Sample Clause: Responsible Supply Chain Representation
This sample commercial contract clause combines a supplier’s agreement to comply with the law when performing its contractual obligations with a commitment to exceed minimum standards in the areas of labor as well as environmental, health, and safety (EHS). Companies are increasingly called to task on these topics by investors, customers, employees, and other constituencies, and public disclosure or certification of performance is often necessary or desired.
[Use this Distributor Supply Chain Due Diligence Checklist to streamline your due diligence process of supply chain contracts for domestic and cross-border distribution transactions.]
Analyzing the value and risk of including a responsible supply chain clause in a commercial agreement
Having a clause such as this one in a manufacturing or supply agreement confirms the importance that the parties assign to lawful and ethical conduct in the operation of the supply chain. It also provides a contractual basis for the customer to request compliance information or certification periodically from the supplier and for the customer to consider EHS process or product improvements discovered by the supplier. The absence of such a clause doesn’t necessarily negate the significance of the subject areas in the parties’ relationship, but it does risk the perception that the parties don’t consider the areas to be of importance.
Affected clauses
Adding a responsible supply chain clause to a commercial agreement may impact the meaning or affect other provisions or the operation of other provisions in the agreement, including:
- Definitions
- Confidentiality
- Breach; remedies
- Compliance with laws
- Term and termination
Sample clause language
The following clause may be adapted for use in a commercial manufacturing or supply agreement to formalize expectations and commitments regarding the supplier’s supply chain performance.
Note that the corruption prohibitions in paragraph (d) below apply to payments, gifts, etc. to customer employees or agents as well as to governmental officials.
Section X. Responsible Supply Chain
(a) Labor. Supplier represents, warrants, and covenants that it does not, as of the Effective Date, and shall not, during the Term (i) use involuntary, bonded, or underage labor at the facility(ies) where its performance under this Agreement will occur; (ii) engage in human trafficking; or (iii) maintain unsafe or unhealthy conditions in any dormitories or lodging that it provides for its employees. Supplier agrees that during the Term it shall promptly disclose to Customer any use, whether intentional or unintentional, of involuntary, bonded, or underage labor or instances of human trafficking, and shall correct unsafe or unhealthy conditions in any lodging that it provides for its employees. Supplier shall use reasonable efforts to include similar prohibition and disclosure requirements in agreements with its own suppliers. Supplier shall cooperate and provide such information and/or certifications regarding its compliance with this sub-section (a) as may be reasonably requested by Customer.
(b) Environment, Health, and Safety. Supplier represents and warrants to Customer that Supplier has and Supplier covenants that it will continue to have a documented, comprehensive environment, health, and safety (EHS) policy that addresses, among other things, its ongoing commitment to environmental stewardship and elimination of workplace injuries and illnesses. Upon Customer’s request, Supplier shall provide Customer with evidence of implementation of such policy and agrees to provide information related to the environmental impact of any Product (or any materials used therein) including but not limited to greenhouse gas emissions, waste generation, recycled content, amounts of regulated chemicals in a Product, and disposal information.
(c) EHS Improvements. As and when they become available, Supplier shall identify and bring to Customer’s attention Product options that have a reduced environment, health, and/or safety impact. In the event Supplier receives an Order for Product for which Supplier has an option with a reduced environmental footprint or a more favorable health and safety profile, Supplier shall promptly notify Customer of such option(s). Supplier shall discuss with Customer the feasibility, efficacy, and regulatory and cost implications of any of the foregoing alternate Product options and shall provide such options if and as directed by Customer.
(d) Anti-Corruption. Supplier shall conduct its activities hereunder in accordance with all Applicable Law related to anti-bribery or anti-corruption legislation, including the U.S. Foreign Corrupt Practices Act of 1977 and all national, state, provincial or territorial anti-bribery and anti-corruption statutes. Accordingly, in connection with its performance under this Agreement, Supplier shall make no offer, payment or gift, will not promise to pay or give, and will not authorize the promise or Commercial, Sample Clause – Responsible Supply Chain Representation, Warranty and Covenant (Annotated) payment of, directly or indirectly, any money or anything of value to any Customer employee or agent, any government official, any political party or its officials, or any person while knowing or having reason to know that all or a portion of such money or item of value will be offered, given or promised for the purpose of influencing any decision or act to assist Supplier or Customer or otherwise obtaining any improper advantage or benefit. Supplier will take appropriate actions to ensure that any person representing or acting under its instruction or control will also comply with the provisions of this sub-section (d).
(e) Import/Export Control. Supplier, any officer, director of Supplier, and any agent, consultant, or other third-party representative of Supplier, acting in its capacity as such, shall conduct their activities in accordance with all Applicable Law relating to the exportation of the Products from [Country] and importation of the Product by Customer into the United States. Supplier shall promptly notify Customer in the event Supplier receives written notice from any Governmental Authority alleging Supplier’s failure to comply with any export or import requirements with respect to the Products.
[Download our GC Guide to Navigating 2024: Transactions and Contracts to help you prepare for key transaction and contract developments impacting in-house legal teams in the year ahead, including the state of supply chains in 2024.]