Regulation Through Contracts: Supply-chain Contracting And Sustainability Standards

European Review of Contract Law 12(3)

Global

Value chains have become instruments to implement transnational sustainability standards. Implementing private standards via international commercial contracts contributes to redefining the organizational business models of supply chains, which in turn influence the effectiveness of the standard and the internal distribution of power. Global environmental standards, particularly those related to sustainability, are profoundly changing the structure and linkages in global value chains. Ensuring compliance with standards is forcing chain leaders to engage suppliers directly, thereby reducing the degree of delegation to intermediate levels. As a consequence, monitoring contractual performance and sanctioning non-compliance have become central issues in organizing value chains. This article addresses the relationship between global private standards and supply-chain contracting, arguing that they mutually influence each other. It then compares different instruments that can be used to implement environmental and social programs along the chain, focusing on private taxation and internal markets. It concludes by illustrating the correlations between different types of environmental standards and contracting in global chains.

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Cafaggi Fabrizio