Contract Language project wants to get rid of business contract jargon

The Contract Language project, launched in February 2024, analyses supply and procurement contracts in the global supply chains of large Finnish companies. The focus is on sustainability, in particular, human rights and environmental responsibilities. The aim of the project is to make contracts easier to understand to promote sustainability goals. Clarifying contracts democratises business operations and gives weaker parties more tools for participating in conversations on sustainability. This means that contracts are no longer an instrument of power but a tool to promote cooperation.

“Contracts are often abstract and complex, both linguistically and content-wise, which makes them ultimately void of meaning. Therefore, it can be very hard for people to understand their rights in a given situation just by reading contracts. Our goal is to unleash the full potential of contracts and facilitate cooperation in global value chains,” Principal Investigator, Senior Research Fellow Anne Ketola explains.

New CSDD Directive puts due diligence on business agendas

The European Parliament voted to adopt the Corporate Sustainability Due Diligence Directive (CSDDD) on 24 April 2024. For the first time, the CSDDD introduced an EU-wide due diligence obligation for businesses, requiring them to identify, prevent, mitigate, and remedy the negative externalities of operations when they are related to human rights and environmental sustainability. For many companies, the adoption of the directive means that sustainability must finally be put on the agenda. The directive also requires that companies work on their contracts to make them more sustainable.

“The Corporate Sustainability Directive is a great way of starting a discussion on this topic and highlighting the problem. Companies rarely have one dedicated person who has a good overall picture of the company’s sustainability issues. People may assume that everything is in order even when this is not the case,” Ketola says.

In a global economy, many things have been outsourced to make production as cost-effective as possible. However, people have realised that the pursuit of profit by any means possible is unethical and there is a will to set limits to such processes. Regulations that protect human rights in Finland do not extend to all countries, such as Bangladesh. Companies may save money by subcontracting production to countries with no relevant regulation or regulation that is ineffectively monitored and enforced.

One of the main points of the Corporate Sustainability Due Diligence Directive is that companies can no longer outsource their responsibilities. Greenwashing must also be avoided. In other words, the gap between sustainability communications and sustainability actions must be closed.

“The EU has issued many pieces of sustainability-related legislation, some of which apply to almost the entire value chain. Since contracts are an effective tool for managing the value chain, we must include a sustainability element in them as we look at the big picture. Because contracts can foster both corporate responsibility and irresponsibility, they are not merely auxiliary instruments; rather, they are critical elements in shaping overall corporate behaviour,” says JARGONFREE researcher Juho Saloranta, a sustainability lawyer specialising in corporate sustainability and the Chair of the Finnish Corporate Sustainability Law Association.

The Corporate Sustainability Due Diligence Directive will advise companies to incorporate new sustainability clauses into their contracts. The model contractual clauses issued by the European Commission will eventually help this. However, there is a risk that the clauses will be drafted in overly technical and opaque contract language, which may not serve the needs of those who rely on these contracts.

“In interpreting the text of the directive, the ‘contractual assurances’ it refers to should be understood as a contractual model that emphasises cooperation, considers stakeholders and aims at better resource allocation. This approach would support the effective implementation of companies’ sustainability due diligence in value chains – a goal we are pursuing with our corporate partners in this project,” Saloranta continues.

The project is taking first steps

The Contract Language research project produces publications targeted at both academic audiences and corporate professionals, particularly those specialising in sustainability, contracting, and procurement. In addition to research publications, the project is developing practical communication tools that companies can use to enhance contract language and promote sustainability in their supply chains.

The project employs a team of lawyers and linguists, who analyse three types of documents: the contracts used in companies’ supply chains, standard clauses, and (Supplier) Code of Conduct documents, i.e. guidelines that companies use to communicate their values and principles to, for example, employees or suppliers. Additionally, the project will examine the underlying sustainability-related legislation.

“Our aim is to produce concrete instructions for improving these texts, content that will promote a change of attitudes or mindsets and help to instil a new kind of corporate mindset,” Ketola says.

The analysis of the contracts has already begun.

“One of our lines of research is the linguistic analysis of the sustainability jargon used in the contracts and their annexes, and this work has already begun. We are mapping the features of this linguistic register to put together a checklist of ways to deconstruct this language,” Ketola says.

“We have also made plain language versions of the human rights responsibilities sections of contracts in which the language and content have been clarified and designed to make them as easy as possible for people with reading comprehension challenges,” Ketola continues.

The Contract Language project brings a new perspective to the promotion of sustainability goals by adopting a linguistic approach. Large Finnish listed companies have already come on board. The companies that are already involved have recognised the need to think about the issues the project is promoting.

“Companies across various industries are already participating, ensuring that we gain a comprehensive understanding of how to address this issue in different contexts. However, we are eager to involve additional companies to further enrich our insights. If interested, please feel free to contact us,” Saloranta says.

The project is funded by the Kone Foundation in the period of 2024—2026.

Read more on the project website.