM in International and Comparative Law from Duke University Law School. Sarah, welcome to the New Earth lawyer podcast.

 

Sarah  1:38  
Thank you so much, Geraldine. Certainly nice to be here.

 

Geraldine  1:42  
Yeah, we were just chatting, we were had a chat last week, actually, and one of the things that we were talking about was the work you're doing now in contracts. So that actually, you know, we've had discussions on this show about contracts before, specifically values-based contracts, so I was really interested to hear what kind of work you're doing in contracts, and how that is intersecting with your social enterprise work and your business and human rights work?

 

Sarah  2:17  
Yeah. Well, the project that I'm working on now is with a working group that was formed under the auspices of the American Bar Association's Business Law Section, and it's a working group that was tasked with drafting model contract clauses that firms could include in their international supply contracts, with the goal being to improve the human rights performance of those contracts, and by extension to improve the human rights performance of global supply chains, generally. And so we, there was actually two versions of the model contract clauses, one came out in 2018. And I wasn't involved in in the drafting of that one. But I thought there were many, many interesting things about that initiative. And the version 2.0, I was very deeply involved with, and that just came out in like, March, April of this year. So, you know, what I think was extremely interesting about version 1.0, that is still very applicable for version 2.0, is the notion that there are many ways in which it is difficult to hold corporations accountable for bad human rights stuff that happens in their supply chains, in particular, when that stuff happens outside of the country in which the corporations are incorporated. And as you know, we don't, so in other words, there is, it's difficult for national laws, even that would regulate corporate misconduct to reach over into stuff that happens overseas. And then we have a deficit in terms of national law in its reach, and we also have a deficit in international law, because international law doesn't really apply. And corporations, right, if we think of international law as international treaties, those are entered into by governments and governments are the ones who are subject to the treaty law. So there is a real gap in terms of norms that apply to corporations' conduct, in particular conduct that extends into international waters and lands. And one of the things that is so powerful, it seems to me about contracts, is that they cross borders, you know, like they have this power that legislation-type hard law doesn't have, and you can use contracts to develop and enforce and institutionalise all kinds of norms that may go above what national law or international law would expect, right?

 

Geraldine  6:19  
Absolutely. I mean, this is exactly the experience we found in Australia. So we had our Modern Slavery Act come in 2019. And what that Act does is it requires entities with a consolidated revenue of 100 million Australian or more to report on the risks of modern slavery in their operations, and supply chains. So the operations can be onshore, offshore, and their supply chains are actually broadly defined, so that it will cover indirect suppliers as well. So it'll actually go to the ultimate supplier, in any direction, in their supply chains. And so having to report on the risks of modern slavery, which is forced labour, child labour, human trafficking, forced marriage, you know, those all come under the umbrella of our modern slavery definition, having to report on the risks means having to do a degree of due diligence. And it's purely a reporting requirement. But what has happened is that through that requirement to basically do due diligence, or you can't report meaningfully, the entities, the reporting entities had to develop a framework. And of course, contracts came into that framework. So we developed in Australia, the legal fraternity, developed modern slavery clauses. And in fact, as I shared with you last week, the Commonwealth Government, our Australian federal government, put out a model a clause that companies, reporting entities can use to require their suppliers to basically be minimising the risk of modern slavery in their operations, and then in their supply chains. So reaching through the mechanism of contract to at least the direct suppliers, and then trying to reach through to the indirect suppliers where contract doesn't exist, but enforcing it through the chain. And that was a really interesting experience, because what happened was that even companies who were not required to report because they didn't meet the reporting revenue threshold, found themselves becoming indirectly bound by the Modern Slavery Act, or indirectly influenced by the Modern Slavery act, because they had customers who were putting these requirements onto them. So contracts are a very powerful tool, even if they are a private law tool.

 

Sarah  9:01  
Yeah, yeah. And they're there, as you put it, I mean, it's, I think part of what you're saying is that contracts are a way that can be identified as a way to come into compliance with national legislation. So national legislators are, it's a good thing for national legislators, especially developing due diligence legislation or any kind of reporting requirements to include contracts in in those laws. And so I do think that contracts have this, you know, this aspect that is helpful for compliance purposes, but sort of more profound to me is that that they can be used also to implement the spirit of the due diligence laws, and to really sort of bring a deeper coherence into being between what companies say that they do to look after human rights in their supply chains, and what they actually do to look after human rights in their supply chains. And contracts are a really big part of companies' operational lives, you know, like, not just for legal compliance purposes, but also for well, how are we going to relate to one another - buyer and supplier? And how are we in our relationship going to take the interests of non parties, like workers or the planet into account as we move forward in our own contractual relationship? And a lot of companies I think, you know, say that they are doing good or want to do good or better, but don't think about well, what do my contracts, say, you know, what my contracts tell me I should be doing in this situation? Or not doing in this situation? Or, you know, how do I not only be in right relationship with my counterpart, but also through my contract in right relationship with non-party stakeholders?

 

Geraldine  11:33  
And this is a really interesting point, because I work with companies who are trying to embed purpose and operationalise purpose. Because these companies have their set-up under a structure, which is all pointed towards making a profit, that's in the framework. And even if it's not in the DNA of the company, so the company might be set up as a social enterprise, they are working within that legal framework. So I've been looking at work, for example, the British Academy did a report couple years ago now on the Principles for Purposeful Business. And they've identified the things within the system that need to change. So they've identified laws, regulations, the objectives of shareholders, the objectives of investors, the metrics, the performance indicators, and the corporate finance, and all of those things need to change. But contracts. Governance was included in that list. And you could say that within governance is contracts. But you don't make that link automatically. And when you were talking to me last week about that, like, it was a lightbulb moment for me, because I also deal with contracts. I mean, almost which lawyer doesn't? At some stage, we're going to be drafting contracts, even if you're a litigator, you'll be drafting settlement deeds. So it's so powerful, and what a direct way for lawyers to be effecting change within companies trying to be more purposeful.

 

Sarah  13:13  
Yeah, it definitely can be you know, they're like little norm vessels is one way that I like to think about contracts, you know, that sort of carry norms around and you get to decide what are the norms going to be. You have a lot of, you know, freedom of contract is not a joke, you have a lot of discretion right, in what you, in deciding what goes in to your agreement. And if what you want is to I mean, I do think that along these lines of operationalising purpose as you say, contracts are a really key ingredient of operationalising purpose if you don't bring your contracts in support of your purpose. Many contracts, especially supply contracts, you know, where one company that doesn't make stuff is buying stuff from a company that does make stuff, so in the manufacturing industries, if you don't enlist your contract as an ally to advance your purpose, it will actually, it is likely that your contract will undermine your purpose, because most contracts are drafted very much on a sort of a zero sum. 

 

Geraldine  14:40  
Yeah. 

 

Sarah  14:41  
You know, approach. So that and the sort of culture in manufacturing supply agreements, particularly industry, in industries like apparel, right, are but also agriculture and also electronics are such that we kind of have a big power disparity between the buyer and the supplier, the buyer of the stuff and the maker of the stuff. And the pressure is very significant on the purchasing teams of the buyer company to get the cheapest possible price. 

 

Geraldine  15:27  
Yes. 

 

Sarah  15:28  
For the stuff, you know, and that is a sure way to undermine purpose. So if you have a social or environmental purpose in your corporate governance documents or on your website, or even if you're a social enterprise, whose bylaws and charter contain a commitment to advancing a social or environmental purpose, but all the rest of this structure is grounded, rooted in get the cheapest price possible, in all likelihood, your contract will run against your purpose and undercut your efforts to advance your purpose.

 

Geraldine  16:10  
And you see that in other relationships, so take the employer-employee relationship. So when employers want to engage with employees, want to lift morale, want to bring employees along on the journey in order to really tap into that, into the purpose potential, which is what a lot of the purpose discussion has been around when it comes to employees, you'll really get them super engaged, however, the contractual relationship is still very formulaic, it's very much along the lines of master-servant, the old master-servant relationship, you know, ultimately, you know, I pay you x sum of money, and I own you for the time that you are actually employed by me. And that undermines the employee engagement. So, you know, now we come up with different ideas about employee ownership, which is trying to change the dynamics of the legal relationship, so that employees are not just employees, but they're also part owners. If you actually had employment contracts that were far more values-based that talked about the values of the company and the values of the employee, and coming together to create whatever it is that the enterprise wants to create, then then you'd actually be talking the same language at the basic level, which governs the relationship and so on. With customers as well.

 

Sarah  17:44  
Mm hmm. Yeah. I mean, this is all going to be, you know, how contracts can be tools for so much more than just transacting.

 

Geraldine  17:55  
Yes.

 

Sarah  17:56  
There are outcomes the contracts can achieve that goes far beyond I'll pay you x number of dollars for x number of hours of your labour or x number of dollars for x number of widgets, like y number widgets, like the contracts can be much more relational and in becoming more relational, they can do so much more good. And so the sort of idea behind the model contract clauses project, the MCCs, we call, is in part to sort of, you know, enlist contracts as allies in these efforts to achieve positive social transformation. And this problem of, you know, contracts are just thought of as these transacting, transactional documents is, and you know, nothing more like they're just paper you know, kind of thing, is common across the board. So it is common in corporations that don't identify social or environmental purpose as a part of their objective on this planet, you know, and businesses that absolutely do. So all the B certified companies, you know, that absolutely have a purpose in their incorporated into their DNA, if you will, themselves, don't have contracts that match the purpose. And even the United Nations. You know, like, if you think of a big UN agency, or agency affiliated with the UN, like the World Food Program, you know, if you think about them as a company, they have a gigantic budget and revenue stream. They're like a many billion dollar business.

 

Geraldine  20:07  
Yeah.

 

Sarah  20:08  
But their supply contracts are drafted much like those of any regular for profit corporation and negotiated in that way where what you want is, you want to get the cheapest price for these goods that you're then going to be giving for free to people in need, right? 

 

Geraldine  20:25  
Yeah. 

 

Sarah  20:26  
You have this very clear social purpose, alleviating hunger around the world, you're making this food freely available to people who are starving or on the edge of, brink of starvation, such a laudable good purpose. But then the supply contracts where you're actually sourcing are rooted in these, you know, close to extractive principles where it's just like, the more I can get for less, the better, you know.

 

Geraldine  20:56  
And all of these penalties as well. So it's very punitive. So we're not used to drafting into our contracts, even with the modern slavery example. We've, I've worked with clients who have, you know, encouraged the lawyers, me included, to draft less punitive clauses, because we need to be getting to the root cause, we need to be resolving the root cause, which is to remove the incentives for slavery and to protect the victims, basically, to protect the victims. And if you have a punitive modern slavery clause in your supply contract, where you can simply terminate the contract, because you found that your supplier is engaging in modern slavery, well, that's not going to help the victim. So we need to draft clauses that are more holistic, you know, that involve working together, or working with NGOs, you know, collaborating, all of those principles that lawyers are not used to drafting. So those have to come in. And that's really what you're getting at, that at the front end really if you like at the end where, at the point where you're actually agreeing what you're going to do, it needs to be more relational. And then at the point where something goes wrong, because something changes, then that needs to rely on the relationship as well. Because otherwise you're not solving any problems, you're just relying on your legal rights or cutting off the relationship and then allowing that person to operate as they wish.

 

Sarah  22:35  
And we definitely saw a lot of that with the pandemic, right, yeah, things changed. And many buyers, everything from Western apparel brands to electronics brands to ag brands changed, you know, use their rights under the contract to exit the contract, do a cut and run, as you say, and then others like quintupled the size of their orders. Because suddenly, now we need so many rubber gloves, you know, and so that we have like either a vast gigantic increase in demand or a precipitous drop, sometimes leading to actual termination of the contract. And without considering well, what are the human rights impacts going to be of changing our orders in these ways, or changing our contracts in these ways? Even if we're allowed to do it under the contract? Is that the responsible thing to do?

 

Geraldine  23:39  
Yes.

 

Sarah  23:41  
And so we have in the in the model, in the version 2.0, we, we have a very consistent sort of theme throughout the clauses, of which there are 33, which is to have to follow a shared responsibility model for the human rights performance of the contract. So to step away from a model where, you know, the buyer just kind of gets to call all the shots and put all the responsibility on the supplier for ensuring that human rights are protected and respected in their factories, or what have you. To shift away from that model to one where both buyer and supplier take responsibility at every stage of the contract for its human rights performance. And that includes at the remedies stage. So one of the things that I think is so powerful about the model contract clauses is that and this is true for 1.0 too, is that it basically says, in earlier contracts, like you would breach a supply contract if you supplied defective goods, right? 

 

Geraldine  25:15  
Yeah.

 

Sarah  25:15  
Goods that didn't meet the order specifications of material, content or, you know, design or whatever, something like this, now we're adding this layer of you can also be in breach if there is a human rights issue. So we have what I refer to as like a social breach possibility that really breaks down the distinction between product conformity, and production process conformity. So we now, you can now be in breach for more things than previously. But one of the things that was not present in version 1.0 is that it said, you know, if there is a social breach, if there is an adverse human rights impact that occurs in the environment of the contract, then the following remedies come in, those remedies are all traditional remedies that basically flow from the supplier, the breaching supplier to the non-breaching buyer. 

 

Geraldine  25:54  
Yeah, 

 

Sarah  26:38  
And mostly it's like money damages, or the buyer has the right to reject the goods that it believes are tainted or to dispose of them in some other way, but doesn't have an obligation to pay the supplier, right, if they receive defective goods, that's the breach that like terminates the buyer's responsibility to pay for the goods, etc. Those sorts of remedies really don't do the trick, when what you're talking about is a social breach, or human rights violation-related breach, what you need in those situations, is to put human rights remediation first. Because you need to target remedies not just between the parties, but to the people who actually experienced the effects of the breach. And that would be in our case of the MCCs where we're mostly focused on the workers. So we need to, part of upgrading contracts to be more relational, rather than just transactional is to say, in some cases, your remedy for breach has to be directed to victims.

 

Geraldine  27:52  
Yeah. And really, you could extend that to environmental breaches. 

 

Sarah  27:57  
Yes. 

 

Geraldine  27:57  
So this whole concept, you know, the UN GPs have actually - the UN Guiding Principles for Business and Human Rights - has actually brought in so many concepts that are extremely relevant, extremely useful for this whole idea that all contracts should be relational. Because we are all part of a system. So this idea that, you know, it's not just that you might cause the social problem, or the environmental problem, are you contributing to it or are you linked to it?  That's actually a very powerful idea, because we're so used to thinking in terms of causation as lawyers, but as soon as you move towards getting to even just being linked to, that goes to the idea of relationship. You know I didn't, I am not responsible for this, but yet I'm, I have a relationship with someone who is responsible for it. So just like, if you were in a close relationship, say your sibling or your partner did something, did something that was unacceptable or morally wrong, you would be linked to that person, it's the same with this idea of companies. And so in some sense, you have a responsibility, you know, or you have some influence, which is really what gets said in the UNGPs, you have an influence. So it then becomes your responsibility to use that influence, you know, where you can. And I think bringing those sorts of concepts into the contract is where you need a mindset shift.

 

Sarah  29:39  
Totally, yeah, that idea of like shifting away from a sort of blame model, who is directly causally to be blamed toward who is responsible in this broader way of not just cause but also contribute to or linked to, through your business relationships is, for me, it is like a total like, pwrrh! for how we think about contracts. Because it's so not how we think about contracts, you know so what does it mean to bring that into the contract? Um, and our answer to that is to well, I should say, one of the things that I, that we often use to describe the Model Contract Clauses is they're kind of like a Google Translate for the UNGPs into contractual obligations so we take these ideas of cause, contribute, linked to and we sort of transform them into or translate them into contractual obligations. And the way that we do that is in three dimensions. One is that we say, both buyer and supplier must engage in human rights due diligence. 

 

Geraldine  31:07  
Yeah. 

 

Sarah  31:08  
So not just supplier. And also the difference is usually and I think the Australian clauses kind of do the 'usually', which is to say, it's just supplier that has to do anything, and supplier usually has to basically warrant or represent that they are in compliance with the buyers' human rights standards or that they have done the due diligence, as if due diligence is like a one and done thing, which it is not. Human rights due diligence is this ongoing, stakeholder involving process right continuous throughout the life of the business, and in our case throughout the life of the contract, to identify, prevent, and address and report on or account for human rights risks. So in the first thing that we do in the MCCs is say, both parties have an obligation to engage in ongoing human rights due diligence. And the second thing, the second way in which that shared responsibility model appears in the Model Contract Clauses is we say, there's a whole section on buyer's responsibilities, to engage in responsible purchasing practices, to negotiate a price for the contract that is sufficient to cover the costs of production and responsible business conduct by the supplier. So at a minimum, to cover the minimum wages under national law. But beyond that, is really what we're going for, for a living wage and responsible business conduct generally. For the buyer to provide reasonable assistance to the supplier in meeting the buyer's own human rights standards. And that assistance can be like training, technological, in kind, or it can actually be money, you know, financial assistance. And for any modifications to the contract to be negotiated and discussed with the supplier to give the supplier a chance to say, actually, I can't meet your tripled order, unless you give me more time or more money per unit so that I can pay my workers overtime, like to actually create room for conversation and negotiation. And the last one is to engage in responsible exits, you know, so like, don't just leave your supplier, the moment that something that you don't like happens and pay any outstanding invoices that you have before you leave, because one of the terrible things that happened with COVID is a whole bunch of brands abandoned their contracts and didn't pay for the orders, even orders that were like completely manufactured and had shipped. So and then the third area where the shared responsibility comes in is remediation, which says that you know, if you have a social breach or human rights issue that arises in the environment of the contract, both the supplier has to engage, has to prepare a remediation plan to address the grievances of the victims. And if the buyer somehow caused or contributed to the harm, then the buyer also has to participate in providing remedy to the victims, which is ...

 

Geraldine  35:08  
It's fundamental. To the UNGPs. 

 

Sarah  35:11  
It's fundamental to the UNGPs and it's a total departure from how we normally think about contract remedies. And then we have the more typical contract remedies around like rejection of the goods and indemnification and so on. But those only come after human rights remediation. 

 

Geraldine  35:32  
Yeah. 

 

Sarah  35:32  
So we flipped the order all to be in line with this, this shared responsibility idea that the UNGPs enshrine for us.

 

Geraldine  35:45  
So it strikes me that as I'm hearing you explain what these Model Contract Clauses are, and how they translate the UNGPs into actual contractual speak, it strikes me that you are really pulling together various parts of law and parts of the whole purpose debate that I've been working in. So what you, modern slavery, for example, balancing profit with purpose is another, and the third is contracts. So I've been, we were introduced through Kim Wright. And I've been thinking of signing up to Kim's Conscious Contracts® course so that I can learn to do what she calls Conscious Contracts®, which are values-based, relational-based contracts and which deal with embedding the values of the, enshrining the values of the two parties plus adjusting to any changes. So what happens when circumstances change, and reducing conflict when that happens. So what I'm seeing is that, insofar as the contracts work that I'm focusing on, the connection with what your work is, I'm seeing that it's taking that contract idea of the parties as being largely smaller enterprises, or individuals, to really extending it up, scaling it up to much larger companies. Because even with the B Corp experience, it's been the same thing. Once you scale up to a very large company with entrenched behaviours, with large legal departments, with a general counsel who may be very resistant to these ideas, you know, you have a lot of cultural change. But what your clauses, I'm getting the sense is, what your clauses do is they are entirely customisable, you know, from small-scale right up to the larger scale. And it's written in language that the large, larger companies can absolutely adopt.

 

Sarah  37:59  
Yeah, they're drafted to be used by any company, of any size, from any industry. 

 

Geraldine  38:08  
Yeah. 

 

Sarah  38:08  
And they are designed to be modular. So even in the document itself, we offer different options. So you can choose different options for your clause. But those are just suggestions, you can edit however you see fit. 

 

Geraldine  38:26  
Yeah. 

 

Sarah  38:26  
So it's definitely not a you have to take all 33 clauses as they are type of exercise. It's really the idea is that the MCCs provide a kind of menu of ways in which contract drafters can enlist their contractors and ally in supporting their purpose. And it invites right a certain like, introspection, you know, what do we want? How far do we want to go? How far do we want to align our legal life with our stated purpose? And, you know, we know that to adjust our contracts in this way is going to have an impact on my budget and operations and all this kind of stuff. Let's talk about it. How much are we ready to really bring coherence in and so yeah, so it's absolutely scalable. But, but you also started saying something that made me think about, oh, yeah, I suppose, like the other thing that's happening, the MCCs are kind of like a part of it is, not just the normalisation of the UNGPs and these ideas of cause or contribute, but also yeah, bringing in a more stakeholder-based approach into, again, the operational and legal life of the corporation and using the contract as a way to, you know, fully make the DNA of the company shift away from a singular focus on shareholder wealth, right?

 

Geraldine  40:24  
Yeah. Which brings me to a question about the response you've had, because I would love to see, we have a task force in Australia around the modern slavery work. who are advisors to the government, I would love to see them look at your MCCs. And I think it would be easy enough to bring it to their attention, because I know people who are on it, and use some of your ideas in what's suggested to Australian businesses and reporting entities. What has been the response that you've observed to these MCCs, these Model Contract Clauses?

 

Sarah  41:09  
So we're still, it still feels pretty early days in terms of launching, we're having like conversations with different groups of folks. So there's conversations happening one on one with companies and conversations happening with like industry associations, because industry associations are really good, interesting way to sort of, not just spread the word, but, kind of change, like identify best practices that every company can then look at. So there's advantages to going company by company, but there's also advantages to going to an industry association level or a multi stakeholder initiative level, where all the companies are looking to that entity for guidance. And we're also talking to some regulators, and we're talking to certification schemes, and different kinds of like private ordering and public ordering bodies. And by and large, and like also the OECD, like a number of, we also had our consultations to draft version 2.0 were very extensive, we talked with over 70 people from various industries and walks of regulatory life, you know, private and public ordering folks. So the reception has been, by and large, very positive, like there's, there's a lot of like, immediate resonance of the idea, like, it doesn't make sense, and it doesn't work to put all the responsibility on the buyer, excuse me, on the supplier. Even, like morality aside, it doesn't work. Like when you put these reps and warranties systems in where you're just saying, supplier warrants that no problems ever in this. It's basically just like getting a stamp on something that you know, isn't true. So it doesn't serve any purpose. It doesn't work for anybody. So people are reading more and more, feel very responsive to the idea that that system needs to be set aside. In favour of what? Well, the shared responsibility model also makes a lot of sense to people. The idea that purchasing practices are a part of the problem is, I think, used to be a very foreign idea. And is increasingly becoming like an accepted part of the, like an understood part of the puzzle of human rights and supply chains, if you will. And so then when we come in and say, well, if you can go that far to realise that how the buyer behaves matters, then you might be interested in these Model Contract Clauses and people are generally like, very interested and also understand how their contracts are an integral part of their corporate social responsibility. I think there is like, as I'm sure you've seen, tends to be quite a separation, silos, within corporations between the CSR or ethical trading or sustainability folks on the one hand, the legal folks on the other and the purchasing team on the other side. 

Geraldine  45:00  
Yeah. 

 

Sarah  45:01  
And what has ended up happening is, sometimes we get to speak to the legal folks first. But what often happens is we come in through the CSR people. And then we talk to them about the contracts. And they're super psyched, because they're like, oh, you've given me tools to talk to my legal team with. 

 

Geraldine  45:26  
Yeah. 

 

Sarah  45:27  
Because often those CSR people are not lawyers, right? So to give them tools that feels really exciting, and it's part of the whole coherence work that the MCCs can do. And so yeah, very positive reception. In terms of like actual uptake. You we know that like law firms, various law firms are using the MCC's as part of their client alerts, are saying like, look, you know, the EU is developing this mandatory human rights due diligence legislation, Germany already has one, France already has one, more are on the way. The EU Directive specifically references contract clauses, specifically says you should have contract clauses that support your human rights or environmental due diligence strategy. So law firms are, we're seeing law firms point to the MCCs as being like this could be a way to meet that legal requirement. Um, so yeah, the idea is is getting a warm reception. I think people are excited to rethink their contracts and include that rethinking as part of a certain kind of introspection. Companies that are already committed, like B Corps, are going to hopefully be especially. 

 

Geraldine  47:04  
I would think so, yes. 

 

Sarah  47:06  
But then you also have the other companies that I think about. The B Corps, I think of as like natural allies. And then there's the other companies that I think of as CYA companies that are like, just concerned about evolving legislation and how to keep in step with it.

 

Geraldine  47:26  
They look very much to what everyone else is doing. So they don't want to go first. Yeah, but that's why the industry associations will be very helpful.

 

Sarah  47:34  
Exactly, exactly. Yes.

 

Geraldine  47:37  
Yeah. Well, that sounds very promising. Sarah, this has been an excellent eye-opening educational episode. So I am really, really I want to congratulate you on on the MCCs and the work that you're doing. I think it's going to take off in a big way.

 

Sarah  47:55  
Oh my gosh, I really hope so. And you know, the Group is obviously not just me, the working group is full of like-minded folks who are all incredible and it's been such an honour and an exciting opportunity to participate in this work, it feels really, it feels like a really nice way to bring, you know my academic and my practical work in line with my own personal values, you know, to bring some coherence into my own experience of you know, being an alive lawyer person. So thank you so, so much for giving me the opportunity to share this.

 

Geraldine  48:40  
Thank you.

 

 

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