Contractual Control in the Supply Chain. On Corporate Social Responsibility, Codes of Conduct, Contracts and (Avoiding) Liability

Abstract

This research addresses a number of questions that have been raised in the wake of the Rana Plaza factory collapse. It focuses on the extent of the legal responsibility and liability for CSR violations in the supply chains of MNCs in the Netherlands, England and California (United States). Many MNCs currently take an array of (semi-)legal measures in order to govern their supply chains in terms of CSR. This book investigates which legal measures a limited number of Dutch, English and Californian MNCs take in practice, in order to govern their supply chains in terms of CSR; do they use contracts, general terms and conditions or codes of conduct (“COCs”) to effectuate certain CSR behavior with their suppliers? How can these instruments be qualified? And what are the consequences of these measures in terms of both contract law and liability law? In identifying the measures that selected MNCs in three jurisdictions have taken to govern their supply chain, this research provides valuable insights into those companies that aim to improve the CSR performance in their supply chains and take measures accordingly. In addition, this research also offers a helpful “reality check” to those scholars working in the field of CSR and/or the law and who make assumptions in respect of the CSR choices that MNCs make. Secondly, and more importantly, it answers the crucial question of what legal impact these measures may have for MNCs, if those measures are not lived up to in practice. It concludes that almost all of the MNCs studied took measures to govern the CSR behavior of their suppliers and that, with some local variations and exceptions, MNCs that used strong measures also ensured that these measures were legally binding, while vague measures were often voluntary in nature. Moreover, it concludes that on the basis of the scant case law available on this subject matter, it is unlikely that an MNC will be held liable for damage caused by CSR violations in the supply chain, unless it takes on obligations that, in one form or another, go outside of that which would normally be expected from the MNC in a buyer-supplier relationship, or unless the factual behavior of the MNC gives rise to a liability claim. A first, careful conclusion would therefore be that, perhaps, the law as it currently stands does not have all that much to offer when it comes to bringing about long‑term improvement for CSR in supply chains. After all, on the basis of the current legal framework, the risk of legal liability for MNCs is small, and what little risk there is tends to be remedied by the way in which COCs and contracts are drafted by MNCs. Moreover, since legislation is limited to transparency requirements for MNCs (and frequently not even that), and governments do not attempt to carve out a clear duty of care for MNCs, the law is unlikely to bring about the revolution that is perhaps necessary to prevent further disasters from occurring.