Shared Value Contracting: A New Way to Think About Contracts

What is it about?

New sustainability and human rights laws are changing how companies operate, requiring firms to take responsibility not only for their own activities but also across their entire supply chains. This creates a practical challenge, as companies depend on many partners to meet these obligations. In most cases, firms respond by adding sustainability clauses to contracts, but these often remain disconnected from how business relationships actually function. They do not influence pricing, planning, or day-to-day coordination, meaning responsibility may look strong on paper but remains difficult to achieve in practice. This article argues that the issue is not simply about compliance, but about how business relationships are designed. Contracts are not just legal documents; they shape how companies collaborate and make decisions. The article introduces “Shared Value Contracting,” an approach that embeds sustainability within the structure of the business relationship itself by aligning incentives, responsibilities, and coordination mechanisms. By integrating economic and sustainability objectives within contractual governance, this approach helps make sustainability more practical, effective, and closely linked to how value is created across value chains.

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Photo by Cytonn Photography on Unsplash

Photo by Cytonn Photography on Unsplash