Get complimentary access to Gartner® research
How Do I Embed ESG (Environmental, Social, Governance) in Vendor Contracts?
Companies attach ever greater importance to vendor-related ESG performance. In essence, they “must shift from treating sustainable procurement as an add-on to codifying ESG into vendor contracts early while lessening potential deadline-incurred burdens from waiting for regulations to catch up.” In this report, Gartner provides practical guidance on vendor vetting and phasing, minimum criteria to consider in ESG clauses, the development of a strategy for ESG inclusion in vendor contracts, and the use of available resources for formulating contractual commitments.
Gartner highlights three key actions that companies can take to embed ESG in vendor contracts:
“Segment vendors by focusing on the organization’s most pressing ESG issues and prioritizing vendors with a high level of associated risk or impact to the ESG strategy.”
“Rather than waiting for laws and regulations to drive action, proactively pave the way toward these outcomes by shortlisting ESG-focused viable market alternatives as potential replacements. Build out a library of ESG clauses to embed and identify areas within your current vendor contracts where they might be applied.”
“Build off of existing resources (such as the Chancery Lane Project, the IFRS Foundation, and other international standards and disclosure regulations) to achieve quick wins (of one or two lesser objectives). This will act as a starting point to guide more ambitious negotiations in the future and ensure continuous positive outcomes.”