Sustainability Principles Embedded in Contracts – A Risky Endeavour? An Example of the European Food Supply Chain

Corporate sustainability performance has become a hot topic for all food supply chain actors. With this recent trend, we first elaborate on requirements that are to be expected from the envisaged ‘Taxonomy’ (a green classification system developed by the EU) – aspects showing that further strengthening and necessity of value sharing across the food supply chain would become inevitable. Second, we build upon the existing literature on organisational contracts as a long-term cooperation and collaboration across the value chain that creates an institutional setting sui generis and briefly elaborate on the consequences in the context of the food supply chain. Third, we consider enforceability of sustainability clauses that are currently being passed on via contractual obligations across the food supply chain and we consider risks stemming from a poorly incorporated (or poorly drafted) sustainability clause, as well as controlling mechanisms in place. Finally, we show that a better organisational contract design might help to mitigate various risks between the food supply chain actors in connection with the sustainability principles.