As ESG (environmental, social, and governance) variables continue to play an integral role within organizations and serve as a prioritized component within business decision-making, ESG clauses in contracts are increasingly at the forefront of contract negotiations and compliance.
Without the right contract management tools, ESG contract clause language can elongate negotiations and cause post-award compliance tracking difficulties.
Fortunately, AI-backed contract management software offers unique tools for reducing pre-award and post-award ESG contract clause bottlenecks so your team can address ESG principles and ESG goals. Read on to learn how.
What Is ESG?
Environmental, social, and governance (ESG) continues to expand based upon an increasing consensus among non-profit and for-profit organizations to conscientiously perform due diligence to contribute to sustainable environmental practices and human flourishing – including:
- Corporate Social Responsibility (CSR) Initiatives
- Equitable Employment Practices (Including the Absence of Child Labor)
- Supplier Diversity Policies
- Ethical Vendor Compliance
- Adherence To a Code of Conduct
- Energy Efficiency (Including Helping Decrease Greenhouse Gas (GHG) Emissions
Explore how you can track vendor risk in this video.
Considering the ranging variables of ESG, legal professionals – especially in-house counsel – can inadvertently increase risk by missing key language in negotiating an ESG contract clause or losing track of suppliers’ post-signature ESG compliance.
Noncompliance can damage your organization’s reputation and damage partnership relationships. To avoid prospective disputes and sustain ESG practices, many companies include ESG clauses in contracts with partners, suppliers, and clients. To efficiently manage ESG contract clauses and other contextual contract details, you can leverage future-minded legal technology tools.
But first, let's define ESG contract clauses.
ESG Contract Clauses
ESG contract clauses are the binding agreed-upon commitment by a supplier to a recipient (client) or between partners regarding social responsibility, sustainable governance, and the environment. Compliance language can also include ethical parameters pertaining to embargoes, fraud, employee safety, and other requirements.
AI-Driven Auto-Redlining for Informed ESG Contract Clause Negotiation
In the pre-signature contract management stages of contract creation and negotiation, contract lifecycle management software can empower your processes with a pre-approved clause library that can provide you with your chosen ESG clause wording – especially with the help of artificial intelligence that has learned over 700,000 clauses.
In negotiating a contract with a counterparty, you can also leverage AI-backed auto-redlining software that can suggest pre-approved ESG contract clause language in place of your counterparty’s proposed ESG clause verbiage.
With the ability to easily draw upon pre-approved ESG clauses and receive AI-based contract clause redline recommendations, you can reduce risk by evaluating differential language clearly and save time with the help of AI-backed automated clause language replacement recommendations. With such technological efficiency, you can confidently approve of ESG expectations and reach contract signing all the sooner.
Compliance & Reporting Tools for ESG Contract Clauses
Manually auditing and reporting ESG contract compliance with tools such as spreadsheets can be cumbersome. Also, ESG regulations and reporting requirements can change frequently.
Fortunately, contract management software offers advanced auditing and reporting features - including visually engaging graphical dashboards - to help retain optimal ESG compliance oversight within your organization and with external stakeholders.
With the help of detailed contract audit trails and milestone tracking, you can remain abreast of upcoming fulfillable contract obligations and non-compliance areas. This allows you to easily track ESG insights in alignment with your organization’s strategies and goals. Leading CLM software offers robust contract compliance auditing and tracking features such as:
- Highly configurable dashboards for prioritized ESG compliance areas.
- Ad-hoc reporting for user-defined reports that can be exportable to various formats – such as Word, Excel, and PDF.
- An online report designer tool to configure compliance report layouts.
See how contract intelligence can help you streamline contract lifecycle management processes and manage contract compliance risk in the whitepaper below.
ESG Clause Management & More With Cobblestone Contract Insight®
Are you ready to stop wasting time manually managing ESG clauses in contracts and instead repurpose your energy toward more strategic contract performance management processes?
Fortunately, you can with the help of CobbleStone Contract Insight - an end-to-end CLM software solution that is equipped with future-minded ESG contract compliance management tools that can help protect your organization’s reputation and bottom line.
CobbleStone Contract Insight can empower you with flexible legal tech tools to evolve with ESG requirements and can help place your organization at the helm of data-driven ESG innovation.
CobbleStone’s trusted, award-winning, highly integrated contract management software streamlines the contract management process with real-time governance, reduced friction, and high flexibility from contract requests to renewals. It's no wonder why Quadrant Knowledge Solutions recognizes CobbleStone as a CLM Leader in the Spark MatrixTM Report!
Discover why thousands of contract managers trust CobbleStone Software with their contract management needs. To learn more, book a free demo or start your free 30-day trial of CobbleStone Contract Insight CLM software today!
*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorneys for legal advice regarding any particular legal matter.
