Vandenbergh and Moore, ‘Governance by Contract: The Growth of Environmental Supply Chain Contracting’

Corporate net zero climate commitments and environmental, social and governance (ESG) policies have the potential to bypass barriers to international, national, and subnational government action on climate change and other environmental issues. But these ESG developments also raise concerns about greenwashing. This Article evaluates a particularly pernicious form of greenwashing, which could occur if a firm’s commitments extend only to its direct operations even though most of its environmental harms arise from its supply chain. The Article presents the results of a new, original empirical study that demonstrates the remarkably widespread use of environmental supply chain contracting requirements. The study finds that roughly 80% of the ten largest firms in seven global sectors include environmental requirements in supply chain contracting, a substantial increase over the 50% reported by a comparable study fifteen years ago. The Article concludes that the prevalence of environmental supply chain requirements, the types of contract requirements, and the motivations of the contracting parties can put to rest a principal greenwashing concern and signal new ways to fill important gaps in public governance.

Vandenbergh, Michael P and Moore, Patricia, Governance by Contract: The Growth of Environmental Supply Chain Contracting (May 2, 2022). Vanderbilt Law Research Paper No 22-07.

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