Principle 4: Fair payment & contract terms

Principle 4 focuses on ensuring fair and transparent contracts and payment terms, with a particular emphasis on preventing exploitation, such as delayed payments (sub-principle 4.3), especially towards SMEs. To support this, the CSDDD requires companies to regularly review their contracts, aligning purchasing practices with human rights obligations, as outlined in Articles 10(2) and 11(3). 

Sub-principles 4.1 and 4.2 highlight the importance of responsibly negotiating contractual assurances and establishing mutual responsibilities between business partners. Articles 10(2)(b) and 11(3)(c) further mandate that companies seek contractual assurances from their direct business partners to ensure compliance with codes of conduct and, where necessary, corrective or preventive action plans. These assurances must extend throughout the supply chain to ensure responsibilities are properly aligned. Sub-principle 4.5 supports stability by prohibiting retrospective changes to contracts, safeguarding the integrity of agreements once they are made. 

Recital 46 underscores that contractual assurances must ensure responsibilities are fairly shared between companies and their business partners, supported by appropriate verification measures. Recital 56 stresses the need for tailored measures for SMEs, accounting for size and power dynamics, and allowing SMEs to share verification results with other companies when necessary. 

Finally, Recital 66 highlights the importance of guidance from the Commission to help companies meet due diligence requirements, including model contractual clauses (sub-principle 4.2). This guidance aims to clarify task allocation and prevent the transfer of obligations to business partners.