Environmental Governance by Contract: The Growing Role of Supply Chain Contracting

Michigan Journal of Environmental & Administrative Law Michigan Journal of Environmental & Administrative Law

Volume 12 Issue 1

2022

Environmental Governance by Contract: The Growing Role of Environmental Governance by Contract: The Growing Role of

Supply Chain Contracting Supply Chain Contracting

Michael P. Vandenburgh

Vanderbilt University Law School

Patricia A. Moore

Clyde & Co.

Follow this and additional works at: https://repository.law.umich.edu/mjeal

Part of the Business Law, Public Responsibility, and Ethics Commons, Environmental Law Commons,

Environmental Policy Commons, and the Operations and Supply Chain Management Commons

Recommended Citation Recommended Citation

Michael P. Vandenburgh & Patricia A. Moore,

Environmental Governance by Contract: The Growing Role of

Supply Chain Contracting

, 12 MICH. J. ENVTL. & ADMIN. L. 1 (2022).

Available at: https://repository.law.umich.edu/mjeal/vol12/iss1/2

https://doi.org/10.36640/mjeal.12.1.environmental

This Article is brought to you for free and open access by the Journals at University of Michigan Law School

Scholarship Repository. It has been accepted for inclusion in Michigan Journal of Environmental & Administrative

Law by an authorized editor of University of Michigan Law School Scholarship Repository. For more information,

please contact mlaw[email protected].

ENVIRONMENTAL GOVERNANCE BY

CONTRACT: THE GROWING ROLE OF

SUPPLY CHAIN CONTRACTING

Michael P. Vandenbergh

†

& Patricia A. Moore

††

Corporate net zero climate commitments and environmental, social, and

governance (ESG) policies have the potential to bypass barriers to international, national,

and subnational government action on climate change and other environmental issues. This

Article presents the results of a new empirical study that demonstrates the remarkably

widespread use of environmental supply chain contracting requirements. The study finds that

roughly 80% of the ten largest firms in seven global sectors include environmental

requirements in supply chain contracting, a substantial increase over the 50% reported by a

comparable study fifteen years ago. The Article concludes that the prevalence of

environmental supply chain requirements, the types of contract requirements, and the

motivations of the contracting parties signal new ways to fill important gaps in public

governance.

ABLE OF CONTENTS

THE ROLE OF ENVIRONMENTAL SUPPLY CHAIN CONTRACTING ........... 7

A. The Regulatory Gap ........................................................................... 8

B. The Definition and Functions of Supply Chain Contracting ................... 11

1. Definition ............................................................................... 11

2. Functions ................................................................................ 13

II. EMPIRICAL STUDY OF SUPPLY CHAIN CONTRACTING .......................... 20

A. Methodology ................................................................................... 20

B. The Sectors Analyzed ....................................................................... 23

1. Discount and Variety Retail .................................................... 23

2. Home Improvement and Hardware Retail ............................... 29

3. Office Products Retail and Distribution .................................. 30

4. Automobile Manufacturing ..................................................... 31

5. Personal Computers ................................................................ 33

† David Daniels Allen Distinguished Chair in Law, Director, Climate Change Research

Network, and Co-Director, Energy, Environment and Land Use Program, Vanderbilt University Law

School. For valuable comments, the authors thank Linda Breggin, Will Martin, David Owen, Craig Philip,

Kevin Stack, and Steph Tai, and the participants at faculty workshops at Florida State College of Law and

Wake Forest University Law School, the Monthly Lecture Series on Environment, Energy and Natural

Resources Law, of the University of Houston Law Center, and the Online Workshop for Environmental

Scholarship hosted by the Cary School of Law, University of Maryland. Elodie Currier, Faith Lowery,

Megan MacGillis, Maeve Masterson, Clanitra Nejdl, Danielle Schaeffer, and Victoria Dorward provided

excellent research and administrative assistance, and the Vanderbilt Dean’s Fund provided financial

support.

†† Associate Attorney, Clyde & Co.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

Lumber and Wood Production ................................................ 36

7. Aluminum Production ............................................................. 39

8. Industrial Machinery and Equipment Manufacturing .............. 40

III. DISCUSSION: THE GROWTH OF ENVIRONMENTAL SUPPLY CHAIN

CONTRACTING ...................................................................................... 42

A. Is Environmental Supply Chain Contracting Sufficiently

Widespread to Yield a Substantial Improvement in

Environmental Quality? .................................................................. 43

B. Is Environmental Supply Chain Contracting Likely to Improve

Firm Environmental Performance? ................................................... 46

C. Is Environmental Supply Chain Contracting Likely to Reduce the

Likelihood of Preferable Government Action? ..................................... 50

Appendix A ............................................................................................. 53

Appendix B ............................................................................................. 59

INTRODUCTION

In the last several years, most large multinational corporations have adopted

“net zero” climate commitments and a variety of other environmental, social, and

governance (ESG) policies.

At the same time, governments at the international,

national, and subnational levels have struggled to make progress on climate change

and other environmental issues.

If new corporate environmental policies are widely

adopted and implemented, they could help fill gaps in public governance.

Anecdotal

examples of environmental supply chain contracting requirements suggest that this

may already be happening. Maersk, the largest shipping firm in the world, with

roughly a quarter of all goods transported globally by ship, has responded to pressure

from half of its 200 largest corporate customers and committed to use carbon

emissions-free ships for many corporate customers and become carbon neutral by

2050.

With oversight from several environmental nongovernmental organizations

1. Roughly two-thirds of the Fortune 500 have set at least one target related to greenhouse gas

(GHG) emissions reduction, energy efficiency, renewable energy sourcing, and/or net zero emissions.

Power Forward 4.0: A Progress Report of the Fortune 500’s Transition to a Net-Zero Economy, W

ORLD

WILDLIFE FUND (June 2, 2021), https://www.worldwildlife.org/stories/fortune-500-companies-are-

acting-on-the-climate-crisis-but-is-it-enough.

2. See, e.g., Coral Davenport, Biden Crafts a Climate Plan B: Tax Credits, Regulation and State Action,

N.Y.

TIMES (Oct. 21, 2022) (discussing barriers to adoption of major climate legislation). For a discussion

of the factors driving federal gridlock, see infra Part I.A.

3. See, e.g., John Ruggie (U.N. Secretary-General’s Special Representative for Business and

Human Rights), Rep. of the Special Representative of the Secretary General on the Issue of Human Rights and

Transnational Corporations and other Business Enterprises: Protect, Respect, and Remedy: A Framework for

Business and Human Rights, P3, U.N. Doc. A/HRC/8/5 (Apr. 7, 2008) (noting the importance of

“governance gaps” that facilitate anti-social behavior by firms regarding human rights); John Knox, The

Ruggie Rules: Applying Human Rights Law to Corporations, in THE UN GUIDING PRINCIPLES ON BUSINESS

AND HUMAN RIGHTS (Radu Mares ed., 2011) (exploring application of the Ruggie Rules to corporations).

4. See A.P. Moller - Maersk Will Operate the World’s First Carbon Neutral Liner Vessel by 2023 –

Seven Years Ahead of Schedule, M

AERSK (Feb. 17, 2021) https://www.maersk.com/news/articles/2021/02/1

Fall 2022 Environmental Governance By Contract

(NGOs), the largest retailer in the world, Walmart, has committed to achieve a

billion tons of carbon emissions reductions from its 100,000 global suppliers by 2030.

These emissions reductions are roughly equal to the total annual emissions of

Germany, the sixth largest emitting country.

These anecdotal examples suggest that corporate supply chain requirements

are forming a global network of environmental agreements that bypass national

boundaries and other barriers to government action at the international, national, and

subnational levels. But these corporate actions will only have important effects on

environmental quality if they include large numbers of firms and if they affect firms’

environmental behavior.

This Article examines the first of these issues and provides

anecdotal information about the second. The Article presents the results of an

original empirical study examining the use of environmental supply chain contracting

requirements by many of the largest global corporations, including those in sectors

with large exposure to retail consumers and those that only sell to other companies.

This empirical study demonstrates that the use of environmental

requirements in supply chain contracting is remarkably widespread and growing.

Roughly 80 percent of the ten largest corporations in seven leading global sectors

have adopted environmental supply chain contracting requirements, a figure that has

increased from roughly 50 percent fifteen years ago.

More research remains to be

done to assess the effects of these requirements, but the Article explores the

motivations of the participants in supply chain contracting – buyers, sellers,

investors, lenders, employees, NGOs, community stakeholders, and others – and

concludes that this supply chain activity is likely to be improving the environmental

performance of many companies. Even if supply chain contracting only has limited

effects on any one supplier’s environmental performance, the results of this study

demonstrate that environmental supply chain contracting is remarkably widespread.

7/maersk-first-carbon-neutral-liner-vessel-by-2023 (announcing that Maersk was accelerating its timeline

for developing emissions-free cargo ships because half of its largest 200 customers had either set or were

about to set supply chain emissions targets).

5. John Fialka, Walmart Has Thousands of Suppliers. It’s Slashing Their CO2, E&E

NEWS (May 14,

2019), https://www.eenews.net/stories/1060328353/.

6. See, e.g., Jeff Tollefson, Climate Pledges from Top Companies Crumble Under Scrutiny, N

ATURE

(Feb. 7, 2022), https://www.nature.com/articles/d41586-022-00366-2 (disclosing limitations of corporate

climate goals and implementation among 25 large companies); Orly Lobel, The Paradox of Extralegal

Activism: Critical Legal Consciousness and Transformative Politics, 120 H

ARV. L. REV. 937, 971 (2007) (raising

concerns that corporate social responsibility activities might reduce support for laws that would address

these issues and concluding that some environmental protections are simply “marketing, recruitment,

public relations, and ‘greenwashing’ strategies”); Stephen M. Johnson, Junking the “Junk Science”: Reforming

the Information Quality Act, 58 A

DMIN L. REV. 37, n.6 (2006) (defining greenwashing to be the

"dissemination of misleading information... to conceal... abuse of the environment in order to present a

positive public image."); Eric L. Lane, Greenwashing 2.0, 38 COLUM. J. ENVTL. L. 279 (2013); Akriti

Bhargava et. al, CSSN Research Report 2022:1: Climate-Washing Litigation: Legal Liability for Misleading

Climate Communications, C

LIMATE SOCIAL SCIENCE NETWORK (2022), https://www.cssn.org/cssn-

research-report-20221-climate-washing-litigation-legal-liability-for-misleading-climate-

communications/.

7. See infra Part III.A.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

The study of supply chain requirements is important for several reasons.

These requirements may affect climate change mitigation strategies because many

large companies beyond Maersk and Walmart, such as Amazon, Google, and major

automakers, have supply chains with tens of thousands of suppliers, which are often

located in jurisdictions without strong environmental laws or the ability to enforce

them. Additionally, in many sectors across the U.S. economy, supply chains account

for the bulk of carbon emissions, with roughly 80 percent of emissions coming from

suppliers.

Supply chain issues are also important for climate change mitigation

because many suppliers are difficult to regulate; they often are small and medium-

sized businesses that fly under the radar of government regulators or are located

beyond national or subnational boundaries.

Suppliers are also not typically targeted

by NGO litigation or naming-and-shaming campaigns.

As firms increasingly rely

on global supply chain contracts with thousands of third-party suppliers around the

world, supply chain requirements are becoming an important complement to or

substitute for environmental standards that in the past might have been enforced

through government regulation or the employment rules and corporate culture that

exist within a single, integrated firm.

The results of this new environmental supply chain study also add to a

growing literature on private environmental governance.

For more than a

generation, environmental law has been conceived of and taught as a public law field.

The leading environmental law supplement for law students suggests that “[t]he

simplest definition of ‘environmental law and policy’ might read: ‘the use of public

8. See H. Scott Matthews et al., The Importance of Carbon Footprint Estimation Boundaries, 42

NVTL. SCI. TECH. 5839 (2008) (discussing supply chain emissions); Alexis Bateman & Leonardo

Bonanni, What Supply Chain Transparency Really Means, H

ARV. BUS. REV. (Aug. 20, 2019),

https://hbr.org/2019/08/what-supply-chain-transparency-really-means (identifying corporations that are

making supply chain commitments); CDP, T

RANSPARENCY TO TRANSFORMATION: A CHAIN

REACTION (2021) https://cdn.cdp.net/cdp-production/cms/reports/documents/000/005/554/original/CD

P_SC_Report_2020.pdf?161416076.

9. Jody Freeman & Dan Farber, Modular Environmental Regulation, 54 D

UKE L.J. 795 (2005)

(discussing lack of government environmental regulations that target small businesses).

10. See Sarah Light, The Law of the Corporation as Environmental Law, 71 STAN. L. REV. 137 (2019).

Although much of the attention regarding supply chains has been directed at climate change mitigation,

supply chains also play important roles in other areas of environmental concern that have been difficult

for governments to address, such as toxic chemical releases and agricultural non-point pollution. See

Michael P. Vandenbergh et al., Lamarck Revisited: The Implications of Epigenetics for Environmental Law, 7

ICH. J. OF ENVTL. & ADMIN. L. 1 (2017) (discussing supply chain toxic emissions of Walmart and

Target); Tannis Thorlakson, Joann F. de Zegher & Eric F. Lambin, Companies Contribution to Sustainability

Through Global Supply Chains, 115 PNAS 2072, (2018) (examining multiple pollutants).

11. See Ronald J. Gilson et al., Contracting for Innovation: Vertical Disintegration and Interfirm

Collaboration, 109 C

OLUM. L. REV. 431, 435 (2009).

12. Michael P. Vandenbergh, Private Environmental Governance, 99 C

ORNELL L. REV. 129, 140

(2013). The private environmental governance builds on the willingness of new governance scholars to

think broadly about the origins and functions of governance. See, e.g., Michael Dorf & Charles F. Sabel,

A Constitution of Democratic Experimentalism, 98 C

OLUM. L. REV. 267 (1998) Charles F. Sabel & William

H. Simon, Minimalism and Experimentalism in the Administrative State, 100 G

EO. L.J. 53 (2011); Charles F.

Sabel & William H. Simon, Contextualizing Regimes: Institutionalization as a Response to the Limits of

Interpretation and Policy Engineering, 110 M

ICH. L. REV. 1265 (2012).

Fall 2022 Environmental Governance By Contract

authority to protect the natural environment and human health from the impacts of

pollution and development.”

As the barriers to public authority at the international,

national, and subnational levels have become clear over the last decade, however,

environmental law scholars, corporate law scholars, change agents, and practitioners

are increasingly turning to private authority to understand environmental

governance.

In the face of government gridlock, preferences for environmental

protection are being expressed through the actions of investors, lenders, insurers,

employees, managers, retail consumers, NGOs, and community stakeholders, and the

resulting private governance activity has important implications across a wide range

of fields.

In many cases, these private initiatives, currently overlooked by the

environmental law literature, are filling gaps in public governance. Models of

environmental governance that favored public responses were embraced by

environmental law scholars working under 20th century conditions – including an

industrial economy with large, visible sources of pollution located within national

boundaries, support for international agreements in the post-Second World War

order, historically low levels of domestic partisanship, and a Supreme Court that

roughly reflected the views of the majority of the population. These models persist

today, despite changing conditions that have opened gaps in the public response. The

worldview, training, and activities of many researchers, practitioners, and

policymakers that developed under 20th century conditions yield a consistent

response to these gaps: double down on international, national, and subnational

public governance. If the hammer is public governance, most nails look like problems

of government. Each one of those 20th-century conditions is no longer in place,

however, and for many environmental issues important inflection points, feedback

effects, and lock-in effects provide little time for wrestling with outdated mental

models and desirable but infeasible options.

More recently, scholars have noted the

importance of private environmental governance in instrument choice,

the

13. JAMES SALZMAN & BARTON S. THOMPSON, ENVIRONMENTAL LAW AND POLICY 3 (5

ed.

2019) (emphasis added).

14. James Salzman was one of the first environmental law scholars to recognize this trend.

See

James Salzman, Informing the Green Consumer: The Debate Over the Use and Abuse of Environmental Labels,

1 J.

OF INDUS. ECOLOGY 11, 12 (1997).

15. See John Cruden, The Brave New World of Private Governance, E

NVTL. F. 60 (Sept.–Oct. 2013);

RIC POSNER & GLEN WYLE, RADICAL MARKETS: UPROOTING CAPITALISM AND DEMOCRACY FOR

JUST SOCIETY (2018) (examining the potential role of markets in addressing issues of social justice).

16. See Michael P. Vandenbergh, Environmental Law in a Polarized Era, 37 J.

OF LAND USE &

ENVTL. LAW (forthcoming 2022) (discussing implications of partisan gridlock for environmental law and

policy); Kristian S. Nielsen et al., Improving Climate Change Mitigation Analysis: A Framework for Examining

Feasibility, 3 O

NE EARTH 325, 332 (Sept. 2020) (discussing the need to account for policy initiative

feasibility in climate modeling); Jonathan Gilligan & Michael Vandenbergh, A Framework for Assessing the

Impact of Private Climate Governance, 60 E

NERGY AND SOCIAL SCIENCE 1 (2020) (discussing the need to

account for initiative feasibility in climate policy).

17. Sarah E. Light & Eric W. Orts, Parallels in Public and Private Environmental Governance, 5

ICH. J. ENVTL. & ADMIN. L. 1 (2015); Sarah E. Light & Michael P. Vandenbergh, Private Environmental

Governance, in D

ECISION MAKING IN ENVTL. LAW 253 (LeRoy C. Paddock et al. eds., 2016).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

conception of the corporation,

and the roles that banks,

insurers,

land

conservation groups,

and many other organizations play in environmental

protection.

These developments suggest that an emerging body of private

governance is often filling gaps in, complementing, and competing with public

governance.

The analysis of supply chain contracts presented in this Article draws on

two earlier studies by Michael Vandenbergh: a 2005 empirical analysis of

environmental provisions in commercial transactions that demonstrated the growing

role of private governance by examining the widespread use of these provisions in

merger and acquisition agreements, commercial loans, and commercial leases,

and

a 2007 study that used information available via the Internet to examine the extent

of environmental supply chain contracting. The 2007 study concluded that roughly

50 percent of the largest firms in eight global sectors used environmental supply

chain contracting requirements; because Walmart was an early leader in the use of

supply chain requirements, the 2007 study described the role of supply chain pressure

for environmental improvement as “the New Wal-Mart Effect.”

The empirical study results presented in this Article revisit the status of the

New Wal-Mart Effect. Part I demonstrates that important gaps exist in public

environmental governance and that those gaps are likely to persist for an extended

period. Part I also identifies concerns about supply chain contracting that arise if

contracting is not sufficiently widespread, does not improve firm environmental

behavior, or displaces more effective public governance. Part II then presents the

18. Sarah Light, supra note 10.

19. Sarah E. Light & Christina Parajon Skinner, Banks and Climate Governance, 121 COLUM. L.

REV. 1895 (2021).

20. Carolyn Kousky & Sarah E. Light, Insuring Nature, 69 DUKE L. J. 323 (2019).

21. Jessica Owley, Land Conservation, in E

NVIRONMENTAL LAW DISRUPTED (Keith Hirokawa &

Jessica Owley eds., 2021).

22. See also Jason J. Czarnezki & Sarah Schindler, President Trump, the New Chicago School and the

Future of Environmental Law and Scholarship, in P

ERSPECTIVES ON ENVIRONMENTAL LAW

SCHOLARSHIP: ESSAYS ON PURPOSE, SHAPE AND DIRECTION 195 (Ole W. Pedersen ed., 2018)

(describing the scholarship in this field as the New Chicago School).

23. The effort by major employers to impose COVID-19 protocols on their employees and

contractors during the early stages of the pandemic even absent federal, state, or local requirements – and

in some cases over the objections of politicians – is only one example of the growing use of private

governance in the face of increasingly high hurdles for public governance. See, e.g., Noah Higgins-Dunn

& Leslie Josephs, Businesses, Sick of Policing Mask Use to Prevent Coronavirus, Ask Government to Step in,

CNBC (July 2020), https://www.cnbc.com/2020/07/07/businesses-sick-of-policing-mask-use-ask-

government-to-step-in.html (providing example of employee mask mandates predating government

mandates); Catherine Thorbecke, Businesses Continue with Mask Requirements Despite States Lifting

Mandates, ABC

NEWS (Mar. 4, 2021, 2:08 PM), https://abcnews.go.com/Business/businesses-continue-

mask-requirements-states-lifting-mandates/story?id=76249924 (describing business implementation of

COVID-19 mitigation measures despite politician and government statements discouraging such).

24. Michael P. Vandenbergh, The Private Life of Public Law, 105 C

OLUM. L. REV. 2029, 2034

(2005).

25. Michael P. Vandenbergh, The New Wal-Mart Effect: The Role of Private Contracting in Global

Governance, 54 UCLA

L. REV. 913 (2007).

Fall 2022 Environmental Governance By Contract

methodology and results of the new empirical study. To achieve an adequate apples-

to-apples replication of the 2007 study, the new study followed three approaches,

each of which revealed an increase in environmental supply chain contracting from

roughly 50% of all firms studied fifteen years ago to roughly 80% today.

Part III examines the implications of the study. It observes that the

widespread use of environmental supply chain contracting should ease concern that

corporate environmental commitments are not sufficiently widespread to reach large

numbers of suppliers. Important questions remain about the extent to which contract

requirements improve firm environmental behavior and how they interact with

public governance, but the study results and recent developments in the ESG

literature provide reasons for optimism on each of these issues.

The Article concludes by suggesting that the network of global contracting

requirements has now grown into an important aspect of environmental law and

policy. This network has the potential to fill gaps in public environmental

governance. If supply chain contracting is to fulfill its potential, however, scholars,

policymakers, corporate and NGO managers, and practicing lawyers will need to

understand that some contracts are not just an agreement between parties, but also a

form of environmental governance.

I. THE ROLE OF ENVIRONMENTAL SUPPLY CHAIN CONTRACTING

Contracting is often the concern of private law scholars who examine why

parties enter into contracts, the commercial function contracts perform, and contract

enforcement and efficiency.

If supply chain contracting is having important effects

on the processes, functions, and goals of public governance, however, it should also

be important to public law scholars and policymakers. Notable recent examples

include the growing use of supply chains to address human rights issues, labor

trafficking, blood diamonds, and the response to the COVID-19 pandemic.

Supply

chain contracting pressure is one way to bypass domestic and international gridlock

26. See, e.g., Khan M.R. Taufique et al., Revisiting the Promise of Carbon Labeling, 12 NATURE

CLIMATE CHANGE 132, 137–39 (2022) (concluding that carbon labeling may reduce corporate carbon

emissions because of supply chain effects, not just consumers).

27. See Errol Meidinger, Governance Interactions in Sustainable Supply Chain Management, in

RANSNATIONAL BUSINESS GOVERNANCE INTERACTIONS: ENHANCING REGULATORY CAPACITY,

RATCHETING UP STANDARDS AND EMPOWERING MARGINALIZED ACTORS (Stepan Wood, Rebecca

Schmidt, Errol Meidinger, Burkard Eberlein & Kenneth Abbott, eds., 2018) (concluding that “sustainable

supply chain management (1) is likely to make modest contributions to improving governance capacity,

(2) may or may not ratchet up standards, and (3) may help protect marginalized parties, but is focused on

better using the existing power of lead firms in supply chains”).

28. See, e.g., Charles J. Goetz & Robert E. Scott, Principles of Relational Contracts, 67 VA. L. REV.

1089 (1981) (developing relational theory for contracts with high levels of uncertainty).

29. David V. Snyder, The New Social Contracts in International Supply Chains, 68 AM. U. L. REV.

1869, 1910 (2019) (examining the use of contract requirements to address human rights and labor

trafficking). See also Kishanthi Parella, Improving Social Compliance in Supply Chains, 95 N

OTRE DAME L.

REV. 1869, 1871 (2019) (examining methods for increasing compliance with human rights-related supply

chain contracting).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

on climate change and other environmental issues and enable individuals to express

widely-held preferences for achieving ESG goals that are not being addressed by

governments.

Supply chain contracting is particularly important for environmental

protection and natural resource management because problems such as climate

change, toxic chemical emissions, non-point water pollution, fisheries depletion, and

deforestation occur across international, national, and subnational boundaries, and

they have characteristics discussed below that make them remarkably difficult for

governments to address. Viewing environmental supply chain contracting through

the lens of governance rather than simply as an economic or market instrument

requires an understanding of both the core issues studied by private law scholars and

the core public law concerns of efficacy and accountability. A full examination of

these issues is well beyond the scope of this Article, but this part briefly examines

the public law concerns at issue to provide context for the empirical data presented

in Part II and the analysis of the results in Part III.

A. The Regulatory Gap

For many scholars and advocates, the frequently asked question for

environmental problems is: What can government do? Often, the answer is “not

enough,” even for the most pressing issues. Climate change provides a valuable case

study for explaining the failure of public governance. Although the Paris Agreement

set a global goal of not exceeding a 2°C global average temperature increase over pre-

industrial levels, and an aspiration of no more than a 1.5°C increase, the post-Paris

process has not yielded binding commitments to achieve those goals. Current

projections suggest that temperature increases will reach 1.5° C by the mid-2030s

and be closer to 3°C than 2°C by the end of the century.

Some progress has been

made by replacing efforts to achieve binding requirements with voluntary national

commitments, but global emissions continue to rise, and deep divides exist regarding

emissions reductions and other responsibilities between the Global North and Global

South.

At the domestic level in the U.S., every four years commentators and

advocates express fresh optimism about the opportunity for major new federal

legislation, whether in the form of a cap-and-trade system, a carbon tax, or the Green

New Deal, yet these efforts have repeatedly failed. Important legislative subsidies

30. Myles Allen et. al., Special Report: Global Warming of 1.5º C: Summary for Policymakers,

NTERGOVERNMENTAL PANEL ON CLIMATE CHANGE (last visited Jan. 28, 2022), https://www.ipcc.ch/

site/assets/uploads/sites/2/2019/05/SR15_SPM_version_report_LR.pdf.

31. See J.B. Ruhl & Robin Kundis Craig, 4° Celsius, 106 MINN. L. REV. 191 (2021).

32. Sinan Ulgen, How Deep is the North-South Divide on Climate Negotiations, C

ARNEGIE EUROPE

(Oct. 6, 2021), https://carnegieeurope.eu/2021/10/06/how-deep-is-north-south-divide-on-climate-nego

tiations-pub-85493.

Fall 2022 Environmental Governance By Contract

have emerged in the last year that will encourage decarbonization,

but major new

legislation to limit emissions has failed despite Democratic control of the White

House, Senate, and House of Representatives.

A swinging pendulum of White

House control has been a barrier to regulatory and policy efforts as well. The EPA

has promulgated regulations under the Clean Air Act for motor vehicles and some

stationary sources, but the Supreme Court has sent an unequivocal signal that it will

take a narrow view of existing agency authority under the Clean Air Act and other

existing federal environmental statutes, whether based on the major questions

doctrine or other theories of limited government.

The Court also has sent negative

signals about the use of common law torts and other litigation options for addressing

climate change.

Similarly, although California and several other states have

adopted major climate measures, states representing roughly half of U.S. carbon

emissions have not, and in many cases these states have litigated against federal

actions.

Importantly, inaction on climate change over the last three decades is not

just the product of industry lobbying and disinformation – although these industry

activities are certainly a problem.

If that were the case, it would follow that

exposing and reducing industry lobbying and disinformation should unleash major

government climate mitigation measures. This is an attractive message, but it

overlooks the extent to which gridlock is the product of deep structural and social

barriers to major government action on climate change. Political action draws on

public support from political parties, and the country is roughly evenly divided

33. See, e.g., INFLATION REDUCTION ACT OF 2022, Pub. L. No. 117-169, 136 Stat. 1818 (2022).

34. I

n fact, only one major federal pollution control statute has been adopted in the last thirty

years. Vandenbergh, Private Environmental Governance, supra note 12, at 2039 nn.42–44; Richard J.

Lazarus, Congressional Descent: The Demise of Deliberative Democracy in Environmental Law, 94 G

EO. L.J.

619, 628–29 (2006). The Inflation Reduction Act included subsidies to curb climate change but did not

include a carbon price or pollution control measures. INFLATION REDUCTION ACT, PL 117-169, 136 Stat.

1818 (2022).

35. NFIB v. Dep’t of Lab., 595 U. S. __ (2022) (OSHA covid mandate); West Virginia v. EPA,

597 U.S. (2022); Sackett v. EPA, No. 10-62 (2012) (cert. granted on WOTUS jurisdiction); Lisa

Heinzerling, The Rule of Five Guys, 119 MICH. L. REV. 1137 (2021) (noting that several of the justices in

the majority in the 5–4 Supreme Court majority that concluded in Massachusetts v. EPA that greenhouse

gases are air pollutants have been replaced with justices more likely to take a narrower view of EPA

authority).

36. Am. Elec. Power Co. v. Connecticut, 564 U.S. 410 (2011).

37. See Energy-Related CO2 Emission Data Tables, E

NERGY INFO. ADMIN. (last visited Feb. 1,

2022), https://www.eia.gov/environment/emissions/state/; State Climate Policy Maps, C

TR. FOR CLIMATE

& ENERGY SOLUTIONS (last visited Feb. 1, 2022), https://www.c2es.org/content/state-climate-policy/.

38. N

AOMI ORESKES, MERCHANTS OF DOUBT, 169–215 (2010) (describing the influence of

lobbyists on climate change denial in American policy and public life).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

between Democrats, Republicans and independents.

Similar divides exist between

liberals, moderates, and conservatives.

As partisan polarization deepens, voters across the political spectrum are

becoming less open to policies and ideas that do not fit their worldview.

Polarization is particularly important for understanding the politics of climate

change.

Polling suggests that climate change is one of the most polarized issues

between Democrats and Republicans in the U.S.

Although some polling suggests

that public concern over climate change is increasing, only 55% of respondents in a

2020 survey were “alarmed” or “concerned” about climate change.

Political polling

has demonstrated that from 2008 to 2020 increasing percentages of Democrats placed

a high priority on major climate action, but support declined among independents

(from 58 percent to 56 percent) and Republicans (from 30 percent to 22 percent).

Furthermore, structural biases in the United States constitutional design

mean that

support from 55 percent of the population has been insufficient for sustained, major

federal action on climate change. As long as these underlying problems persist, it is

reasonable to assume that adequate government action on climate change will not

occur during this decade. The gap available for private governance to fill is thus large

and likely to remain for some time. This Article addresses the question of how, and

to what degree, supply chain contracting is filling this gap.

39. Trends in Party Affiliation Among Demographic Groups, PEW RSCH. GRP. (Mar. 20, 2018)

https://www.pewresearch.org/politics/2018/03/20/1-trends-in-party-affiliation-among-demographic-

groups/.

40. Political Polarization in the American Public, P

EW RSCH. GROUP (June 12, 2014)

https://www.pewresearch.org/politics/2014/06/12/section-1-growing-ideological-consistency/.

41. See Lilliana Mason, Losing Common Ground: Social Sorting and Polarization, 16 T

HE FORUM 47

(2018); Michelle LeBaron, Cultural and Worldview Frames, B

EYOND INTRACTABILITY (Aug. 2003),

https://www.beyondintractability.org/essay/cultural_frames.

42. For a discussion about taxes and other forms of carbon pricing, see Shi-Ling Hsu, Carbon

Pricing, in L

EGAL PATHWAYS TO DEEP DECARBONIZATION IN THE UNITED STATES (M. Gerrard &

J.C. Dernbach eds., 2018).

43. For instance, a 2020 survey concluded that climate change is the most polarized issue in the

United States, with more polarization than abortion, health care, or immigration. As Economic Concerns

Recede, Environmental Protection Rises on the Public’s Policy Agenda: Partisan Gap on Dealing with Climate

Change Gets Even Wider, P

EW RSCH. CTR. (Feb. 13, 2020), https://www.pewresearch.org/politics/2020/0

2/13/as-economic-concerns-recede-environmental-protection-rises-on-the-publics-policy-agenda/ (noting

that climate concern has risen but that “it’s more partisan than ever”).

44. Anthony Leiserowitz et al., Climate Change in the American Mind: December 2020, Y

ALE

PROGRAM FOR CLIMATE COMMC’N & GEORGE MASON UNIV. CTR. FOR CLIMATE CHANGE

COMMC’N, Dec. 2020, at 34 https://climatecommunication.yale.edu/wp-content/uploads/2021/02/climat

e-change-american-mind-december-2020.pdf. (summarizing findings from Nov. 2008 – Dec. 2020).

45. A

NTHONY LEISEROWITZ ET AL., POLITICS AND GLOBAL WARMING: APRIL 2020 30 (2020),

https://climatecommunication.yale.edu/wp-content/uploads/2020/06/politics-global-warming-april-2020

c.pdf.

46. See American Democracy’s Built-in Bias Towards Rural Republicans, T

HE ECONOMIST, July 14,

2018, at 11. See also Sarah A. Binder, Going Nowhere: A Gridlocked Congress, BROOKINGS (Dec. 1, 2000),

https://www.brookings.edu/articles/going-nowhere-a-gridlocked-congress/ (discussing whether the

framers intended to create a structure that tended toward inaction rather than action).

Fall 2022 Environmental Governance By Contract

B. The Definition and Functions of Supply Chain Contracting

To assess whether environmental supply chain contracting can serve as a

valuable gap filler, it is necessary to understand the functions that contracting

performs and the motivations of the participants in environmental supply chain

contracting. Because private governance initiatives perform traditionally

governmental functions (e.g., reducing pollution and managing common pool

resources), it is appropriate to examine environmental supply chain contracting using

the criteria often applied to public governance: efficacy and accountability.

The

empirical study that forms the core of this Article provides insights into one aspect

of efficacy – the prevalence of supply chain contracting – but it does not address

accountability, which was addressed in the 2007 New Wal-Mart Effect study.

To be an effective form of environmental governance, supply chain

contracting should be sufficiently widespread to reach many of the sources of

important environmental problems, should lead to substantial improvements in firm

performance regarding those problems, and should not undermine more effective

government measures.

Part II addresses the extent of supply chain contracting, but

this Part I.B defines supply chain contracting and examines the motivations of the

parties that engage in supply chain contracting to provide insights into the potential

efficacy of environmental provisions in supply chain contracting and to provide

context for the empirical results.

1. Definition

For the purposes of the empirical study, the term “supply chain

contracting” refers not only to the inclusion of specific provisions in contracts entered

into by buyers and sellers in the supply chain, but also to the use of procurement

policies that are incorporated into supply chain contracts or used to screen out

potential suppliers who are unwilling or unable to commit to standards. The source

of the environmental requirements varies. In some cases, corporations and NGOs

develop collaborative standards that are then incorporated into private contracts.

Examples include the Marine Stewardship Council (MSC) and Forest Stewardship

Council (FSC) standards, which are set by NGOs in collaboration with businesses

and other stakeholders and establish sustainability standards for the management of

a large share of the fisheries and forests around the world. In other cases, industry

47. See, e.g., Vandenbergh, supra note 25, at 943 (asking two questions “typically asked of other

forms of governance: (1) Will environmental contracting be effective in achieving a desired social goal

[for example, improved environmental conditions]?; and (2) To whom and how should the parties that

engage in environmental contracting be held accountable?”).

48. Id. at 941–69.

49. See, e.g., id. at 944 (noting that “[t]o be effective, the private governance agreements must

meet several conditions: (1) Widespread adoption in the form of incorporation into procurement policies

or into terms in procurement contracts; (2) Environmental standards that have content adequate to achieve

environmental protection objectives; and (3) adequate implementation of the standards by suppliers”).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

groups set standards, such as the Responsible Business Alliance standards developed

by the electronics industry. Often, however, the standards are developed unilaterally

by a company or through bilateral negotiations with its suppliers. Initiatives in the

United Kingdom and U.S. are developing model supply chain contracting provisions

designed to reduce transaction costs, ensure a minimum amount of environmental

rigor in contract requirements, and increase the reputational value of environmental

contracting requirements.

Corporate buyers are the principal focus of the empirical study discussed in

this Article, although corporate buyers are not the only sources of environmental

supply chain requirements. In some cases, corporate sellers impose conditions on

buyers, presumably out of concern for the reputational or legal risks arising from the

use of the purchased products or services. For instance, the chemical industry’s trade

association, the American Chemistry Council, has developed an industry standard

called the Responsible Care Program that imposes standards for chemical handling

and disposal not only on chemical sellers, but also on chemical buyers.

Private

organizations other than corporations, such as universities and religious

organizations, also include environmental requirements in their supply chain

contracting. Examples include recent efforts by Rutgers University, the University

of Wisconsin,

and the Catholic Church.

These private governance activities can

have major effects on carbon emissions, but national, state, and local government

procurement requirements also have substantial potential. These requirements are

proliferating at all three levels of government,

and the federal government alone

50. See About the Chancery Lane Project, CHANCERY LANE PROJECT, https://chancerylaneproject.

org/about/ (last visited Jan. 27, 2022); Private Environmental Governance, E

NVTL. L. INST.,

https://www.eli.org/private-environmental-governance (last accessed Jan. 10, 2022). For an overview, see

Michael P. Vandenbergh et al., Model Environmental Supply Chain Contracts, in C

ONTRACTS FOR

RESPONSIBLE AND SUSTAINABLE SUPPLY CHAINS: MODEL CLAUSES, LEGAL ANALYSIS, AND

PRACTICAL DISCUSSION (American Bar Association, David Snyder & Susan Maslow, eds., forthcoming

2023).

51. Responsible Care®: Driving Safety & Industry Performance, AM. CHEMISTRY COUNCIL,

https://www.americanchemistry.com/chemistry-in-america/responsible-care-driving-safety-industry-

performance (last visited Jan. 27, 2022).

52. See Office of Sustainability, Projects, U

NIV. OF WISC.-MADISON, https://sustainability.wisc.

edu/projects/ (last visited Jan. 27, 2022) (discussing green procurement program); University

Procurement Services, Green Purchasing Program, R

UTGERS, https://procurementservices.rutgers.edu/pur

chasing/diversity-and-sustainability/green-purchasing-program (last visited Jan. 27, 2022).

53. Paul Simpson, Can Compliant Procurement Fix the Pope’s Financial Crisis?, S

UPPLY

MANAGEMENT (Dec. 2019), https://www.cips.org/supply-management/analysis/2019/december/can-

compliant-procurement-fix-the-popes-financial-crisis/ (describing Papal efforts to combat climate change

through procurement for the Vatican, including investment in a new eco-center, banning single-use

plastics, and committing to electric vehicle procurement for the Catholic Church).

54. See Exec. Order No. 14030, 86 Fed. Reg. 27,269; Federal Acquisition Regulation: Minimizing

the Risk of Climate Change in Federal Acquisitions, 48 C.F.R. Ch. 1 (2021) (describing the Department

of Defense, General Service Administration, and National Aeronautics and Space Administration

proposed rulemaking ensuring major federal agency procurements minimize the risk of climate change)

(available at https://perma.cc/2N6S-9K5R) plus existing requirements. See also Federal Acquisition

Regulation: Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk, 87 Fed. Reg.

68312 (proposed Nov. 14, 2022) (to be codified at 48 CFR pt. 1, 4, 9, 23 and 52) (implementing a

requirement to ensure certain federal contractors disclose their greenhouse gas emissions and climate-

Fall 2022 Environmental Governance By Contract

buys over $600 billion in products and services, so the potential for emissions

reductions is remarkable.

This Article leaves non-corporate procurement activity

for future research, although it is important to note that synergistic effects may arise

if corporations, government, and other organizations establish comparable

environmental contracting standards.

2. Functions

Legal and Social Norm Enforcement. Understanding how contracting affects

firm behavior and the motivations of the firms that enter into supply chain contracts

can shed light on the functions performed by environmental contracting.

Of course,

in its most basic form, a contract is an exchange of promises, but law and economics

scholars have wrestled with the function of contracts given the uncertainties involved

in contracting and the difficulties of obtaining legal remedies. Much of the law and

economics scholarship on relational contracts examines why firms enter into formal,

written contracts given the large number of uncertainties in many contractual

relationships and the low likelihood that courts will issue an enforceable legal remedy

for many violations.

This is a particularly acute problem for contract provisions that

focus on social responsibility, and Jonathan Lipson has argued that these contract

provisions are “unlikely to be enforceable in any ordinary sense.”

Courts often limit contract enforcement to expectation damages,

consequential damages, and specific performance. If the legal enforceability of

contract terms is necessary for contracts to affect firm ESG behavior, then these

contract terms might have limited effects.

Courts are wary of requiring specific

performance for ESG-related terms in contracts. In addition, the difficulty of pricing

related financial risk and set science-based targets to reduce their greenhouse gas emissions). For an

overview of federal policy, see Federal Agencies Consider Incorporating Climate Impacts and Risks in

Procurement Decisions, Colum. Climate Sch. Sabin Ctr. For Climate Change L. (Oct. 2021)

https://climate.law.columbia.edu/content/federal-agencies-consider-incorporating-climate-impacts-and-

risks-procurement-decision [hereinafter Sabin Ctr.]; Danielle M. Conway, Sustainable Procurement Policies

and Practices at the State and Local Level, in G

REENING LOCAL GOVERNMENT 43–73 (Keith H. Hirokawa

& Patricia E. Salkin eds., 2012). For more recent examples, see compiled sets of state programs in Neil

Seldman, State and Local Government – Environmentally Preferable Purchasing Programs and Policies, I

NST.

FOR LOCAL SELF-RELIANCE (Apr. 6, 2020), https://ilsr.org/state-and-local-government-

environmentally-preferable-purchasing-programs-and-policies/.

55. Sabin Ctr. supra note 54; Press Release, The White House, President Biden to Sign Executive

Order Strengthening Buy American Provisions, Ensuring Future of America is Made in America by All

of America’s Workers (Jan. 25, 2021), https://www.whitehouse.gov/briefing-room/statements-

releases/2021/01/25/president-biden-to-sign-executive-order-strengthening`buy-american-provisions-ens

uring-future-of-america-is-made-in-america-by-all-of-americas-workers/.

56. See Jonathan Lipson, Promising Justice: Contract (as) Social Responsibility, 2019 WIS. L. REV.

1109, 1111–12 (2019).

57. See Scott Baker & Albert Choi, Contract’s Role in Relational Contract, 101 V

A. L. REV. 559, 561

(2015).

58. Lipson, supra note 56, at 1111.

59. See supra note 6 for a definition of greenwashing.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

expectation or consequential damages may undermine the likelihood that courts will

award these types of damages in the ESG context.

In many cases the buyer may not be interested in winning damages from

the seller, however. Instead, the buyer may simply want to be able to walk away from

the contract with a minimum risk of litigation from a seller unwilling or unable to

comply with the buyer’s environmental requirements. Buyers thus may benefit from

environmental supply chain contracting provisions, not by being able to secure an

enforceable specific performance or damages remedy, but by discouraging a seller

from suing the buyer for canceling a contract based on ESG concerns.

Furthermore, some forms of legal enforceability are possible despite the

concerns mentioned above. Consequential damages, which include damages to

reputation, may be an increasingly promising avenue for legal enforcement of

environmental supply chain contracts. Reputation makes up much of the value of

many of the largest firms, and, as the title of one leading political economist’s book

suggests, for many corporations, “Reputation Rules.”

Environmental and other

ESG provisions in supply chain contracts are sometimes thought to benefit third

parties and therefore require a third-party beneficiary claim to succeed, but the

benefits of environmental provisions often run directly to the buying firm rather than

to third parties. As the discussion below suggests, a buying firm’s reputation with its

investors, lenders, insurers, retail customers, employees, managers, and local

communities may be precisely the value that the seller’s environmental promises are

designed to provide. The challenge of quantifying harms to reputation remains a

barrier but one that empirical research is increasingly able to address.

Perhaps most important, firms may enter into contracts with environmental

provisions for a variety of reasons that do not rest on formal legal enforceability.

Contracts perform both instrumental and expressive functions, and as early as 1963

Stuart Macaulay demonstrated that legal enforceability is not the holy grail of

contracts.

Instead, social norms among the contracting parties play a large role in

determining whether contracts are performed. Lipson draws on the work of Lisa

Bernstein, Ronald Gilson, Matt Jennejohn, Robert Scott, and others to argue that

supply chain contracting with ESG terms can affect firm behavior even if supply

chain contracts have a mix of enforceable and unenforceable terms.

This is because

these terms can clearly identify and call attention to specific norms while providing

the flexibility necessary for the parties to modify their performance over time.

60. Lipson, supra note 56, at 1124–26.

61. See D

ANIEL DIERMEIER, REPUTATION RULES: STRATEGIES FOR BUILDING YOUR

COMPANY’S MOST VALUABLE ASSET (2011) (explaining the importance of a company’s reputation as an

asset).

62. Lipson cites several studies elaborating on this point. See Lipson, supra note 56, at 1125–27

n.68–70.

63. Stewart Macaulay, Non-Contractual Relations in Business: A Preliminary Study, 28 A

M. SOC.

REV. 55, 57 (1963). For a discussion of the expressive functions of contracts, see Lipson, supra note 56, at

1151–52.

64. See Lipson, supra note 56, at 1114 nn.15–17.

Fall 2022 Environmental Governance By Contract

The motivations for buyers to adopt environmental requirements, for

buyers to agree to them, and for these requirements to change supplier behavior are

complex and have shifted strongly in the direction of pro-environmental behavior in

the fifteen years since the publication of the first New Wal-Mart Effect study.

Supply chain contracting requirements regarding ESG issues can be understood as a

response to changes in the global economy that have resulted in social disruptions

and flattening of organizational hierarchies.

As large, integrated organizations have

responded to the make-or-buy decision in light of modern technological

developments and the increasingly globalized economy, many firms have contracted

with third parties for goods and services that might have been produced by a

vertically-integrated firm in earlier periods.

Firms that may have been able to establish norms that control employees’

corporate decision-making regarding environmental issues and even personal

behavior now face the challenge of establishing norms for third party contractors. As

a result, the preferences held by retail customers and other core firm constituencies

may be important to the firm’s profitability, but the firm must now satisfy those

preferences through supply chain contracting rather than through corporate policies

and incentives for employees.

Other Motivations. To understand the functions that environmental supply

chain contracting may perform in environmental governance, it is also important to

look beyond legal and social norm-based enforcement to understand the other

motivations of the interested parties. These motivations have shifted in recent years

and help explain the growth in environmental supply chain contracting. A commonly

discussed motivation begins with the preferences of the population for

environmental protection. As a study on climate and politics suggests, many

Americans support climate action, but they are insufficient in numbers and

geographic distribution to overcome the structural and other barriers to major federal

legislation.

Unlike legislators, however, many businesses cannot gerrymander their

markets for retail customers, employees, investors, lenders, insurers, and community

stakeholders. When those actors have preferences that are not being satisfied by

governments, they look to the private sector to satisfy them. This occurs through

retail investor, retail customer, employee, and community stakeholder actions, all of

which can affect firm profitability.

The motivations for companies to engage in environmental supply chain

contracting are complex, but they are often consistent with the assumption that

65. Lipson refers to these types of contracts as a form of corporate social responsibility or CSR,

but Alan Palmiter has demonstrated that an inflection point occurred in roughly 2012 when CSR

approaches, which are often grounded in altruism or pro-social motivations, transitioned to the ESG

movement, which draws more heavily on corporate motivations that do not require altruism. Lipson,

supra note 56, at 1110. See also A

LAN R. PALMITER, CAPITALISM, HEAL THYSELF 1 (2021),

papers.ssrn.com/sol3/papers.cfm?abstract_id=3940395.

66. Global Warming’s Six Americas, Y

ALE PROGRAM ON CLIMATE CHANGE COMMUNICATION,

https://climatecommunication.yale.edu/about/projects/global-warmings-six-americas/ (last visited Jan.

27, 2022).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

private sector actors have a strong profit motive, and many actions to reduce

pollution absent government regulation do not require altruism. In fact, the shift

from corporate social responsibility (CSR) to ESG initiatives in the last decade

reflects the idea that pro-social corporate behavior often does not arise because of

altruistic motivations.

Instead, on issues such as climate change, many companies

may view the reputational benefits of a positive environmental image as outweighing

any increased costs of supply chain contracting. Although, as discussed above,

reputational costs and benefits can be hard to quantify, reputation may have

important effects on retail consumers and investors, employee recruitment and

retention, local communities, investors, lenders and insurers, and regulators.

For many years, antitrust law, corporate law, trade law, and other fields

have operated as if individuals in the marketplace have only pecuniary goals and that

the legal system should be arranged to only satisfy those goals. This is the basic view

attributed to Friedman in the famous quotation that “the social responsibility of

business is to increase its profits.”

It also permeates the role assigned to the

consumer in the Chicago School approach to antitrust law,

to the role of fiduciary

duties in corporate law,

and to the role of environmental concerns about the

provenance of a good, rather than its other characteristics, in trade law.

According

to this approach, any other goals should be satisfied through government action, such

as progressive taxation for addressing social equity, subsidies for social programs and

research, and environmental regulations for reducing pollution. This approach also

affects the legal enforceability of environmental and other ESG supply chain

contracting provisions. The assumption is that a buyer’s goals regarding “commercial

interests” are enforceable, whereas those “designed to have an important social or

environmental impact” are not.

This narrow legal view does not insulate companies

from reputational or other pressure, however. Contracting with third parties in states

or nations with weak environmental requirements or disengaged communities is no

longer a way to avoid reputational pressure. With the growth of global supply chains

and social media, the behavior of suppliers can be monitored, attributed to buying

firms, and communicated to important stakeholders at low cost and in a matter of

minutes. An example of a social media platform performing this role is TikTok,

67. See Palmiter, supra note 65, at 3.

68. Milton Friedman, The Social Responsibility of Business is to Increase Its Profits, N.Y.

TIMES, Sept.

13, 1970 (§ SM), at 17.

69. See Herbert Hovenkamp & Fiona Scott Morton, Framing the Chicago School of Antitrust

Analysis, 168 U.

PA. L. REV. 1843, 1843–44 (2020). .

70. See Leo Strine, Kirby Smith & Reilly Steel, Caremark and ESG, Perfect Together: A Practical

Approach to Implementing an Integrated, Efficient, and Effective Caremark and EESG, 106 I

OWA L. REV. 1885,

1885–1886 (2020).

71. See Douglas A. Kysar, Preferences for Processes: The Process/Product Distinction and the Regulation

of Consumer Choice, 118 H

ARV. L. REV. 526, 526 (2004). .

72. Lipson, supra note 56, at 1117.

Fall 2022 Environmental Governance By Contract

which users frequently employ to highlight the environmental impact of industries

such as fashion.

In addition, efficiency is an important motivation for including

environmental requirements in supply chain contracting. Companies sometimes

reduce pollution because they save money by finding efficiencies that reduce costs

and emissions.

This is true not only for large buyers such as Walmart, but for their

suppliers as well, and may explain some major environmental supply chain

contracting initiatives such as Walmart’s Project Gigaton. Research suggests that

when firms are pushed to identify emissions reductions, they often find savings.

An example is Walkers Crisps, the largest maker of potato chips in England, which

identified major potential savings in its potato chip-making process when it studied

the carbon footprint of its chips. It found that its pricing scheme was paying farmers

by weight, which created incentives for the farmers to dig the potatoes when they

were wet and humidify warehouses, only to have Walkers Crisps bear high transport

and drying costs before cooking the potatoes.

The ability to use environmental

requirements to identify efficiencies that can then lead to price reductions captured

by the buyer is a potential motivator in many sectors.

The increased ESG efforts of large institutional investors also may reflect

the insights of universal owner theory.

This theory holds that large institutional

investors manage index funds and other large, diversified portfolios, so they and their

clients have an interest in the overall success of the economy, and they often do not

have an interest in having one firm in their portfolio increase in value at the expense

of the other firms in their portfolio. A recent model analysis suggests that the value

of Blackrock’s holdings may decline by $6 billion if it induces ExxonMobil to

decarbonize, but that would be more than offset by a $9 billion increase in the other

stocks in its portfolio arising from the avoided costs of climate change.

Whether or not this example bears up under further scrutiny, the universal

owner concept appears to have merit and to be driving the thinking of large

73. See, e.g., Eliza Huber, Gen Z is Using Fashion TikTok to Fight Climate Change. Will it Work?,

EFINERY29 (Sept. 25, 2020), https://www.refinery29.com/en-gb/2020/09/10052835/tiktok-sustainable-

fashion-cottagecore-clothes.

74. Michael P. Vandenbergh, Keynote: Motivating Private Climate Governance: The Role of the

Efficiency Gap, 71 A

RK. L. REV. 349, 353–54 (2018). See also Taufique et al., supra note 26, at 136–38.

75. Vandenbergh, supra note 74, at 351–52. See Taufique et al., supra note 26, at 136.

76. M

ICHAEL P. VANDENBERGH & JONATHAN M. GILLIGAN, BEYOND POLITICS: THE

PRIVATE GOVERNANCE RESPONSE TO CLIMATE CHANGE 197–98 (2017).

77. See John C. Coffee Jr., The Future of Disclosure: ESG, Common Ownership, and Systemic Risk,

2021 COLUM. BUS. L. REV. 602, 610 (2021); Madison Condon, Externalities and the Common Owner, 95

WASH. L. REV. 1, 6 (2020). Recent research demonstrates that the managers of large index funds have

been active in shareholder votes regarding ESG issues. See Michael Barzuza, Quinn Curtis & David

Webber, Shareholder Value(s): Index Fund ESG Activism and the New Millennial Corporate Governance, 93 S.

CA. L. REV. 1243, 1309 (2020) (arguing that index funds may be adopting ESG policies to differentiate

themselves to attract millennial investors).

78. Condon, supra note 77, at 3, 45–47.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

institutional investors.

And large institutional investors have begun taking major

steps to improve the environmental performance of firms. The most dramatic recent

examples were the votes by large institutional investors to elect climate change-savvy

board members over the objections of the Exxon Mobil management, and to adopt a

shareholder proposal seeking to force Chevron to assess and disclose the carbon

emissions of the oil and gas it sells.

Because roughly 30 of the largest institutional

investors together own over half of the shares of the 500 largest firms in the U.S.,

institutional investor ESG and climate pressure is a major potential driver of firm

environmental supply chain contracting.

The financial risks of climate change and pressure from retail customers,

employees, and others, are affecting not only the policies of large institutional

investors, but also other investors, lenders, and insurers.

To reduce these risks,

many financial actors are motivated to pressure the companies they do business with

to improve their environmental performance. For instance, all the major U.S. banks

refused to lend to bidders on the oil and gas rights to land in the Alaska National

Wildlife Refuge, leading to many parcels going unleased.

Similarly, over twenty

nine of the largest global insurers have committed not to insure coal mines and other

fossil fuel-heavy projects.

In addition, supply chain contracting can extend pressure for climate

commitments from large firms to the much larger pool of smaller firms. Much of

private governance involves actions by large, multinational firms like Apple, Google,

Microsoft, Walmart, and Target. For instance, roughly two-thirds of the firms in the

Fortune 100 have made major climate commitments, often including reductions in

carbon emissions with a “net zero” commitment by 2050.

The level of activity drops

off somewhat as firm size falls: of the Fortune 500, roughly 23% have made climate

79. See, e.g., Larry Fink, Larry Fink’s 2022 Letter to CEOs: The Power of Capitalism, BLACKROCK,

https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter (last visited Jan. 31, 2022).

80. Steven Mufson, The Fight for the Soul – and Future – of ExxonMobil, W

ASHINGTON POST (May

21, 2021), https://www.washingtonpost.com/climate-environment/2021/05/21/exxon-faces-shareholder-

revolt-over-climate-change/; Chevron's Investors Call for Improved Methane Disclosures in a Near-Unanimous

Vote, C

ERES (May 25, 2022), https://www.ceres.org/news-center/press-releases/chevrons-investors-call-

improved-methane-disclosures-near-unanimous-vote; Chevron investors back proposal for more emissions cuts,

EUTERS (May 26, 2021), https://www.reuters.com/business/energy/chevron-shareholders-approve-

proposal-cut-customer-emissions-2021-05-26/.

81. See Palmiter, supra note 65, at 12.

82. See Louis Leonard, Under the Radar: A Coherent System of Climate Governance, Driven by

Business, 50 E

NVTL. L. REP. 10546, 10547 (2020).

83. Rachel Koning Beals, Bank of America Joins Big U.S. Banks That Won’t Finance Oil in the Arctic

Refuge Trump Opened to Drilling, M

ARKETWATCH (Dec. 5, 2020) https://www.marketwatch.com/story/ba

nk-of-america-joins-big-u-s-banks-that-wont-finance-oil-in-the-arctic-refuge-trump-opened-to-drilling-1

1606843342.

84. Net-Zero Insurance Alliance, U

NITED NATIONS ENVIRONMENT PROGRAMME FINANCE

INITIATIVE, https://www.unepfi.org/net-zero-insurance/ (last visited Sept. 25, 2022).

85. See Alan Murray & David Meyer, The Latest Fortune 500 CEO Survey Does Not Show A Lot of

Optimism, F

ORTUNE (May 24, 2022), https://fortune.com/2022/05/24/2022-fortune-500-ceo-survey-ceo-

daily.

Fall 2022 Environmental Governance By Contract

commitments.

Of the over 4,000 firms working with the Science-Based Targets

Initiative to reduce their emissions, many are among the largest firms in their

sectors.

These environmental commitments extend to supply chain contracting in

some cases. For instance, although specific supply chain contracts are often not

material and therefore not required to be filed with the SEC, firms are required to

disclose whether supply chain contracting may have material effects on the firm’s

financial performance. For instance, if a firm is a supplier and a particularly large

buyer or group of buyers include environmental requirements in procurement that

will have a large effect on the supplier’s costs or ability to satisfy the buyer’s demand

for its product, SEC disclosure may be required. An assessment of the 2020 SEC

disclosures of the Fortune 100 finds that 10 percent of the firms disclose the use of

environmental provisions in supply chain contracting.

Many NGOs and firms have recognized that reaching small and medium-

sized enterprises (SMEs) is important if their goal is to achieve emissions reductions

at the scale necessary to achieve the 2°C goal or 1.5°C aspiration of the Paris

Agreement. Influencing the behavior of SMEs is also important for many non-

climate issues as well, including toxics, deforestation, natural resource depletion, and

other issues. For climate change mitigation, CDP (formerly the Carbon Disclosure

Project) has taken a leading role on supply chain contracting among NGOs in the

last several years. CDP uses the backing of investment firms with over one hundred

trillion dollars of assets under management to induce corporations to disclose and

reduce emissions.

CDP has recognized that large scale emissions reductions will

require inducing major firms to commit to extend carbon reductions to their

suppliers, and it ranks firms based on their supply chain contracting activity. As of

2021, CDP has given an “A” rating to a handful of the largest global firms based on

their supply chain contracting activity.

The Environmental Defense Fund (EDF)

has a supply chain effort that it describes as a “digital hub for sustainability resources,

best practices, thought leadership, and news.”

The Clean Energy Buyers Alliance

(CEBA) (formerly the “Renewable Energy Buyers Alliance”), a collaboration

between major corporations and NGOs designed to promote renewable power,

86. NATURAL CAPITAL PARTNERS, DEEDS NOT WORDS: THE GROWTH OF CLIMATE ACTION

IN THE

CORPORATE WORLD 2 (2019).

87. See Companies Taking Action, S

CI. BASEDTARGETS, https://sciencebasedtargets.org/companie

s-taking-action (last visited Feb. 4, 2023).

88. Michael P. Vandenbergh, Disclosure of Private Environmental Governance Risks, 63 W

ILLIAM &

MARY L. REV. (2022) (available at https://scholarship.law.wm.edu/wmlr/vol63/iss5/6) (noting that the

firms disclosing environmental supply chain contracting requirements in SEC filings were Alphabet, Best

Buy, Costco, Facebook, Intel, HP, Home Depot, Lowes, Microsoft, and Target).

89. What We Do, CDP, https://www.cdp.net/en/info/about-us/what-we-do (last visited Apr. 4,

2021).

90. CDP Scores, CDP, https://www.cdp.net/en/scores (last visited Sept. 25, 2022).

91. About, EDF

SUPPLY CHAIN SOLUTIONS CTR., https://supplychain.edf.org/about/ (last

visited Jan. 10, 2022).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

focuses on supply chain contracting regarding the electricity used by its member

companies. It encourages its members to induce suppliers to make renewable power

commitments as well.

These examples of corporate and NGO activity provide

indications that supply chain contracting has grown since the first New Wal-Mart

Effect study and is now widespread.

II. EMPIRICAL STUDY OF SUPPLY CHAIN CONTRACTING

Widespread uptake of environmental supply chain contracting provisions

is an essential aspect of efficacy, and the anecdotal examples of new supply chain

contracting initiatives discussed above suggest that environmental supply chain

contracting has grown substantially in recent years. But no systematic empirical

studies have tested this assertion at the core of understanding the efficacy of

environmental supply chain contracting. The study discussed below replicated the

2007 New Wal-Mart Effect study by drawing on the same types of public

information sources and including many of the same firms and sectors included in

the earlier study. Using this approach, the New Wal-Mart Effect study concluded

that more than half of the 94 firms included in the study publicly acknowledged

engagement in such efforts.

Today these requirements are even more widespread,

and we discuss the study methodology and results below.

A. Methodology

The current study examined the same sources of information as the 2007

New Wal-Mart Effect study. Because specific supply chain contracts are often not

subject to disclosure in SEC filings, searches of supply chain contracts filed with the

SEC are unlikely to provide an accurate view of the extent of environmental supply

chain contracting, even among the large, publicly traded firms that have SEC

disclosure obligations. As a result, like with the 2007 study, the current study

examined publicly available policies and statements found on corporations’ websites,

in their supplier codes of conduct, and in media reports.

92. See REBA Announces Top 10 U.S. Large Energy Buyers in 2020, BUSINESSWIRE (Feb. 10, 2021,

9:00 AM), https://www.businesswire.com/news/home/20210210005144/en/REBA-Announces-Top-10-

U.S.-Large-Energy-Buyers-in-2020 (demonstrating involvement by multiple sectors); Supply Chain &

International Collaboration, CEBA, https://cebuyers.org/programs/supply-chain-and-international-

collaboration/ (last visited Sept. 25, 2022).

93. Vandenbergh, supra note 25, at 913.

94. The SEC disclosure study searched the LexisNexis EDGARPlus Exhibits database

“descriptions” search field using all caps and terms “supply agreements” and “supply contract” for

agreements filed in the fourth quarter of 2001. An agreement was classified as a supply agreement if it

involved the sale of goods as defined in U.C.C. § 2-103(k) (2004). The broader study performed Google

searches using firm names with the following search terms added: “supplier code of conduct”, “code of

conduct”, “bans chemicals from suppliers”, “requires EMS for suppliers”, “requires suppliers to reduce

ghg emissions”, “requires iso 14001 for suppliers”, “requires suppliers to reduce energy”, “requirements

for suppliers”, and “sustainability.” Researchers also visited the firms’ corporate websites to view the firms’

sustainability sub-pages as well as vendor and supplier portals, many of which included codes of conduct

Fall 2022 Environmental Governance By Contract

Although a single apples-to-apples comparison would involve applying the

same screen to the same firms in the same sectors, changes in sector designations and

in the firms that qualify as the largest ten firms in each sector make simple replication

of the earlier study impossible. The 2007 New Wal-Mart Effect study relied on the

Hoovers database, which provides searchable company profiles and industry analysis

to sales and marketing professionals. The 2007 study analyzed the top ten firms in

eight sectors selected to include a broad swath of consumer-facing (business-to-

consumer or B-to-C) and non-consumer facing (business-to-business or B-to-B)

firms with global supply chains.

These sectors, as classified by the Hoovers

database, were discount and variety retail, home improvement and hardware retail,

office products retail and distribution, automobile manufacturing, personal

computers, lumber and wood production, aluminum production, and industrial

machinery and equipment manufacturing. The 2007 study identified the top ten

firms in each sector by sales and examined their public disclosures of environmental

supply-chain requirements. Six firms included by Hoovers in the aluminum

production sector were not principally involved in aluminum production, and they

were excluded from the analysis, resulting in a total of 94 firms in the study.

In the fifteen years since the publication of the New Wal-Mart Effect

research results, several changes have affected the sectors included in the initial

study. Hoovers, which in 2007 was a Dun & Bradstreet affiliate, was fully acquired

by Dun & Bradstreet in 2017 and rebranded as D&B Hoovers.

In this transition,

or terms of engagement for suppliers. It is important to note that the extent of environmental supply chain

contracting and the text of individual supply agreements can be difficult to uncover, making empirical

evaluation of the prevalence and form of those agreements challenging. Many agreements are private

documents between suppliers and their customers and are not publicly available. In addition, as to the

SEC study, although suppliers may be collectively an integral part of a business, because the individual

contracts are rarely comprehensive enough to be material under the SEC, disclosure of those documents

is not compelled. For more detail, see Vandenbergh, supra note 25 at 936–39 (describing the study

methodology).

95. See id. at 926 (noting that “the analysis includes sectors comprised of large retail firms, mixed

retail and industrial firms, and non-retail industrial firms” and that “three sectors are comprised principally

of firms that have retail operations in developed countries and do little or no manufacturing …, two

sectors are comprised principally of firms that have both retail and industrial operations …, and three

sectors are comprised principally of firms that do not have retail operations …..”).

96. The D&B Hoovers data used to identify the firms used in the current study was taken from

the Dunn & Bradstreet Business Directory, Business Directory, D

UNN & BRADSTREET

www.dnb.com/business-directory.html. Due to the structure of the online database, Michigan Journal of

Environmental and Administrative Law editors were unable to confirm the revenue numbers used to select

the firms in the current study. Since the database updates frequently, the numbers used in this study are

also not reflected in the database’s current data. The authors attest, however, that the numbers used to

select the firms in this study were accurate when the initial selection of firms was made in June 2020.

These choices are reflected in two memos on file with the authors that were written at that time. Unless

otherwise identified, all references to the current size of a firm (relative or absolute) were sourced from

the D&B Business Directory in 2020. For purposes of this study, “firm” should be understood to mean an

entity as reported in the D&B Directory at the time the study was conducted (i.e. each firm listed in this

study was recorded in the database as a separately operating entity). Some firms that had undergone

mergers were recorded in the D&B database as separate entities. See infra note 102. Other firms,

particularly those operating under new names, were recorded in the D&B database as the merged entity.

See infra note 146. It should also be noted that the corporate form of a number of the firms in the study

has changed since the scope of the study was defined in 2020. As is noted below, several of these firms

Michigan Journal of Environmental & Administrative Law Vol. 12:1

the sector classifications and industry codes were re-worked. The industry sector

categories listed in 2007 thus have evolved, although comparable sectors exist for

seven of the eight sectors included in the first study. As a result, although a

completely parallel sector-to-sector comparison is no longer possible, it is possible to

examine seven current sectors that are analogous to seven of the eight initial sectors

included in the earlier study.

The new study identified close equivalents to the sectors by using the 2020

incarnations of each company and selecting the current D&B Hoovers sector with

the most overlaps to the earlier Hoovers sectors. This process was clear for most

sectors; however, the original discount and variety retail sector was split equally

across the new department stores and grocery stores sectors, so both were included

in the new study. Furthermore, although the original office products sector was split

between paper wholesale and miscellaneous store retailers in D&B Hoovers, neither

was sufficiently analogous to the original classifications, so both sectors were

removed from the analysis. The office products firms that exist from the previous

paper are still analyzed in the B-to-B analysis, however. Finally, the D&B Hoovers

aluminum production sector is most closely approximated by Hoovers’ metal

products manufacturing sector. This sector is very different, though, from the

original aluminum production sector. It is largely steel- rather than aluminum-

dominated. Steel and aluminum have different environmental profiles, in that

aluminum production from bauxite requires large amounts of electricity and

generates many consumer products, while steel production does not. Therefore, the

current metal products manufacturing sector does not provide the same snapshot of

aluminum-focused firms as the old aluminum production sector in the original

analysis, so no equivalent to the aluminum production sector was included in the

study. As with the office products firms, however, the surviving forms of the original

aluminum firms are still captured in the B-to-B analysis. In sum, the current sectors

analyzed were as follows: department stores, grocery stores, home and garden retail,

motor vehicle manufacturing, computer and peripheral equipment manufacturing,

paper product manufacturing, and construction machinery manufacturing.

Changes also have occurred to the firms within each of the sectors included

in the 2007 study. These changes are the result of shifts in business lines, corporate

mergers, acquisitions, and divestitures. The new methodology also accounts for the

fact that mergers, acquisitions, divestitures, and bankruptcies have caused some of

the businesses to no longer exist or continue to operate as part of another business

listed in the original sector. Some of the original firms no longer produce the same

went through mergers both during and after the collection of environmental commitments used in this

study. When an environmental commitment is attributed to a firm, therefore, it should be understood as

reflecting that firm’s behavior at some point after the study’s scope was defined in 2020 but before that

firm was affected by major changes in corporate structure.

97. See Vandenbergh, supra note 25 at 926 (noting that the top ten companies for each sector in

the original paper were chosen by U.S. sales, and by global sales where U.S. sales were not listed; as U.S.

sales are no longer listed at all in D&B Hoovers, for the current study the top ten current companies were

those with the highest revenue).

Fall 2022 Environmental Governance By Contract

products or services as they did at the time of the 2007 study, or those business lines

now make up a very small share of their operations. For example, Apple, which was

in the personal computer sector in 2007, is now primarily a mobile communications

company and is categorized differently today. These changes have required some

adjustments to produce valuable B-to-B comparisons.

Although there are only seven sectors in the new study as opposed to the

eight in the original study, because there were new entrants into the top ten firms in

these sectors, the new study also analyzed the original firms in their 2020

incarnations. In sum, to achieve an adequate apples-to-apples replication of the first

study, the new study followed three approaches: (1) it compared the supply chain

contracting disclosures of the firms that were included in the 2007 study to

disclosures of the same firms in 2020 (excluding those firms that no longer had

comparable business lines); (2) it compared the disclosures of the ten largest firms in

the seven 2020 sectors that most closely match the eight sectors included in the initial

study with those of the firms in the initial eight sectors; and (3) it compared the

disclosures of all of the firms included in the first study with all of the firms included

in the second study. In total, because the new study examined both the same firms

as the first study and the firms that are now in the newly-configured sectors, it

analyzed one hundred thirteen firms, compared to the original paper’s seventy-four.

B. The Sectors Analyzed

For each sector, the discussion below compares the original study results

with the current study results in two ways. First, the discussion compares the firms

in a sector included in the original study to the same firms in 2020, to the extent

those firms still operate the same business lines. Appendix A identifies all the

companies included in the first study and identifies the same or analogous firms

included in the current study. Second, the discussion identifies the 2020 sector most

analogous to the sector in the original study and identifies which firms in the current

analogous sector disclose that they engage in environmental supply chain contracting.

Appendix B identifies the sectors included in the first study and the same or

analogous sectors included in the current study.

1. Discount and Variety Retail

In 2007, the top ten firms in the discount and variety retail sector were

Wal-Mart, Kroger, Costco Wholesale, Target, Walgreens, Albertsons, Safeway,

CVS, Ahold USA, and Loblaw.

At the time, these firms had a combined total of

$697 billion in annual sales.

Half of them (representing $495 billion in sales)

98. Vandenbergh, supra note 25, at 927.

99. Id.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

publicly stated that they imposed environmental requirements on suppliers.

100

The

other half (with $202 billion in sales) did not have any public information available

on environmental standards for suppliers.

101

a. Firm-to-Firm Analysis

All ten of these companies were still operating in 2020, if in slightly

different forms.

102

Every one of these firms now has some form of publicly stated

environmental requirement that it imposes on suppliers. Walmart, Inc. remains the

largest firm of the ten and has over 100,000 suppliers.

103

Because of Walmart’s

position as the largest retailer in the world, it has enormous power over its

suppliers.

104

A frequent target of NGO-led protests, Walmart has long used this

power to address environmental issues through its supply chain.

105

As mentioned in

The New Wal-Mart Effect, Walmart began educating suppliers about sustainability

measures in 2006, while doubling its organic product offering and instituting a policy

of purchasing only MSC-certified fish for the wild-caught fish in its North American

market.

106

In 2017, Walmart introduced Project Gigaton, its plan to cut 1 billion

metric tons in greenhouse gases from its supply chain by 2030, with participation

from several environmental groups including the Environmental Defense Fund.

107

The second largest firm of the ten is Kroger, with $122 billion in annual

sales.

108

Although Kroger was the largest firm in this sector that did not publicly

disclose environmental requirements for suppliers in 2007,

109

today it requires

vendors to comply with environmental laws in all countries in which they operate.

110

100. Id.

101. Id.

102. While Albertson’s owner and Safeway merged in 2015, see Albertsons, Safeway complete merger,

UPERMARKET NEWS (Jan. 30, 2015), https://www.supermarketnews.com/safeway-albertsons-

merger/albertsons-safeway-complete-merger, the firms continued to operate independently such that they

appeared separately in the Dun and Bradstreet database in 2020 and were considered separately for this

study, see supra note 96.

103. Kim Souza, Walmart to Roll Out a New Supplier Excellence Program in Early 2021, T

ALK

BUSINESS & POLITICS (Sept. 4, 2020, 2:59 PM), https://talkbusiness.net/2020/09/walmart-to-roll-out-a-

new-supplier-excellence-program-in-early-2021/.

104. See Matthew Boyle, Fined for Arriving Early? Wal-Mart [sic] Puts Its Suppliers On Notice,

NDUSTRYWEEK (July 14, 2017), https://www.industryweek.com/supply-chain/article/22022636/fined-

for-arriving-early-walmart-puts-its-suppliers-on-notice (detailing the exacting standard Walmart expects

of suppliers and penalties imposed by Walmart even when imperfect performance is the result of extreme

weather).

105. Vandenbergh, supra note 25, at 927.

106. See id. at 936–39 (2007).

107. John Fialka, Walmart Has Thousands of Suppliers. It’s Slashing Their CO2, E&E

NEWS (May 14,

2019, 7:26 AM), https://www.eenews.net/stories/1060328353/.

108. The Kroger Co., D&B

BUS. DIRECTORY, https://www.dnb.com/business-directory/company-

profiles.the_kroger_co.64841d2bdcccb79bc0e64e1e5298ccb7.html (last visited Feb. 1, 2022).

109. Vandenbergh, supra note 25, at 928.

110. Vendor Code of Conduct, K

ROGER, https://www.thekrogerco.com/wp-content/uploads/2017/09

/code-of-conduct.pdf (Aug. 3, 2020).

Fall 2022 Environmental Governance By Contract

As of 2018, vendors must operate through Kroger’s portal to assure compliance.

111

Kroger also states that it is attempting to improve the sustainability of its branded

products’ packaging.

112

Kroger reports that in 2020 80% of its Our Brand products

used RSPO-certified palm oil, and in 2021 it reported an increase to 88%.

113

In 2020

Kroger committed to a target of 30% reduction of scope 1 and 2 greenhouse gas

emissions based on a 2018 baseline, and pledged in 2022 to set new emissions target

goals based on a 1.5 degree Celsius scenario covering scope 1, 2, and 3 emissions by

2023.

114

Of the remaining eight companies, Costco, Target, Walgreens, Loblaw,

Ahold Delhaize USA, and CVS all require suppliers to comply with the

environmental laws of their host countries.

115

Costco is committed to achieving 100%

RSPO-certified palm oil in its Kirkland Signature products and imposes

environmental standards on waste disposal on all of its suppliers.

116

CVS has

committed to a target of 70% of their suppliers setting science-based carbon

emissions-reduction targets on scope 1 and 2 emissions by 2023.

117

Scope 1 emissions

arise from a company’s facilities, whereas scope 2 emissions arise from electricity or

hot water generated off-site.

118

Target requires all suppliers to have environmental monitoring systems in

place and to work towards reducing energy consumption.

119

In 2013, Target

111. Supplier Hub, KROGER, https://www.thekrogerco.com/vendors-suppliers/supplier-hub/ (last

visited June 1, 2021).

112. 2021 Performance Tables, K

ROGER, https://www.thekrogerco.com/sustainability/2021-

performance-tables/ (last visited Sept. 22, 2022).

113. N

URTURING SHARED VALUES: KROGER CO. ESG REPORT 2022, KROGER 15, (2022),

https://www.thekrogerco.com/wp-content/uploads/2022/08/Kroger-Co-2022-ESG-Report.pdf.

114. Id. at 37.

115 Supplier Code of Conduct, C

OSTCO, (last visited June 1, 2021), https://investor.costco.com/static-

files/4563ac77-f3ca-45a8-a9d1-545c56339d92; Standards of Vendor Engagement, T

ARGET (last visited

June 1, 2021), https://corporate.target.com/corporate-responsibility/responsible-sourcing/social-complian

ce/standards-of-vendor-engagement; New Vendor – Vendor Expectations, W

ALGREENS (last visited June 1,

2021), https://webapp.walgreens.com/VendorPortalStellent/prodpublisher/new_vendor/walgreens_vend

or_expectations/vendor_expectations.htm#P266_23808; Supplier Code of Conduct, L

OBLAW (last visited

October 11, 2022), https://www.loblaw.ca/en/supplier-code-of-conduct; Our standards of engagement,

HOLD DELHAIZE (last visited Oct. 11, 2022), https://www.aholddelhaize.com/about/governance/our-

standards-of-engagement/; Responsible sourcing standard, CVS

HEALTH (last visited Oct. 11, 2022),

https://www.cvshealth.com/policies/responsible-sourcing-standard.

116. Environmental Impacts, C

OSTCO (last visited June 2, 2021), https://www.costco.com/sustainab

ility-environment.html; C

OSTCO, supra note 115, at 9.

117. Our Commitment to Reducing Our Greenhouse Gas Emissions, CVS

HEALTH (last visited June 2,

2021), https://cvshealth.com/news-and-insights/articles/our-commitment-to-reducing-our-greenhouse-

gas-emissions#:~:text=CVS%20Health%20also%20commits%20that,Fund%20for%20Nature%20(WWF).

118. See the Greenhouse Gas Protocol (GHG Protocol) jointly convened by the World Business

Council for Sustainable Development (WBCSD) and the World Resources Institute (WSI),

REENHOUSE GAS PROTOCOL, https://ghgprotocol.org/about-us; THE GREENHOUSE GAS PROTOCOL:

A CORPORATE ACCOUNTING AND REPORTING STANDARD REVISED EDITION, 25 (2004)

https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf (defining Scope 1, 2 and 3

emissions).

119. T

ARGET, supra note 115.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

partnered with the now-defunct GoodGuide app to develop an industry standard for

sustainability in cleaning products, cosmetics, personal care items, and baby care.

120

The resulting Target Sustainable Product Standard appears to have since been

deprioritized, but Target’s current standards for suppliers focus on the sustainability

of products throughout its stores, including forest products, cotton, coffee, and

seafood.

121

In 2017, Target introduced its chemicals strategy, aimed at reducing

harmful chemicals in its products through managing ingredients across the supply

chain, providing transparency to consumers, and developing safer alternatives.

122

also participates in Clean by Design, a program though the Apparel Impact Institute

that reduces emissions and waste in textile mills.

123

As of 2022, Target has

committed to a goal of net-zero emissions by 2040, and has committed to reducing

scope 3 supply chain emissions 30% from a 2017 baseline by 2030.

124

Ahold Delhaize requires suppliers to meet ingredient standards and

chemical restrictions above those required by law.

125

Albertsons also requires

suppliers for store-brand products to meet chemical and ingredient restrictions,

126

and it stated that it was working toward 100% sustainable palm oil production in store

brands.

127

Safeway imposes ingredient limitations on cleaning products suppliers.

128

120. Mary Mazzoni, Target Teams Up with GoodGuide to Rate Sustainable Products, TRIPLE PUNDIT

(Oct. 14, 2013), https://www.triplepundit.com/story/2013/target-teams-goodguide-rate-sustainable-pro

ducts/48461.

121. Target Forward: Our Sustainability Strategy, T

ARGET, https://corporate.target.com/sustainabili

ty-ESG/strategy-target-forward (last visited Feb. 4, 2023).

122. Chemicals, T

ARGET, https://corporate.target.com/sustainability-esg/environment/chemicals

(last visited Sept. 16, 2022).

123. Climate & Energy, T

ARGET, https://corporate.target.com/sustainability-ESG/environment/cli

mate-and-energy (last visited Sept. 17, 2022).

124. T

ARGET supra note 121.

125. Russell Redman, Ahold Delhaize USA Raises Sustainability Standards, S

UPERMARKET NEWS

(Sept. 20, 2019), https://www.supermarketnews.com/sustainability/ahold-delhaize-usa-raises-

sustainability-standards.

126. See Position Statements, A

LBERTSONS COMPANIES, https://www.albertsonscompanies.com/ou

r-impact/position-statements/default.aspx#:~:text=Chemical%20Policy,certain%20ingredients%20of%20c

onsumer%20concern (last visited Sept. 19, 2022); Albertsons Revenue 2019–2022, M

ACROTRENDS, https://

www.macrotrends.net/stocks/charts/ACI/albertsons/revenue#:~:text=Albertsons%20annual%20revenue%

20for%202022,a%203.17%25%20increase%20from%202019 (last visited Sept. 19, 2022).

127. A

LBERTSONS COMPANIES, SUSTAINABILITY UPDATE 4 (2018), https://s29.q4cdn.com/2399

56855/files/our_impact/sustainability_doc/AlbertsonsCompanies_SustainabilityUpdate_2018.pdf.;

See also R

ESPONSIBLE SOURCING, ALBERTSONS https://www.albertsonscompanies.com/our-impact/pro

ducts/responsible-sourcing/default.aspx (last visited Feb. 4, 2022).

128. See A

LBERTSONS COMPANIES, SUPPLIER SUSTAINABILITY GUIDELINES AND

EXPECTATIONS 10–11 (2020), https://suppliers.safeway.com/docs/supplier_sustainability_expectations.

pdf; Albertsons Revenue 2019–2022, M

ACROTRENDS, https://www.macrotrends.net/stocks/charts/ACI

/albertsons/revenue#:~:text=Albertsons%20annual%20revenue%20for%202022,a%203.17%25%20increase

%20from%202019 (last visited Sept. 19, 2022).

Fall 2022 Environmental Governance By Contract

As of 2022, Albertson’s has committed to achieving net zero emissions by 2040, and

a 47% reduction in scope 1 and 2 emissions by 2030.

129

b. Sector-to-Sector Analysis

As discussed above, the Hoovers 2007 discount and variety retail sector has

split into department stores and grocery stores, with Walmart, Inc. and Kroger

leading the sectors in annual sales, respectively.

(1) Department Stores

The top ten firms in the department stores sector are Walmart, Costco,

Target, The TJX Companies, Inc., Dollar General, Macy’s, Dollar Tree, Kohl’s, BJ’s

Wholesale Club, and J.C. Penney.

130

All of the top ten firms impose environmental

requirements of some sort on their suppliers, including requirements that their

suppliers must cooperate with the environmental laws of their host countries.

131

Walmart, Costco, and Target were all analyzed above in the firm-to-firm analysis.

Dollar General, Macy’s, and Dollar Tree all impose chemical ingredient

policies on their suppliers.

132

Macy’s and Kohl’s both require suppliers to use the

Higg index, a set of five tools to measure supply chain sustainability developed by

129. RECIPE FOR CHANGE, ALBERTSONS COMPANIES: 2021/2022 ENVIRONMENTAL, SOCIAL

AND

GOVERNANCE (ESG) REPORT, ALBERTSONS 7 (2022) https://s29.q4cdn.com/239956855/files/our

_impact/sustainability_doc/ALBCIV193285_CORP_ESG_Report_Update_October2022-(2).pdf.

130. See supra note 96. JC Penney filed for bankruptcy during the research phase of this project,

after top ten data compiled. See Catherine Leffert, JCPenney to Exit Bankruptcy by Mid-2021 upon Approval

of Sale, D

ALLAS BUSINESS JOURNAL (Dec. 7, 2020, 3:54 PM), https://www.bizjournals.com/dallas/news/

2020/12/07/jcpenney-exit-bankruptcy.html.

131. See Vendor Code of Conduct, TJX, https://www.tjx.com/responsibility/responsible-

business/vendor-code-of-conduct (last visited Sept. 18, 2022); Corporate Social Responsibility, D

OLLAR

GENERAL, https://www.dollargeneral.com/about-us/corporate-social-responsibility.html (last visited

Sept. 18, 2022); M

ACY’S, INC., VENDOR & SUPPLIER CODE OF CONDUCT 7 (2019), https://content-

az.equisolve.net/macysinc/files/pages/vendors-h7gvr8coq8pq/code-of-conduct/200226_CoC+DOCUME

NT+%288.5x11%29.pdf; D

OLLAR TREE, INC., CODE OF VENDOR CONDUCT 3 (2020),

https://www.dollartree.com/file/general/Code_of_Vendor_Conduct.pdf; K

OHLS, TERMS OF

ENGAGEMENT 13, https://corporate.kohls.com/content/dam/kohlscorp/corporate-responsibility/respon

sible-sourcing/TOE%20Corporate%20Website%20Version.pdf (last visited Sept. 18, 2022); BJ’

WHOLESALE CLUB, INC., CODE OF CONDUCT 2 (2014),

https://www.bjs.com/biz/about_conduct/images/Code_of_Conduct_120814.pdf; JCP

ENNEY, SUPPLIER

PRINCIPLES 3 (2018), https://www.jcpenney.com/dotcom/images/2018_SupplierPrinciples.pdf.

132. Mike Schade & Mike Belliveau, Dollar General, Sephora, Lowe’s Among 7 Most Improved Retailers

Addressing Toxic Chemicals, GreenBiz (Feb. 3, 2020), https://www.greenbiz.com/article/dollar-general-

sephora-lowes-among-7-most-improved-retailers-addressing-toxic-chemicals#:~:text=The%20policy%20i

ncludes%20a%20list,to%20reduce%20or%20eliminate%20their; Christie Boyden & Lindsey Rupp, After

Activist Pressure, Macy’s Vows to Ensure Furniture is Free of Toxic Flame Retardants,

LOOMBERG (Oct. 20, 2015, 2:38 PM), https://www.bloomberg.com/news/articles/2015-10-20/macy-s-

to-ensure-furniture-is-free-of-toxic-flame-retardants; Dollar’s Tree Grade, R

ETAILERREPORTCARD.COM

(last visited June 4, 2021), https://retailerreportcard.com/retailer/dollar-tree/.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

the Sustainable Apparel Coalition.

133

J.C. Penney requires all suppliers of wood and

paper products to meet sustainable forestry management practices.

134

(2) Grocery Stores

The top ten firms in the grocery stores sector are Kroger, Albertsons,

Publix, Ahold Delhaize, H.E. Butt, Target Stores, Whole Foods Market,

135

Safeway,

136

Supervalu,

137

and Southeastern Grocers, Inc.

138

All but Supervalu

impose at least one environmental requirement on their suppliers. Kroger,

Albertsons, Ahold Delhaize, and Safeway have all been discussed above in the firm-

to-firm comparisons.

Publix requires all suppliers to have environmental commitments in place

and encourages them to implement resource conservation practices.

139

H.E. Butt

requires suppliers to maintain environmental management systems and work to

minimize pollution.

140

Target Stores and Whole Foods Market require suppliers to

maintain environmental management systems, monitor all energy use, air emissions,

and wastewater, and work to reduce energy use.

141

Southeastern Grocers partners

with the Global Aquaculture Alliance (GAA) to hold suppliers of its farm-raised

seafood to GAA standards.

142

133. See Responsible Products and Sourcing, MACY'S, https://www.macysinc.com/purpose/responsibl

e-products-and-sourcing (last visited June 4, 2021); Terms of Engagement – Vendor Partners, K

OHLS,

https://corporate.kohls.com/content/dam/kohlscorp/corporate-responsibility/responsible-sourcing/TOE

%20Corporate%20Website%20Version.pdf (last visited June 4, 2021); The Higg Index,

PPARELCOALITION.ORG, https://apparelcoalition.org/the-higg-index/ (last visited June 4, 2021).

134. See JCP 2014 Environmental Principles, JCP

ENNEY (2014), https://www.jcpenney.com/dotcom

/images/JCP_2014_EnvironmentalPrinciples.pdf.

135. Although Amazon acquired Whole Foods in 2017, see Aine Cain, The history of Amazon and

Whole Foods' sometimes-rocky marriage, which kicked off 5 years ago with a $13.7 billion acquisition, BUSINESS

INSIDER (Aug. 29, 2022) https://www.businessinsider.com/amazon-whole-foods-market-history-2022-8.

The two companies remained separate for purpose of the Dun and Bradstreet database and this study.

136. See supra note 102.

137. While United Natural Foods acquired Supervalu in 2018, see Mark Reilly, Supervalu's gone—

—at least from Wall Street——as $2.9B acquisition closes. Now what?, MINNEAPOLIS/ST. PAUL BUSINESS

JOURNAL (Oct. 23, 2018) https://www.bizjournals.com/twincities/news/2018/10/23/supervalus-gone-at-

least-from-wall-street-as-2-9b.html. The two companies remained separate for purpose of the Dun and

Bradstreet database and this study.

138. See supra note 96.

139. P

UBLIX, SUPPLIER POLICIES & GUIDELINES, 30 (Nov. 1, 2022), http://corporate.publix.com

/business/publix-business-connection/retail-product-supplier.

140. H-E-B S

UPPLIERS, SUPPLIER CODE OF CONDUCT, 1–2 (June 2, 2021) https://supplier.heb.c

om/requirements.

141. T

ARGET, supra note 115; WHOLE FOODS MARKET, WHOLE FOODS MARKET SUPPLIER

CODE OF CONDUCT, 6–7, 10 (2019), https://assets.wholefoodsmarket.com/www/company-info/WFM%

20Supplier%20Code%20of%20Conduct_12.30.19.pdf.

142. Southeastern Grocers is Committed to Sustainable Seafood, E

L DIARIO NY (Oct. 27, 2016)

https://eldiariony.com/latinowire/southeastern-grocers-is-committed-to-sustainable-seafood/.

Fall 2022 Environmental Governance By Contract

2. Home Improvement and Hardware Retail

In 2007, the top ten home improvement and hardware retail stores were

Home Depot, Lowe’s, Wolseley, CCA Global Partners, Menard, Sherwin-Williams,

Stock Building Supply, 84 Lumber, Ace Hardware, and Do It Best.

143

At the time,

these firms had combined annual sales totaling over $178 billion.

144

Four of the ten

firms, representing $152 billion in sales, had some sort of publicly disclosed

environmental requirement.

145

All ten companies still exist, although Wolseley has

changed its name to Ferguson in all but its Canadian and U.K. markets

146

, and Stock

Building Supply merged with BMC to become BMC Stock Holdings.

147

a. Firm-to-Firm Analysis

At the time of the current study, six of these ten firms imposed

environmental requirements of some kind on their suppliers. Home Depot purchases

its lumber almost entirely from suppliers certified under FSC, SFI, and PEFC.

148

They also require suppliers’ factories to operate in a way that minimizes their

environmental impact and have phased out a number of chemicals from their

paints.

149

Lowe’s has pledged that 100 percent of its suppliers will have sustainability

goals by 2025.

150

Both companies require vendors to comply with all local

environmental laws,

151

as do Ferguson,

152

Sherwin-Williams and BMC Stock

Holdings.

153

Sherwin-Williams and Ace Hardware have also worked to phase out

143. Vandenbergh, supra note 25, at 929.

144. Id. This figure represents the annual sales of the top nine firms, plus the sales of Do It Best,

the exact number of which was unavailable at the time of writing.

145. Id.

146. Sam Dean, Wolseley to Rebrand as Ferguson as it Departs from Scandinavia, T

HE TELEGRAPH

(Mar. 28, 2017), https://www.telegraph.co.uk/business/2017/03/28/wolseley-rebrand-ferguson-departs-

nordic-region; Esha Vaish, Wolseley to Change Name to U.S. Brand Ferguson, Reflecting Regional Focus,

EUTERS (Mar. 28, 2017), https://www.reuters.com/article/us-wolseley-results/wolseley-to-change-

name-to-u-s-brand-ferguson-reflecting-regional-focus-idUSKBN16Z0LV.

147. BMC History, BMC, https://www.buildwithbmc.com/bmc/s/bmc-history (last visited June 16,

2020).

148. 5 Tips for a Sustainable Remodel, T

HE HOME DEPOT, https://corporate.homedepot.com/news/

sustainability/five-tips-sustainable-remodel (last visited Oct. 8, 2022).

149. H

OME DEPOT, RESPONSIBLE PRODUCT STANDARDS, 2, 8 (2019), https://corporate.homede

pot.com/sites/default/files/image_gallery/PDFs/responsible-product-standards.pdf.

150. Our Approach to Corporate Responsibility, L

OWES (last visited June 9, 2021),

https://corporate.lowes.com/our-responsibilities/our-approach-corporate-responsibility.

151. H

OME DEPOT, supra note 149, at 8; See LOWES, VENDOR CODE OF CONTRACT, 1, 3 (2021)

https://www.loweslink.com/llmain/pubdocuments/lgsbusinessethics.pdf.

152. Environmental & Social Sustainability Policy, F

ERGUSON 1,

https://www.fergusonplc.com/content/dam/ferguson/corporate/sustainability/our-approach/Environmen

t-and-Social-Sustainability-Policy.pdf. (last visited Oct. 15, 2022).

153. BMC, G

ENERAL PURCHASE ORDER TERMS AND CONDITIONS 2 (2018), https://cdn-media

.amplience.com/stock/pdfs/BMC_Supplier_Purchase_Order_Terms_Conditions_2018_FINAL3.pdf.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

some chemicals from their paints.

154

CCA Global Partners, Menard, 84 Lumber, and

Do It Best have not publicly disclosed any environmental requirements for suppliers.

b. Sector-to-Sector Analysis

The D&B Hoovers new sector classification most closely analogous to

home improvement and hardware retail is home and garden retail. The top ten firms

in this sector are Home Depot, Lowe’s, Menard, Volt Parent, Fortive, Ace Hardware,

Snap-On, Fred Meyer Stores, Ufp Warrens, and LBM Borrower.

155

Of these firms,

six impose at least one environmental requirement on suppliers. Home Depot,

Lowe’s, Menard, and Ace Hardware are all discussed above in the firm-to-firm

analysis.

Fortive requires all suppliers to have environmental management systems,

obey all local environmental laws, and seek to reduce their environmental impact.

156

Snap-On and Fred Meyer Stores both also require that suppliers obey all local

environmental laws.

157

Volt Parent, Ufp Warrens, and LBM Borrower do not

publicly disclose any environmental supply chain requirements.

3. Office Products Retail and Distribution

The top ten firms in the office products retail and distribution sector in

2007 were Staples, Office Depot, Office Max, Unisource, IKON, United Stationers,

Corporate Express, S.P. Richards, School Specialty, and Global Imaging Systems,

accounting in total for $61 billion in annual sales for the sector.

158

Of these, only

Staples and Office Depot imposed environmental requirements on their suppliers.

159

154. Sherwin-Williams Commits to Ban Deadly Paint Strippers, Nat’l Res. Def. Council (June 15, 2018),

https://www.nrdc.org/media/2018/180615#:~:text=Today%20the%20nation's%20largest%20specialty,the

%20end%20of%20this%20year; Sujatha Bergen, Mike Schade, & Daniel Rosenberg, Toxic Paint Strippers:

Ace Hardware (Finally) Acts; Trump EPA Stalls, T

OXIC-FREE FUTURE (Feb. 28, 2019),

https://toxicfreefuture.org/blog/toxic-paint-strippers-ace-hardware-finally-acts-trump-epa-stalls/.

155. See supra note 96.

156. The Fortive Supplier Code, F

ORTIVE 4, 11, https://www.fortive.com/sites/default/files/2021-

09/FOR-000_Supplier%20Code%20Brochure_R3_ENGLISH-compressed.pdf (last visited Oct. 15,

2022).

157. Supplier Code of Business Conduct, S

NAPON 1, https://www.snapon.com/Snap-on-Files/Supplie

rs/Code-of-Conduct/2019-Code-of-Conduct/Snap-onSuppliercodeofconduct-Nov2019_English.pdf (last

visited June 9, 2021); Fred Meyer, as a subsidiary of the Kroger Co., abides by the Kroger Co. Vendor

Code of Conduct: Vendor Code of Conduct, K

ROGER (Aug. 3, 2020), https://www.thekrogerco.com/wp-

content/uploads/2017/09/code-of-conduct.pdf.

158. Vandenbergh, supra note 25, at 929–30.

159. Id. at 930.

Fall 2022 Environmental Governance By Contract

a. Firm-to-Firm Analysis

A number of these firms have gone through major changes since 2007.

Office Max was purchased by Office Depot,

160

Unisource merged with International

Paper’s xpedx division to become Veritiv,

161

IKON was purchased by Ricoh Co.,

162

and United Stationers changed its name to Essendant.

163

Since Office Max and

IKON are now owned by other companies, eight firms of the original ten remain. Of

these eight firms, half have disclosed the use of environmental supply chain

requirements. Staples and Office Depot continue to impose environmental

requirements on their suppliers.

164

Both Veritiv and Essendant require suppliers to

comply with all local environmental laws,

165

and Veritiv requires that paper suppliers

meet either FSC, SFI, or PEFC standards.

166

b. Sector-to-Sector Analysis

As noted above, no current sector is analogous to the office products retail

and distribution sector, so no sector in this general business area was included in the

current study.

4. Automobile Manufacturing

In 2007, the top ten firms in the automobile manufacturing sector were

General Motors, Toyota, DaimlerChrysler, Ford, Volkswagen, Nissan, Honda,

Peugeot, Fiat, and Renault.

167

Of those ten firms, General Motors, DaimlerChrysler,

Toyota, Nissan, and Fiat had some form of environmental requirements, with

Renault planning to impose requirements in 2007.

168

These seven firms represented

160. Dhanya Skariachan, Office Depot Closes Deal to Buy OfficeMax, REUTERS (Nov. 5, 2013),

https://www.reuters.com/article/us-officedepot-officemax-results/office-depot-closes-deal-to-buy-office

max-idUSBRE9A418720131105.

161. International Paper Announces Completion of xpedx Spinoff and Merger with Unisource, C

ISION PR

NEWSWIRE (July 1, 2014), https://www.prnewswire.com/news-releases/international-paper-announces-

completion-of-xpedx-spinoff-and-merger-with-unisource-265434071.html.

162. S&P Summary: Ricoh Co. Ltd., R

EUTERS (Mar. 29, 2012), https://www.reuters.com/article/id

USWLA550620120329.

163. Our Company History, E

SSENDANT https://www.essendant.com/about-us/our-history (last

visited June 17, 2020).

164. Staples Supplier Code of Conduct, S

TAPLES, https://www.staples.com/sbd/cre/noheader/about_

us/documents/suppliercodeofconduct.pdf (last visited June 9, 2021); Greener Purchasing Policy for Paper

Products, O

FFICE DEPOT, https://www.officedepot.com/cm/help/paper-policy (last visited June 9, 2021).

165. Veritiv Supplier Code of Conduct 2019, V

ERITIV, https://www.veritivcorp.com/sites/default/files

/veritiv-supplier-code-of-conduct-2019.pdf (last visited June 9, 2021); Essendant Inc. Supplier Code of Ethics,

SSENDANT, https://www.essendant.com/wp-content/uploads/2019/04/ESND_Supplier_Code_of_Ethi

cs_1-2016.pdf (last visited June 9, 2021).

166. 2021 Corporate Social Responsibility Report, V

ERITIV 2 (2021), https://s2.q4cdn.com/507213534/

files/doc_downloads/2021/Veritiv-2021-CSRR-FINAL.pdf.

167. Vandenbergh, supra note 25, at 930.

168. Id., at 930 n.69.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

$910 billion in sales, 77 percent of the sales for the top ten firms in the sector.

169

All

ten companies existed at the time of the new study, although Chrysler had become a

subsidiary of Fiat, not Daimler.

170

a. Firm-to-Firm Analysis

All ten currently impose at least one environmental requirement on their

suppliers. General Motors, Volkswagen, and Fiat Chrysler require suppliers to

address a variety of environmental matters including reducing their carbon footprint,

energy use, water use, waste, and emissions.

171

In addition, General Motors

encourages suppliers to increase usage of renewable energy and develop

environmentally friendly technologies.

172

Similarly, Daimler requires suppliers to

implement emissions reduction strategies, as well as strategies for reducing and

recovering resources.

173

Toyota asks suppliers to aim for carbon neutrality,

174

while

Ford requires that raw materials be responsibly sourced.

175

Nissan asks suppliers to

reduce carbon dioxide emissions and water use throughout the supply chain and to

be proactive about recycling.

176

Honda requires management, reduction, and,

wherever possible, elimination of greenhouse gas emissions from suppliers.

177

Fiat

Chrysler, Volkswagen, Peugeot, and Daimler all required or suggested that certain

169. Id. at 930.

170. James R. Healey, Done deal: Fiat owns Chrysler, USA TODAY (Jan. 21, 2014),

https://www.usatoday.com/story/money/cars/driveon/2014/01/21/done-deal-fiat-now-owns-all-of-chrysle

r/4718529/; After the scope of this study was set in June 2020, Chrysler and Peugeot merged to become

Stellantis, Colin Beresford, It’s Official: Fiat Chrysler and PSA Group Are Now Stellantis, C

AR AND DRIVER,

(Jan. 19, 2021) https://www.caranddriver.com/news/a35254008/fiat-chrysler-peugeot-become-stellantis/;

Graeme Roberts, Daimler Becomes Mercedes Benz Group, J

UST AUTO, (Feb. 1, 2022), https://www.just-

auto.com/news/daimler-becomes-mercedes-benz-group/. Since this change happened after the

commencement of the study, the companies remain separate herein, and their environmental

commitments are derived from before the merger and reflect the behavior of the companies in 2020.

171. G

ENERAL MOTORS, GM SUPPLIER CODE OF CONDUCT, 6–8 https://www.gmsustainability

.com/pdf/policies/GM_Supplier_Code_of_Conduct.pdf (last visited Oct 11, 2022); V

OLKSWAGEN,

CODE OF CONDUCT FOR BUSINESS PARTNERS, 14 (2021), https://www.volkswagenag.com/presence/na

chhaltigkeit/documents/policy-intern/CodeofConduct_BusinessPartners_V2020.pdf; F

IAT CHRYSLER

UTOMOBILES, FCA ENVIRONMENTAL GUIDELINES, 3, https://www.stellantis.com/content/dam/stella

ntis-corporate/archives/fca/corporate-regulations/FCA_Environmental_Guidelines_2018.pdf (last visited

Feb. 6, 2018).

172. G

ENERAL MOTORS, supra note 171, at 6.

173. D

AIMLER AG, DAIMLER SUSTAINABILITY REPORT 2019, 39, 49, 92 (2020), https://sustaina

bilityreport.daimler.com/2019/servicepages/downloads/files/daimler_sr_2019.pdf.

174. T

OYOTA MOTOR CORP., TOYOTA SUSTAINABILITY GUIDELINES, 5 (2021), https://global.t

oyota/pages/global_toyota/sustainability/esg/supplier_csr_en.pdf.

175. See generally, F

ORD, FORD SUSTAINABILITY REPORT 2019/20, 4 (2020), https://s23.q4cdn.co

m/799033206/files/doc_downloads/esg/2020/06/Ford-sr20.pdf.

176. N

ISSAN, NISSAN GREEN PURCHASING GUIDELINES, 5 (2020), https://www.nissan-

global.com/EN/DOCUMENT/PDF/SR/Nissan_Green_Purchasing_Guideline_e.pdf.

177. H

ONDA, HONDA SUPPLIER SUSTAINABILITY GUIDELINES, 5, https://global.honda/sustain

ability/cq_img/report/pdf/supply-chain/supplier-sustainability-guidelines.pdf (last visited Oct. 15, 2022).

Fall 2022 Environmental Governance By Contract

suppliers obtain ISO 14001 certification or work within certified systems.

178

Although most companies require their suppliers to comply with local environmental

laws, Renault also requires that they anticipate and stay ahead of new legislation by

implementing and continuously improving environmental management systems.

179

b. Sector-to-Sector Analysis

The automobile sector is now referred to as the motor vehicle parts

manufacturing sector in the D&B database classifications.

180

Of the top ten from

2007, Volkswagen, Toyota, Ford, General Motors, Honda, Nissan, Fiat, and Peugeot

remain at the top today.

181

SAIC, a Chinese automobile manufacturer, and Audi have

replaced Daimler and Fiat Chrysler. As a member of Volkswagen Group, Audi has

the same supplier requirements as Volkswagen.

182

SAIC claims to advance the ISO

14001 environmental management system, and it requires subsidiaries and affiliated

holding companies to comply with local environmental laws and set standards for

pollutants.

183

SAIC expresses interest in “green supply chain” but does not have

published targets, goals, or compliance metrics for suppliers.

184

5. Personal Computers

The top ten firms in personal computers in 2007 were Hewlett-Packard,

Sony, Dell, Toshiba, NEC, Apple, Acer, Fujitsu Siemens Computers, Gateway, and

Lenovo.

185

At the time, these companies had $336 billion in global sales.

186

The seven

largest of these firms, Hewlett-Packard, Sony, Dell, Toshiba, NEC, Apple

Computer, and Acer, accounting for 96 percent of computer sales, all imposed

178. VOLKSWAGEN, VOLKSWAGEN AKTIENGESELLSCHAFT SUSTAINABILITY REPORT 2019, 39

(2020), https://www.volkswagenag.com/presence/nachhaltigkeit/documents/sustainability-report/2019/

Nonfinancial_Report_2019_e.pdf (but limiting the ISO 14001 requirement to suppliers with 100 or more

employees); D

AIMLER AG, supra note 173, at 113.

179. N

ISSAN, RENAULT-NISSAN CSR GUIDELINES FOR SUPPLIERS, 7 (2021),

https://www.nissan-global.com/EN/DOCUMENT/PDF/SR/CSR_Alliance_Guidelines.pdf.

180. See supra, note 96.

181. Id.

182. V

OLKSWAGEN GROUP, BRANDS, https://www.volkswagenag.com/en/group/brands-and-

models.html (last visited Oct. 15, 2022); A

UDI, VOLKSWAGEN CODE OF CONDUCT FOR BUSINESS

PARTNERS, (2021), https://www.audi.com/content/dam/gbp2/company/sustainability/downloads/docum

ents-and-policies/corporate-guidelines/Volkswagen_Code_of_Conduct_for_Business_Partners-2019-DE

-EN.pdf.

183. SAIC,

SAIC MOTOR CORPORATION LIMITED: ANNUAL REPORT 2021, 56–58,

https://www.saicmotor.com/english/images/investor_relations/annual_report/2022/7/12/763203D083E5

4499855A319FB8356217.pdf .

184. Id.

185. Vandenbergh, supra note 25, at 932.

186. Id.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

environmental performance requirements on their suppliers.

187

The remaining three

companies did not disclose if they had any such requirements of suppliers.

188

a. Firm-to-Firm Analysis

All the original companies exist in some form today, with the exception of

Gateway, which is now part of Acer.

189

All nine companies impose some type of

environmental requirement on suppliers. HP, Sony, Dell, and Acer are all members

of the Responsible Business Alliance and use the Alliance’s code of conduct as the

standard for their suppliers.

190

This code requires minimization or elimination of

emissions and waste discharge, conservation of natural resources, and

implementation of a water management system.

191

Dell, Apple, and NEC require

suppliers to implement ISO 14001 environmental management systems, and Toshiba

and Fujitsu encourage them.

192

Lenovo requires suppliers to meet the Electronic

Industry Citizen Coalition (EICC) standards.

193

It also requires suppliers to have

aggressive and public climate change targets and to obtain independent verification

of performance where possible.

194

Toshiba encourages suppliers to implement

procurement policies that focus on materials with the smallest negative

environmental impact, and to reduce or eliminate use of hazardous substances.

195

NEC has a long list of requirements for suppliers, including taking actions for climate

187. Id.

188. Id. at 933.

189. G

ATEWAY, Company Background, Gateway Today, https://www.gateway.com/gw/en/US/

content/company-background (last visited Oct. 19, 2022).

190. Members, R

ESPONSIBLEBUSINESS.ORG, http://www.responsiblebusiness.org/about/members

(last visited June 9, 2021); HP, HP S

UPPLIER CODE OF CONDUCT, 1 (2021) https://h20195.www2.hp.co

m/V2/getpdf.aspx/c04797684; S

ONY, SONY SUPPLY CHAIN CODE OF CONDUCT, 2 (2021),

https://www.sony.com/en/SonyInfo/csr_report/sourcing/Sony_Supply_Chain_CoC_3.0_E.pdf; D

ELL,

DELL SUPPLIER PRINCIPLES, 1 (2021), https://i.dell.com/sites/doccontent/corporate/corp-comm/en/Doc

uments/dell-supplier-principles.pdf; A

CER, SUPPLY CHAIN CHEMICAL SUBSTANCES

MANAGEMENT, https://www.acer.com/sustainability/en/supplier-chemical-substances-management.htm

l (last visited June 9, 2021).

191. Responsible Business Alliance Code of Conduct 7.0, R

ESPONSIBLEBUSINESS.ORG, http://www.res

ponsiblebusiness.org/media/docs/RBACodeofConduct7.0_English.pdf (last visited June 9, 2021).

192. D

ELL, supra note 190, at 1; APPLE, APPLE SR STANDARDS FINAL, 88, https://www.apple.co

m/supplier-responsibility/pdf/Apple-Supplier-Responsible-Standards.pdf (last visited June 11, 2021);

JPN, G

REEN PROCUREMENT, 3, https://jpn.nec.com/eco/ja/product/green/pdf/green_procurement_EN

.pdf (last visited June 11, 2021); T

OSHIBA, TOSHIBA GROUP PROCUREMENT POLICY, 2 (2020), https://

www.global.toshiba/content/dam/toshiba/jp/procurement/corporate/policy/pdf/en_procurementpolicy.p

df; F

UJITSU, SUSTAINABILITY REPORT 2020 (2020), https://www.fujitsu-general.com/shared/pdf-f000-

sustainability-report2020-all-01.pdf.

193. L

ENOVO, SUPPLIER CODE OF CONDUCT, 3, https://www.lenovo.com/medias/Supplier-

Code-of-Conduct.pdf?context=bWFzdGVyfHNvY2lhbF9yZXNwb25zaWJpbGl0eXwxMjg1Mzl8

YXBwbGljYXRpb24vcGRmfHNvY2lhbF9yZXNwb25zaWJpbGl0eS9oNTMvaDE3LzkzMzExMDg4N

zIyMjIucGRmfDY0OGU5NDQ4ZmEyNzIxMDI4NGQ1ZGFjMzZlZThmNjZlNTY5YThlYjM (last

visited June 11, 2021).

194. Id.

195. T

OSHIBA, supra note 192, at 2–3.

Fall 2022 Environmental Governance By Contract

change, green purchasing, designing for long product lifetimes, and designing with

recycling in mind.

196

It also explicitly requires suppliers to encourage and supervise

these practices in upstream companies.

197

Fujitsu encourages suppliers to set carbon

dioxide reduction targets and implement policies to meet them, specifically

encouraging working with outside organizations and upstream suppliers.

198

b. Sector-to-Sector Analysis

The most closely analogous sector to the former personal computer sector

is now referred to as computer and peripheral equipment manufacturing.

199

Dell,

HP, and Toshiba all remain in the top ten in the sector. The remaining seven are

Hitachi, Cisco Systems, Denali Intermediate, EMC, Canon, Cloud Network Tech

Singapore, and Wistron.

200

All except Denali and Cloud Network Tech impose at

least one environmental requirement on suppliers. EMC was acquired by Dell in

2016 and follows its environmental policies.

201

Hitachi requires suppliers to reduce

resource use and waste, and to implement environmental management systems,

recommending suppliers obtain an international environmental certification.

202

Cisco and Wistron are members of the RBA and require suppliers to follow the RBA

code of conduct.

203

Cisco also requires GHG emissions reporting and auditing

through CDP.

204

Canon requires adoption of environmental management

systems.

205

196. JPN, supra note 192, at 7–10.

197. Id. at 7.

198. F

UJITSU, FUJITSU GROUP SUSTAINABILITY DATA BOOK 2019 (2019), https://www.fujitsu.c

om/global/documents/about/resources/reports/sustainabilityreport/2019-report/fujitsudatabook2019-020

501-e.pdf.

199. See supra, note 96.

200. Id.

201. See, John Pflueger, Engaging Our Suppliers on Energy and Carbon Emissions,

ELLTECHNOLOGIES.COM (July 27, 2017), https://www.delltechnologies.com/en-us/blog/engaging-our-

suppliers-on-energy-and-carbon-emissions/.

202. H

ITACHI, HITACHI GROUP CSR MANAGEMENT GUIDELINE THE 3RD EDITION, 15–17

(2017), https://www.hitachicm.com/global/wp-content/uploads/2017/09/HSC_CSR_GB_E.pdf;

ITACHI, GREEN PROCUREMENT GUIDELINES, S2, https://www.hitachi.com/environment/library/pdf

/green_en.pdf (last visited June 11, 2021).

203. C

ISCO, SUPPLIER CODE OF CONDUCT,

https://www.cisco.com/c/en/us/about/csr/impact/environment/supplier-code-of-conduct.html (last

visited June 11, 2021); W

ISTRON, RESPONSIBLE BUSINESS, https://esg.wistron.com/en/innovation/Susta

inableSupplyChain/ (last visited June 11, 2021).

204. Douglas Bellin, Making Manufacturing Sustainable – Starting with Our Supply Chain, C

ISCO

BLOGS (Apr. 13, 2016), https://blogs.cisco.com/manufacturing/making-manufacturing-sustainable-

starting-with-our-supply-chain.

205. C

ANON, CANON GREEN PROCUREMENT STANDARDS, 8 (2021),

https://global.canon/en/procurement/gp-docs/green-v13-en.pdf.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

6. Lumber and Wood Production

In 2007, the top ten firms in the lumber and wood production sector were

International Paper, Weyerhaeuser, Georgia-Pacific, OfficeMax, MeadWestvaco,

Bowater, Louisiana-Pacific, Universal Forest Products, Potlatch, and Sweetheart.

206

The combined 2005 U.S. sales for these companies was over $91 billion.

207

Of these,

International Paper, Weyerhaeuser, Georgia-Pacific, MeadWestvaco, Bowater, and

Louisiana-Pacific all imposed SFI and local law compliance requirements on their

timber suppliers, while Potlatch encouraged FSC compliance.

208

OfficeMax,

Universal Products, and Sweetheart did not publicly disclose whether they imposed

any standards on suppliers.

209

Of the top ten companies in 2007, International Paper, Georgia-Pacific,

Weyerhaeuser, Louisiana-Pacific, and Universal Forest Products remain in

essentially the same form. OfficeMax, as stated in the discussion of the office

products and retail distribution sector, is now a subsidiary of Office Depot, which is

not a major player in the lumber and wood production sector. Similarly, Sweetheart,

which had been acquired by Solo Cup shortly before the 2007 paper was published,

was acquired by Dart Container in 2012.

210

Dart is primarily a rubber and plastics

products manufacturer, and thus is not analyzed here as a member of the lumber and

wood production sector.

211

MeadWestvaco merged with Rock-Tenn in 2015 to form

WestRock, and Potlatch became Potlatchdeltic after acquiring Deltic Timber in

2018.

212

Finally, Bowater merged with Abitibi-Consolidated in 2007 to become

AbitibiBowater, then changed its name to Resolute Forest Products after emerging

from bankruptcy in 2010.

213

a. Firm-to-Firm Analysis

Today, seven of the eight remaining companies (all save Universal Forest

Products) impose environmental performance standards on suppliers, primarily

206. Vandenbergh, supra note 25, at 933–34.

207. Id. at 933.

208. Id. at 934.

209. Id.

210. Dart Container Closes on Acquisition of Solo Cup Company, D

ART CONTAINER CORP., (May 4,

2012), https://www.dartcontainer.com/news/news-archives/news-stories/2012/05/dart-container-closes-

on-acquisition-of-solo-cup-company/.

211. Dart Container, D

UN & BRADSTREET BUS. DIRECTORY, https://www.dnb.com/business-

directory/company-profiles.dart_container_corporation.a14b6c3f69735cc4d095048e7e26d40b.html (last

visited Feb. 1, 2022)

212. Arno Schuetze, U.S. Packaging Group Westrock Puts Dispensers Unit Up for Sale, R

EUTERS (Nov.

18, 2016), https://www.reuters.com/article/us-westrock-divestment/u-s-packaging-group-westrock-puts-

dispensers-unit-up-for-sale-sources-idUSKBN13D1ZS; Potlatchdeltic Corporation, D

UN &

BRADSTREET BUS. DIRECTORY, https://www.dnb.com/business-directory/company-profiles.potlatchdel

tic_corporation.cdfb211202377deccb452734119b91b3.html (last visited Feb. 1, 2022).

213. Our History, R

ESOLUTE FOREST PRODS.,

https://www.resolutefp.com/About_Us/Our_History/ (last visited Oct. 17, 2022).

Fall 2022 Environmental Governance By Contract

because their certifications through SFI, FSC or PEFC require that certain

environmental practices be met by suppliers for the producers to retain their

certifications.

214

Both International Paper and Resolute Forest Products work with

small landowners to help them become FSC-certified.

215

WestRock is the only

company of the seven that is not independently certified under one of the above

certification systems, but it does require its suppliers to comply with all local laws

and regulations.

216

b. Sector-to-Sector Analysis

The lumber and wood production sector is the only one included in the

2007 study that has not changed to a different sector in the D&B Hoovers

reorganization.

217

The makeup of the top ten companies has changed, however.

International Paper and Georgia-Pacific remain the top two companies in terms of

revenue, and WestRock has moved up from fifth to third.

218

The remaining seven

companies from 2007 are no longer in the top ten.

219

The fourth through tenth largest

companies today are Kimberly-Clark, Graphic Packaging International, Avery

Dennison, Packaging Corporation of America, Sonoco Products, Domtar, and

Bemis.

220

All ten companies impose at least one environmental supply chain

requirement on suppliers.

International Paper, Georgia-Pacific and WestRock were discussed above.

Of the remaining seven, Graphic Packaging, Packaging Corp. of America, Sonoco

Products, and Domtar all have SFI and PEFC certifications, and Sonoco and Domtar

214. Forest Management Certification, INTERNATIONALPAPER.COM, https://www.internationalpap

er.com/docs/default-source/english/sustainability/2013-sustainability-report.pdf?sfvrsn=df57a033_0 (last

visited June 11, 2021); GP,

SUSTAINABILITY BROCHURE, 7, https://www.gppackaging.com/wp-

content/uploads/2020/08/GP-Sustainability-Brochure-5.pdf (last visited June 11, 2021);

EYERHAEUSER, SUSTAINABILITY, 16 (2014), https://www.weyerhaeuser.com/application/files/1615/13

03/1667/Weyerhaeuser-Sustainability-Report_2014.pdf; Forestry and Fiber Sourcing, R

ESOLUTEFP.COM,

https://www.resolutefp.com/Sustainability/Forestry_and_Fiber_Sourcing/ (last visited June 11, 2021); A

commitment to sustainable forestry, W

ESTROCK, https://www.westrock.com/company/forest-

resources#fiber-certifications (last visited Oct. 17, 2022); LP,

SUSTAINABILITY BROCHURE, 2 (2020),

https://lpcorp.com/media/5087/17-lp-0150-m2mp-lp-sustainability-brochure-digital.pdf; Corporate

Responsibility–Environment, P

OTLATCHDELTIC.COM, https://www.potlatchdeltic.com/Page/ViewPage/19

(last visited June 11, 2021).

215. I

NTERNATIONAL PAPER, FOREST MANAGEMENT CERTIFICATION, 29–30 (2013),

https://www.internationalpaper.com/docs/default-source/english/sustainability/2013-sustainability-repor

t.pdf?sfvrsn=df57a033_0; Forestry and Fiber Sourcing, R

ESOLUTEFP.COM, https://www.resolutefp.com/S

ustainability/Forestry_and_Fiber_Sourcing/ (last visited June 11, 2021).

216. W

ESTROCK, GLOBAL PRINCIPLES OF CONDUCT (2021), https://www.westrock.com/-

/media/pdf/policies/supplier-principles-of-conduct-pdf.pdf?modified=20180725145724#:~:text=Business

%20Practices%3A%20Suppliers%20shall%20not,to%20the%20satisfaction%20of%20WestRock.

217. After the scope of the study was defined, however, the sector was renamed as Converted Paper

Product Manufacturing, see supra note 96.

218. See supra note 96.

219. Id.

220. Id.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

are also FSC certified.

221

These certifiers require participating companies to meet

certain standards in their choice of suppliers.

222

In addition, International Paper,

Georgia-Pacific, WestRock, Graphic Packaging International, and Packaging

Corporation of America all are part of Amazon’s Packaging Support and Supplier

Network, which tests and certifies packaging materials in an effort to reduce waste,

including requiring packages above a certain size to ship in the original box to avoid

double-packaging and that all packaging be 100% recyclable.

223

Kimberly-Clark states on its website that its “sustainability policies outline

[its] commitment to operating in a . . . responsible manner” and that it expects its

suppliers “to adopt these same commitments.”

224

It also requires suppliers to be in

full compliance with local laws and regulations, as do all nine other firms in this

section.

225

Graphic Packaging requires suppliers to demonstrate a commitment to

221. GRAPHIC PACKAGING INT’L, 2017 SUSTAINABILITY AND SOCIAL RESPONSIBILITY REPORT,

17 (2017), https://www.graphicpkg.com/documents/2018/12/gpi-sustainability-report-2017.pdf;

ACKAGING CORP. OF AMERICA, PCA 2019 RESPONSIBILITY REPORT, 31 (2019),

https://www.packagingcorp.com/filebin/pdf/PCA_2019_Responsibility_Report.pdf; Sonoco, Sustainable

OOD AND FIBER POLICY, 1 (2020), https://www.sonoco.com/sites/default/files/technical-

files/Sustainability%20Reports%20Page/Sonoco%E2%80%99s%20Sustainable%20Wood%20and%20Fibe

r%20Policy_0720.pdf; D

OMTAR, DOMTAR SUSTAINABILITY REPORT 2019, 14 (Aug. 2019),

https://www.domtar.com/sites/default/files/2019-08/Domtar-Sustainability-Report-2019.pdf.

222. See SFI Standards, F

ORESTS.ORG, https://www.forests.org/standards (last visited June 11,

2021); Our Approach, PEFC.

ORG, https://www.pefc.org/what-we-do/our-approach (last visited June 11,

2021); Forest Management Certification, FSC.

ORG, https://fsc.org/en/forest-management-certification (last

visited June 11, 2021).

223. APASS Combined Referral List, APASS, https://assets.aboutamazon.com/a0/ad/e742c51e482

584453a60009032c2/apass.Combined.Referall.List.5.26.2021.pdf (last visited June 11, 2021); A

MAZON,

Amazon Packaging Support and Supplier Network (APASS), 3–5 (Mar. 3, 2021), https://assets.aboutamazon

.com/a2/b7/83f5d066470d9b02259b6d7e7f18/apass.Combined.Referall.List.3.03.2021.pdf.

224. K

IMBERLY-CLARK, Sustainability Policies, https://www.kimberly-clark.com/en-us/company/su

pplier-link/standards-and-requirements/social-compliance/sustainability-policies (last visited Oct. 9,

2022).

225. K

IMBERLY-CLARK, Stewardship Standards for Suppliers, https://www.kimberly-clark.com/en-

us/company/supplier-link/standards-and-requirements/stewardship (last visited Oct. 9, 2022);

NTERNATIONAL PAPER, Supplier Code of Conduct, 1 (2013), https://www.internationalpaper.com/docs/de

fault-source/english/company/suppliers/supplier-code-of-conduct/supplier-code-of-conduct---united-sta

tes-(en)-previous-version.pdf?sfvrsn=7d58b833_6; G

EORGIA-PACIFIC, Supplier Sustainability Guidelines,

1–3 (2022), https://kochind.scene7.com/is/content/kochind/Sustainability-Supplier-Guidelines;

ESTROCK, supra note 216; GRAPHIC PACKAGING INTERNATIONAL, Global Supplier Code of Conduct, 1

(2020), https://www.graphicpkg.com/documents/2020/01/global-supplier-code-of-conduct-english.pdf/;

VERY DENNISON, Supplier Standards, 3 (May 6, 2020), https://esg.averydennison.com/content/dam/ave

ry_dennison/corporate/global/english/documents/procurement/Supplier_Standards_2020.pdf;

ACKAGING CORP. OF AMERICA, PCA’s Social Responsibility and Sustainability Expectations of our Direct

Suppliers, https://www.packagingcorp.com/supplier-expectations (last updated October 18, 2013);

ONOCO, Sonoco Products Company – Supplier Standards, 1 https://www.sonoco.com/sites/default/files/Son

oco%20Supplier%20Standards_18.pdf (last updated Nov. 29, 2018); D

OMTAR, Code of Business Conduct

and Ethics, 4, 9 (Feb. 2022),

https://www.domtar.com/sites/default/files/2022-02/Code%20of%20Busines

s%20Conduct%20and%20Ethics.pdf;. Bemis was acquired by Amcor in 2019 and abides by its supplier

code of conduct. A

MCOR, Amcor Completes Acquisition of Bemis, Creating the Global Leader in Packaging (June

11, 2019), https://www.amcor.com/media/news/amcor-completes-acquisition-of-bemis; A

MCOR, AMCOR

UPPLIER CODE OF CONDUCT, 1, https://assets.ctfassets.net/f7tuyt85vtoa/6vKfxsmeRisoQumUWIsEQ

w/09eac164d42103e24abb101c431c9037/Amcor-Supplier-Code-of-Conduct.pdf (last visited Oct. 9,

2022).

Fall 2022 Environmental Governance By Contract

preservation of the environment through waste reduction, resource conservation, and

pollution control.

226

Packaging Corporation of America and Sonoco Products both

require quantifiable sustainability goals from their suppliers and that suppliers work

towards those goals.

227

Domtar conducts reviews to verify that the fiber they are

purchasing comes from sustainably managed forests.

228

It also has a policy against

purchasing fiber from genetically modified trees.

229

7. Aluminum Production

In 2007, of the top ten firms in the aluminum production sector only four

produced aluminum as their principal business.

230

These four were Alcoa, Norsk

Hydro, Alcan, and Nippon Light Metal.

231

None of them disclosed the imposition

of environmental requirements on their suppliers.

232

Alcoa split in 2016 into Alcoa

Corp., which is analyzed here, and the smaller Arconic Inc.

233

Alcan was acquired by

Rio Tinto in 2007 and now operates as the subsidiary Rio Tinto Alcan.

234

Norsk

Hydro is now Hydro Aluminum Metals, and Nippon Light Metal continues to exist

under the same name.

235

a. Firm-to-Firm Analysis

Today, Nippon is the only company of the four that does not disclose at

least one environmental supply chain requirement. Alcoa, Rio Tinto Alcan, and

Hydro Aluminum require suppliers to follow all local environmental laws and

regulations.

236

Alcoa also requires suppliers to reduce or eliminate waste and manage

environmental risks.

237

In 2019, it created a Global Supplier Sustainability Program

to oversee the sustainability of its suppliers and act to manage risks and demand

226. GRAPHIC PACKAGING INT’L, supra note 225.

227. P

ACKAGING CORP. OF AMERICA, supra note 225; SUNOCO, supra note 225, at 1.

228. Sustainability Policies, D

OMTAR.COM, https://www.domtar.com/en/resources/sustainability/

sustainability-policies (last visited June 11, 2021).

229. Id.

230. Vandenbergh, supra note 25, at 934.

231. Id.

232. Id.

233. Alcoa Inc. Board of Directors Approves Separation of Company, A

LCOA, (Sept. 29, 2016),

https://news.alcoa.com/press-releases/press-release-details/2016/Alcoa-Inc.-Board-of-Directors-Approve

s-Separation-of-Company/default.aspx.

234. Rio Tinto makes a recommended all cash offer for Alcan, R

IO TINTO ALCAN, (July 12, 2007),

https://www.sec.gov/Archives/edgar/data/4285/000100329707000184/ex992.htm.

235. See supra note 96.

236. A

LCOA, ALCOA SUPPLIER STANDARDS DECEMBER 2020, 3 (2020), https://www.alcoa.com/

global/en/who-we-are/ethics-compliance/pdf/supplier-standards/Supplier_Standards.pdf; R

IO TINTO,

SUPPLIER CODE OF CONDUCT, 2 (2021), https://www.riotinto.com/en/footer/suppliers; HYDRO,

HYDRO SUPPLIER CODE OF CONDUCT, 3, (2020), https://www.hydro.com/globalassets/download-

center/supplier-code-of-conduct/hydro-supplier-code-of-conduct2.pdf.

237. A

LCOA, supra note 236, at 5.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

improvement in supplier sustainability performance.

238

Rio Tinto Alcan states that

it expects suppliers to “continuously improv[e] environmental and resource

management.”

239

Hydro Aluminum requires suppliers to minimize emissions and

waste production and to implement environmentally-friendly processes.

240

Suppliers

are subjected to reviews and audits to evaluate compliance.

241

b. Sector-to-Sector Analysis

Under D&B Hoover’s new classifications, the aluminum production sector

is now most closely approximated by Hoovers’ metal products manufacturing

sector.

242

This sector differs greatly from the former aluminum production sector,

being largely steel- rather than aluminum-dominated. Due to steel and aluminum’s

differing environmental profiles (discussed above in section III.A), the current metal

products manufacturing sector does not provide the same snapshot of aluminum-

focused firms as the old aluminum production sector in the original article’s analysis,

and the sector has been removed from the analysis.

8. Industrial Machinery and Equipment Manufacturing

The final sector analyzed in the 2007 article was industrial machinery and

equipment manufacturing.

243

The top ten firms at the time were United

Technologies, Caterpillar, Mitsubishi Heavy Industries, John Deere, ABB, MAN

Aktiengesellschaft, Komatsu, Illinois Tool Works, CNH Global, and Parker

Hannifin.

244

Of these firms, seven – United Technologies, Mitsubishi Heavy

Industries, John Deere, ABB, MAN Group, Komatsu, and Illinois Tool Works –

publicly disclosed the imposition of environmental requirements on their

suppliers.

245

All ten companies exist today in some form. United Technologies

merged with Raytheon in 2020 to form Raytheon Technologies Corp., and CNH

Global merged with Fiat Industrial in 2013 to become CNH Industrial.

246

238. ALCOA, 2019 SUSTAINABILITY REPORT, 56–58 (2020), https://www.alcoa.com/sustainability

/en/pdf/2019-Sustainability-Report.pdf.

239. R

IO TINTO, supra note 236, at 5.

240. H

YDRO, supra note 236, at 3.

241. Responsible Supply Chain, H

YDRO, https://www.hydro.com/en/sustainability/business-

integrity-and-responsible-sourcing/responsible-supply-chain/ (last visited June 12, 2021).

242. See supra note 96.

243. Vandenbergh, supra note 25, at 935.

244. Id.

245. Id.

246. United Technologies and Raytheon Complete Merger of Equals Transaction, R

AYTHEON

TECHNOLOGIES, (Apr. 3, 2020), https://www.rtx.com/News/2020/04/03/United-Technologies-and-

Raytheon-Complete-Merger-of-Equals-Transaction (last visited Oct. 8, 2022); Our History, CNH

INDUSTRIAL, https://www1.cnhindustrial.com/en-us/know_us/who_we_are/Pages/our_history.aspx

(choose "2013" from timeline below CNH INDUSTRIAL subheader) (last visited June 18, 2020).

Fall 2022 Environmental Governance By Contract

a. Firm-to-Firm Analysis

Today, all ten companies publicly disclose environmental requirements for

their suppliers. Raytheon Technologies not only requires its suppliers to responsibly

source metals but also obligates those suppliers to impose the same obligations on

their suppliers as well.

247

It also requires that suppliers “conduct [their] operations in

a manner that: actively manages risk; conserves natural resources; prevents pollution;

safeguards the environment; and minimizes waste, emissions, and energy

consumption.”

248

Caterpillar requires minimization of water discharges and other

waste, improvement of material and energy efficiency, reduction of greenhouse gas

emissions, and use of co-generation and renewable energy sources.

249

Likewise, ITW

requires reduced waste, energy consumption, and greenhouse gas emissions, as well

as responsible chemical management and the development of more efficient

technologies.

250

CNH has very similar requirements as well.

251

Deere & Co. and

Komatsu restrict or discourage the use of some chemicals by suppliers.

252

Deere & Co., MAN Group, Komatsu, MAN and CNH all recommend ISO

14001 compliant environmental management systems.

253

In addition, Komatsu

requests that suppliers maintain ISO 14001 or Eco-Stage certifications, and Illinois

Tool Works expects that suppliers will attain ISO-14001 standards, whether or not

actual certification is achieved.

254

Nine firms require suppliers to comply with all

local environmental laws and regulations, while Mitsubishi Heavy Industries

247. Documentation on file with author.

248. R

AYTHEON, SUPPLIER CODE OF CONDUCT, 3, https://prd-sc101-cdn.rtx.com/-/media/rtx/s

uppliers/2020-03/files/english.pdf?rev=0f2c7b1a8b924abaa88f24e22a0effb7#:~:text=RTX's%20officers%

2C%20directors%2C%20employees%2C,effectively%2C%20and%20hold%20themselves%20accountable

(last visited June 12, 2021).

249. C

ATERPILLAR, CATERPILLAR’S SUPPLIER CODE OF CONDUCT, 5, https://s7d2.scene7.com/

is/content/Caterpillar/CM20200319-f7958-d691d (last visited June 12, 2021).

250. ITW,

SUPPLIER CODE OF CONDUCT 2 (2021), https://www.itw.com/media/4dgdjo14/itw-

supplier-code-of-conduct.pdf.

251. CNH,

SUPPLIER CODE OF CONDUCT, 3–4 (2021) https://www1.cnhindustrial.com/en-

us/governance/policies_and_guidelines/policies_and_guidelines_documents/supplier/Supplier_Code_of_

Conduct.pdf.

252. DEERE, RESTRICTED MATERIALS LIST FOR JOHN DEERE SUPPLIERS, https://jdsn.deere.co

m/wps/wcm/connect/jdsn/646eb909-6198-447f-903c-f90d24d05f8b/restricted_materials_list_suppliers.p

df?MOD=AJPERES (last visited June 12, 2021); K

OMATSU, ENVIRONMENTAL RISK MANAGEMENT,

https://komatsu.disclosure.site/en/themes/153#anc13 (last visited Oct. 6, 2022).

253. J

OHN DEERE, JOHN DEERE SUPPLIER CODE OF CONDUCT, 3 https://s22.q4cdn.com/25359

4569/files/doc_downloads/code_of_conduct/SupplierCodeofConduct_English.pdf (last visited June 21,

2021); CSR procurement guidelines, K

OMATSU, https://komatsu.disclosure.site/en/themes/189 (last visited

June 12, 2021); CNH, supra note 251 at 3; MAN also accepts other options, such as the European Union’s

EMAS directive. MAN,

MAN CODE OF CONDUCT SUPPLIERS AND BUSINESS PARTNERS, 4,

https://www.man-es.com/docs/default-source/compliance/code-of-conduct-for-suppliers-and-business-

partners.pdf?sfvrsn=83402c3f_46 (MAN also accepts the European Union’s EMAS directive) (last visited

June 12, 2021).

254. K

OMATSU, supra note 252, at § 4; Illinois Tool Works Inc. Supplier Expectations, ITW, 3 (2021),

https://www.itw.com/media/0b5moago/illinois-tool-works-supplier-expectations.pdf.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

requires compliance with local waste disposal laws and requires suppliers to

“minimize environmental impact.”

255

b. Sector-to-Sector Analysis

The most analogous current sector is the construction machinery

manufacturing sector.

256

Of the top ten firms in 2007, only Caterpillar, Deere & Co.,

and Komatsu remain in the top ten.

257

The top ten firms today are STA Services

Techniques, Caterpillar, Deere & Co., Komatsu, Huarun Concrete Co., Liebher-

Intertrading, Dingsheng Tiangong Engineering Machinery Sales, IHI Corp.,

Hitachi Construction Machinery, and Sany Heavy Ind. Co., Ltd.

258

Of these, six,

including Caterpillar, Deere, and Komatsu (discussed above), require environmental

measures from suppliers.

The three firms not discussed in the firm-to-firm comparison are Liebher-

Intertrading, IHI, and Hitachi. All three require compliance with local laws and

regulations.

259

In addition, IHI asks suppliers to minimize environmental impact.

260

Hitachi requires reduction of waste and energy use, as well as requiring

environmental management systems.

261

III. DISCUSSION: THE GROWTH OF ENVIRONMENTAL SUPPLY CHAIN

CONTRACTING

To what extent do the study results address whether supply chain

contracting provisions are sufficiently widespread to have an important impact on

255. RAYTHEON, SUPPLIER CODE OF CONDUCT, 3, https://prd-sc101-cdn.rtx.com/-/media/rtx/s

uppliers/2020-03/files/english.pdf?rev=0f2c7b1a8b924abaa88f24e22a0effb7#:~:text=RTX's%20officers%

2C%20directors%2C%20employees%2C,effectively%2C%20and%20hold%20themselves%20accountable

(last visited June 12, 2021); C

ATERPILLAR, supra note 249, at 5; JOHN DEERE, supra note 253, at 3; ABB,

ABB SUPPLIER CODE OF CONDUCT, 2 (2018) https://new.abb.com/docs/librariesprovider46/scm/abb-

supplier-code-of-conduct_v2_en_2018.pdf?sfvrsn=2#:~:text=As%20a%20supplier%20to%20ABB,%2C%2

0threatening%2C%20abusive%20or%20exploitative; MAN, supra note 253, at 4; K

OMATSU GREEN

PROCUREMENT GUIDELINES, KOMATSU, 2, https://s3-ap-northeast-1.amazonaws.com/sustainability-

cms-komatsu-s3/en/csr/pdf/green_procurement_guideline_e.pdf (last visited June 12, 2021); ITW, supra

note 250, at 3; CNH, supra note 251, at 3; P

ARKER, DISTRIBUTOR CODE OF CONDUCT, 9 (2021),

https://www.parker.com/parkerimages/Parker.com/About%20Us/Literature/Ethics%20and%20Integrity/

Distributor%20Code%20of%20Conduct_EN.pdf; M

ITSUBISHI HEAVY INDUSTRIES, MHI GROUP

SUPPLY CHAIN CSR PROMOTION GUIDELINES, (2018), https://www.mhi.com/company/procurement/c

sr/pdf/guideline.pdf.

256. See supra note 96.

257. Id.

258. Id.

259. L

IERBHERR, LIEBHERR CODE OF CONDUCT, 2, 4, https://www.liebherr.com/shared/media

/corporate/documents/brochures/compliance/code-of-conduct/li_compliance-groupemployees_a4_en.pdf

(last visited June 12, 2021); IHI

GRP., IHI Group Procurement Policy, 2–3 (Dec. 31, 2013),

https://www.ihi.co.jp/var/ezwebin_site/storage/original/application/c51ebfca37f67d71a80e573adedc711c.p

df; H

ITACHI GRP., supra note 202, at 14–18..

260. IHI

GRP., supra note 259, at 3.

261. HITACHI GRP., supra note 202, at 15–19.

Fall 2022 Environmental Governance By Contract

environmental quality? Even if they are sufficiently widespread, do they actually

improve firm environmental performance? Do they displace preferable government

action? The results presented above provide an answer to the first question, and they

hint at the answers to the other two. Part IV addresses these questions in turn.

A. Is Environmental Supply Chain Contracting Sufficiently Widespread to

Yield a Substantial Improvement in Environmental Quality?

The simple answer to the first question is yes. The study results indicate

remarkably wide use of environmental supply chain contracting and provide insights

into overall trends within sectors. As discussed above, a direct apples-to-apples

comparison to the firms included in the original New Wal-Mart study was not

possible due to changes in sector designations as well as mergers and acquisitions,

bankruptcies, and changes in business lines over the intervening period. The results

regarding the firm-to-firm, sector-by-sector, and overall frequency of environmental

supply chain contracting produce a comparable assessment, however, and the results

show widespread use and growth of supply chain contracting across all three

measures.

Firm-to-Firm. The first New Wal-Mart Effect study reviewed 74

companies, and it found that 41 (55 percent) imposed environmental requirements

on their suppliers.

262

Just over a decade later, as to the 74 firms reviewed in the first

study, 69 of these firms still existed in a comparable form at the time of the current

study, and 60 (85 percent) utilize environmental requirements in supply chain

contracting.

Sector-to-Sector. To conduct a sector-to-sector comparison of all firms in the

comparable sectors then and at the time of the current study, regardless of whether

the firms were included in the first study, the firms in the eight sectors included in

the original study were compared to the firms in the seven most analogous sectors.

The eight sectors included in the original study were selected to provide a broad

overview of sectoral types and included business-to-consumer sectors (B-to-C, such

as discount and variety retail) and business-to-business sectors (B-to-B, such as

industrial machinery and equipment manufacturing), and the seven sectors included

in the current study include analogous representatives from B-to-C and B-to-B

sectors. The results by sector are summarized in Table 1.

262. Although the study attempted to review the top ten firms in eight sectors, six of the firms in

the aluminum production sector were not engaged principally in aluminum production activities and were

excluded. See, Vandenbergh, supra note 25, at 934.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

Table 1. Percent of Sector Disclosing Environmental Contracting, Original vs.

Current Study

Sector Original

Study

Sector Current

Study

Discount/Variety Retail 50% Department Stores

Grocery Stores

100%

90%

Home Improvement/

Hardware Retail

40% Hardware/Home and

Garden Retail

60%

Automobile

Manufacturing

50% Motor Vehicle

Manufacturing

100%

Personal Computers 70% Computer and

Peripheral Equipment

Manufacturing

80%

Lumber and Wood

Production

70% Lumber and Wood

Production

100%

Industrial Machinery

and Equipment

Manufacturing

70% Construction

Machinery

Manufacturing

60%

Office Products

Retail/Distribution

20% Office Products Retail/

Distribution

n/a

Aluminum Production 0% Aluminum Production n/a

These results are consistent with the firm-to-firm analysis. They suggest

widespread use of environmental supply chain contracting, with at least half of the

firms in all seven sectors disclosing supply chain contracting, and among all 70 firms

in the seven sectors, a total of 59 of the firms (84 percent) disclosing supply chain

contracting. In three sectors, all firms now engage in environmental supply chain

contracting. In all but one sector supply chain contracting is more common now than

it was in the original study, and the decline in the one sector (construction machinery

manufacturing) was only by one firm.

All Firms. As a final check to ensure that the increase in observed supply

chain contracting reflects actual growth rather than differences in methodology

between the two studies, the second study also compared all firms included in the

first study to all firms included in the second study. The second study analyzed more

companies than the first study because it re-examined those firms included in the

first study with the same business lines, and it studied firms in the seven most

comparable sectors. In some of those sectors, new firms emerged over the intervening

period as among the ten largest or were included because of small differences in the

sector definitions. In total, the second study analyzed 113 firms as compared to the

Fall 2022 Environmental Governance By Contract

74 included in the first study. As to all 113 firms included in the second study, 93 (82

percent) disclosed the use of environmental supply chain requirements for suppliers.

Table 2 presents the combined results of the study. The firm-to-firm

comparisons include 69 companies, while the sector-to-sector includes 70. Twenty-

six firms that are analyzed in the firm-to-firm comparison also appear in the sector-

to-sector analysis, as they are still among the top ten earners in their categories. The

remaining 44 firms are new to the top ten list in their sectors. Of the 69 companies

in the firm-to-firm analysis, 60 (or 85%) disclose use of environmental supply chain

contracting requirements. Of the 44 firms which appear only in the sector-to-sector

analysis in the current study, 33 (or 75%) impose one or more environmental

requirement on suppliers. Of the 70 firms in all seven sectors included in the current

study, a total of 59 (84%) impose one or more environmental requirements on

suppliers. In total, 93 out of the 113 companies (82%) contain at least one

environmental requirement in their supply agreements.

Table 2. Results by Firm, Sector, and Total

Firm Category Firms Number of Firms

w/Environmental

Requirements

Percent of Firms

w/Environmental

Requirements

Firm-to-Firm 69 60 87

Sector-to-Sector

(newly added firms in

current study)

44 33 75

Sector-to-Sector

(all firms in current

study)

70 59 84

All Firms in Study 113 93 82

Limitations. The results of the study are not based on a representative

sample of sectors. The included sectors are sufficiently broad and sufficiently

economically and environmentally important, however, to provide an indication

about the level of activity regarding environmental supply chain contracting even if

they are not representative of all U.S. or global sectors. It is also possible that some

of the firm disclosures and media accounts about environmental supply chain

contracting activity are inaccurate. Although this is possible, there is a greater risk

about the level of enforcement of environmental supply chain requirements than

about the existence of the requirements, given that the existence of requirements is

often easily verifiable, and in many cases multiple sources confirmed the information

included in the study. In addition, although there is no claim of statistical

significance, the results are sufficiently robust to speak for themselves: the percentage

of firms that disclose environmental supply chain contracting requirements in these

Michigan Journal of Environmental & Administrative Law Vol. 12:1

sectors is so high that even if some firms were erroneously included or excluded,

environmental contracting appears to be very widespread and growing. Finally, it is

also possible that changes in the sector categories and the firms in each sector have

affected the results, but the fact that three perspectives on the data produced

comparable results suggests that this is not a serious concern.

In short, a consistent conclusion emerges: the percentage of firms that

disclose that they engage in environmental supply chain contracting has increased

from roughly 50% to roughly 80% over the last fifteen years. Environmental supply

chain contracting is sufficiently widespread to produce important environmental

benefits if these contracts are improving firm environmental performance and are

not undermining more effective public governance.

B. Is Environmental Supply Chain Contracting Likely to Improve Firm

Environmental Performance?

Although the study demonstrates that environmental supply chain

contracting requirements are remarkably widespread, it does not address the effects

of this supply chain contracting on the buyers or their supply chains, and it is possible

that despite being widely deployed, environmental supply chain contracting

requirements are not affecting corporate environmental behavior or performance.

The percentage of firms engaging in environmental supply chain contracting is so

high, however, that even if they are inducing only small improvements in

environmental performance, the results are likely to be important for climate change

mitigation and other environmental issues. The potential for effects on

environmental performance can be inferred from the provisions included in the

contracts, the ways that contracting requirements can affect behavior, the

motivations of the parties involved, and the existing research on the environmental

behavior and performance of suppliers.

Criteria. At the outset, it is important to distinguish among the three criteria

used to assess environmental success: environmental behavior, environmental

performance, and environmental conditions. Positive firm environmental behavior

changes could include changes in a wide range of activities, such as adoption of an

environmental management system, adding an environmental health and safety

manager or chief sustainability officer, adopting new pollution control measures,

banning the use of toxic chemicals in products or in the production of products by

suppliers, or compliance with government or supplier environmental requirements.

Many firm environmental behavior changes are likely to result in improved

environmental performance, but they may not.

In contrast, firm environmental performance refers to the environmentally

significant effects of changes in firm behavior. An example might be reduced

greenhouse gases in air emissions or reduced discharges of pollutants in wastewater.

Of course, ultimately the most important consideration involves improvements in

environmental conditions, not in the environmental performance of firms, such as

Fall 2022 Environmental Governance By Contract

reductions in atmospheric carbon concentrations or the amount of toxic chemicals in

fish. Measurement of environmental performance and environmental conditions is

difficult, however, and often scholars and policymakers default to measuring

environmental behavior.

263

This analysis focuses on the environmental performance

of firms, which is more meaningful for environmental protection than environmental

behavior and easier to measure than environmental conditions.

Types of Provisions. The study did not attempt to identify all the provisions

used by the firms that engage in environmental supply chain contracting, but it did

reveal a range of provisions in procurement policies or specific contracts, many of

which are likely to affect environmental performance if implemented. These include

requirements to comply with government environmental laws, to disclose carbon,

toxics, or other pollutant emissions, to achieve a level of environmental performance

(a requirement to meet an environmental standard even if not required by

government environmental laws), and to adopt an environmental management

system (EMS).

264

In some cases the provisions commit the seller to take specific

actions, such as to report carbon emissions to the seller and to reduce them by a

specific amount. In others they are much more general or only require the seller to

“review” the buyer’s environmental policies. In some cases, the information produced

through the contracting is required to be made available to third parties, but in many

cases it is not. If the buyer is motivated to enforce these provisions, either through

legal action or by opting not to trade with the seller in the future, many of these

provisions provide sufficient requirements to result in important environmental

behavior change and improved performance by the buyer. The buyer and the seller

may both want the terms to create the impression about environmental concerns but

not want to bear the costs, however, and they could do this through very vague or

unenforceable provisions or through provisions that are clear and stringent but

unenforced. For most environmental supply chain contracting, the motivations of

the buyer are likely to determine whether these provisions change the behavior or

performance of suppliers.

Capacity for Monitoring and Enforcement. Even if supply chain environmental

requirements are stringent and focus on important pollutants or actions, they may

have little effect on firm environmental performance if the seller does not perceive

that compliance with environmental requirements is linked to a meaningful

likelihood of detection and substantial sanctions or rewards, whether via formal legal

enforcement or economic or social norm effects. Two aspects of modern supply chain

contracting suggest that the risks of monitoring are growing for many suppliers.

263. See Michael P. Vandenbergh, Beyond Elegance: A Testable Typology of Social Norms in Corporate

Environmental Compliance, 22 S

TAN. ENVTL. L.J. 55, 92–93 & nn.116–17 (2003) (explaining that the “link

between particular reductions in noncompliance rates or in pollutants emitted and changes in human

health and environmental quality is poorly understood in some cases” due in part to difficulty and cost).

264. See Vandenbergh, supra note 25, at 936 (noting

“the frequencies of several provisions: (1)

environmental performance (a requirement to meet an environmental standard even if not required by

host country environmental laws); (2) law compliance (a requirement to comply with host country

environmental laws); and (3) a requirement to adopt an EMS

”).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

Monitoring is difficult for many types of environmental requirements, but with the

growth of the Internet information is much more easily acquired now and transmitted

to those with the preferences for environmental protection and the ability to use their

market power to create pressure for improvements. Monitoring risks for sellers also

are affected by the extensive auditing systems that many large firms use to inspect

suppliers. For instance, Walmart performed approximately 14,000 audits of supplier

facilities in 2022

265

and Nike performed 561 audits of supplier factories in 2020,

although the extent to which these monitors are focused on environmental issues as

opposed to labor, human rights and other requirements is unclear.

266

The demand

for monitoring of supply chain requirements is sufficiently great to have spawned a

new compliance assurance sector in many accounting and management firms, but

more research is needed on the environmental aspects of this sector.

267

Motivations of Key Participants. The effects of environmental supply chain

contracting likely turn more on the motivations of the parties than on the specific

terms of contracts or the availability of monitoring mechanisms and legal remedies.

As discussed above, corporate buyers have strong internal economic incentives to

reduce supply chain costs by forcing suppliers to reduce energy use and other sources

of pollution.

Large institutional investment firms are another source of motivations to

monitor and enforce environmental supply chain contract requirements. These

investment firms now manage large, diversified portfolios that create incentives to

pressure the firms they invest in to reduce carbon emissions, and multiple examples

in the last several years demonstrate that after decades of not even voting the shares

they own, they are beginning to push for boards of directors that will focus on carbon

emissions reductions and to support shareholder resolutions on climate change and

other environmental issues.

268

Major lenders and insurance companies have adopted

similar policies. The motivations for reducing climate change and other society-wide

risks are sufficiently strong to generate a major new NGO, the Shareholder

Commons, which is developing a set of global guardrails. The guardrails will form a

set of global private ESG standards that large investors will require major companies

to follow, and if they include supply chain contracting requirements the guardrails

could affect suppliers as well.

269

Starting with economic, not altruistic, motivations,

large segments of the financial industry thus have shifted from a passive to an active

role on ESG issues. The goal of social and environmental success that large financial

institutions need for financial success cannot be achieved without transferring these

265. WALMART, INC., ENVIRONMENTAL, SOCIAL, AND GOVERNANCE SUMMARY REPORT

FY2022 34 (2022).

266. NIKE

INC., BREAKING BARRIERS: FY2020 NIKE INC. IMPACT REPORT 29 (2020).

267. See, generally, Reiner Quick & Sanjar Sayer, The Impact of Assurance on Compliance Management

Systems on Bank Director’s Decisions, 25 I

NT’L J. OF AUDITING 3 (Oct. 25, 2020).

268. See Barzuza et al., supra note 77, at 1272–75.

269. The Shareholder Commons, F

REDERICK ALEXANDER (last visited Jan. 31, 2022),

https://frederickalexander.net/the-shareholder-commons/.

Fall 2022 Environmental Governance By Contract

ESG goals from the largest, publicly traded companies to millions of small and

medium-sized businesses around the world, and this transfer is likely to occur

through supply chain contracting.

270

In addition, in the last two decades preferences for environmental

protection and climate mitigation have increased in the U.S. and many areas around

the world. These majorities are often insufficient to produce adequate government

action, but technology has made expressing these preferences in the marketplace

much easier. Retail consumers and investors, employees, managers, and local

community members are all important players in the potential for supply chain

contracts to be enforced through legal or social means. Research demonstrates that

retail consumer responses to environmental information are mixed, but some types

of labeling and other information affect consumer behavior, and concerns about

consumer behavior in turn influence corporate behavior.

271

In the current study, the

three sectors with all firms disclosing environmental supply chain contracting are all

consumer-facing firms.

272

Carbon labeling efforts are increasing, and they not only

can affect consumer behavior but also induce firms to find efficiencies and reduce

carbon emissions even absent consumer behavior change.

273

Finally, employee recruitment and retention are also increasingly important

drivers of firm behavior on climate and other ESG issues. Organizations such as

Climate Voice have organized employees and have pushed not only for changes in

firm environmental behavior but also changes in how firms lobby governments,

which often conflicts with stated ESG goals.

274

Empirical Research on Supply Chain Contracting Effects. Empirical research is

beginning to shed light on the effects of sustainability or environmental supply chain

requirements on the environmental behavior of firms. Early studies indicated that

the costs of supply chain sustainability initiatives may undermine their effects, but

recent meta-analyses have identified positive associations between supply chain

sustainability commitments and firm performance.

275

In some cases, early

270. Potential efficiencies combined with investor, insurer, lender, and employee pressure may be

important drivers. These firms also may be attempting to anticipate future government requirements or

raise rivals’ costs. See Tim Kraft & Yanchong Zheng, How Supply Chain Transparency Boosts Business Value,

MIT

SLOAN MGMT. REV. 34–35 (Sep. 8, 2021), https://sloanreview.mit.edu/article/how-supply-chain-

transparency-boosts-business-value/

271. See Taufique et al., supra note 26, at 132 (discussing literature on consumer responses to

product environmental information).

272. As in 2007, in sectors with only some firms engaging in public disclosure of environmental

supply chain requirements, those who required some level of compliance tended to be the larger firms in

the sector. The exception to this general rule is the Construction Machinery Manufacturing Sector. Most

notably, STA Services Techniques, the largest company in the sector, does not publicly disclose whether

it imposes environmental requirements on suppliers. This could be due to the business-to-business nature

of the sector, although thirteen of the seventeen companies analyzed did impose requirements on

suppliers.

273. Taufique et al., supra note 26, at 7-8.

274. About Us, C

LIMATEVOICE, https://climatevoice.org/about/ (last visited Oct. 12, 2022).

275. See Kannan Govindan et al., Supply Chain Sustainability and the Performance of Firms: A Meta-

Analysis of the Literature, 137 T

RANSP. RSCH. PART E: LOGISTICS & TRANSP. REV. 101923 (May 2020);

Michigan Journal of Environmental & Administrative Law Vol. 12:1

investigations were less than promising; for instance, a 2010 study of Chinese

electronics firms found that although managers were concerned about environmental

impacts, a wide range of factors drove the sustainability-related decisions of

companies in the supply chain.

276

As sustainability costs have decreased, however, and benefits associated

with improved environmental performance have increased over the past decade,

firms have grown more willing to engage in sustainable supply chain contracting. A

meta-analysis of over 100 papers, including 27 empirical surveys conducted in a

variety of sectors including textiles, automobiles, food, and electronics, found

overwhelmingly positive associations between firm performance and the adoption of

supply chain sustainability programs.

277

Another study, conducted in 2021, found

that companies that used green supply chain management practices benefitted from

a buffer effect during COVID-19 market disruptions.

278

Although research results

differ about whether these effects are limited to a specific type of environmental

supply chain management, with the best results coming from “agile” as opposed to

“traditional” construction of sustainable supply chains,

279

the overall lesson from the

empirical research published in the last five years is that positive outcomes are linked

to environmental supply chain contracting.

In sum, although environmental supply chain contracting has not been

demonstrated to improve firm environmental performance, it is likely to have a

positive effect. Many of the environmental provisions, if enforced, are of a type that

are likely to affect suppliers’ environmental behavior. Monitoring and enforcement

are hard to gauge, but as information is increasingly available, many parties have

motivations to ensure that supply chain contract requirements are enforced, and there

are initial indications in the literature of an association between environmental

supply chain contracting and improved environmental performance.

C. Is Environmental Supply Chain Contracting Likely to Reduce the

Likelihood of Preferable Government Action?

Although environmental supply chain contracting is widespread and the

prospects for improvement in supplier environmental behavior are encouraging, the

Dayal Prasad et al., Critical Success Factors of Sustainable Supply Chain Management and Organizational

Performance: An Exploratory Study, 48 T

RANSPORTATION RESEARCH PROCEDIA 327 (2020).

276. Jason Park et al., Creating Integrated Business and Environmental Value Within the Context of

China’s Circular Economy and Ecological Modernization, 18 J.

CLEAN. PROD. 1494, 1495 (2010) (emphasizing

the importance of multiple drivers of sustainable supply chain action, including “achiev[ing] both firm-

and industrial-level value in terms of cost reduction, revenue generation, resiliency, and legitimacy”).

277. See Govindan et al., supra note 276, at 137.

278. Marco Fasan et al., An Empirical Analysis: Did Green Supply Chain Management Alleviate the

Effects of COVID-19, 30 B

US. STRATEGY & THE ENVIRO. 2702, 2703 (Mar. 2021).

279. Ricardo Zimmerman et al., An Empirical Analysis of the Relationship between Supply Chain

Strategies, Product Characteristics, and Environmental Uncertainty and Performance, 25 S

UPPLY CHAIN

MGMT. 275, 386–86 (2020).

Fall 2022 Environmental Governance By Contract

growth of this private governance model raises three related questions when

compared with traditional public governance: first, is private governance as effective

as public governance in enforcing desired behaviors; second, does the growth of

private governance displace public governance; third, is private governance able to

adequately address concerns about environmental justice and equality, at least when

compared to public governance? The remainder of this section suggests approaches

to answering the first two questions. The third question – the effect of environmental

supply chain contracting on disadvantaged and disempowered communities across

the globe – requires a much fuller discussion than can be adequately provided in this

article.

Standard of Review. Identifying the appropriate standard of review for

assessing the implications of environmental supply chain contracting is essential for

evaluating whether scholars and policymakers should be encouraging or discouraging

its use. The proper standard for NGOs, policymakers, and environmental governance

scholars is whether the use of environmental requirements improves corporate

environmental performance in ways that are preferable to other viable options. In

other words, the appropriate question is not whether environmental supply chain

contracting is an ideal response, but whether it is better than feasible alternatives.

This may sound simple, but it includes several important easily-overlooked aspects.

Reviewers may be inclined to ask whether environmental provisions in supply chain

contracts achieve full compliance or solve the environmental problems that they

address,

280

which Nobel laureate Elinor Ostrom called the Panacea Bias, but these

questions misconstrue the potential contribution of supply chain contracting to

environmental protection.

Achieving Comparable Levels of Compliance. High levels of compliance are

important indicators of potential environmental benefits by suppliers, but

compliance levels should be compared to levels that would be achieved under feasible

government regulations, not to ideal levels. Measured levels of material compliance

with environmental statutes vary widely, but the leading study concluded that they

were in the range of 75%.

281

Anecdotal examples of failures that occurred despite the

existence of supply chain contracts are common in the literature. The most famous

failure is the tragic Rana Towers disaster, in which over 1,100 workers lost their lives

in a building collapse.

282

This disaster occurred despite the fact that many of the

workers were producing goods for suppliers to major companies with labor-focused

supply chain contracting requirements. Anecdotal examples are not a sound basis for

280. See Sudheer Gupta & Omkar D. Palsule-Desai, Sustainable Supply Chain Management: Review

and Research Opportunities, 23 IIMB

MGMT. REV. 234, 241–42 (2011).

281. Wesley A. Magat & W. Kip Viscusi, Effectiveness of the EPA’s Regulatory Enforcement: The Case

of Industrial Effluent Standards, 33 J.

L. & ECON. 331, 357 (Oct. 1990).

282. A search for the term “Rana Plaza” in Westlaw on January 27, 2022, yielded over 23,000

articles and a search in Google Scholar yielded more than 29,000 articles. Westlaw,

https://1.next.westlaw.com/, (search in search bar for “Rana Plaza”) (last visited Oct. 12, 2022); Google

Scholar, https://scholar.google.com/scholar?hl=en&as_sdt=0%2C23&q=Rana+Plaza&btnG= (search in

search bar for “Rana Plaza”) (last visited Oct. 12, 2022).

Michigan Journal of Environmental & Administrative Law Vol. 12:1

evaluating any public or private governance effort, however. Anecdotes tell us that a

failure occurred in a particular situation, and in the Rana Towers case the failure was

catastrophic. They do not tell us whether these failures are widespread or whether a

government requirement would have been adopted and better enforced in the

absence of the supply chain contract requirements.

283

Potential to Displace Beneficial Government Action. The next consideration is

whether environmentally beneficial aspects of environmental supply chain

contracting are outweighed by displacement of more beneficial governmental action.

Displacement could occur if a viable government option exists but the environmental

supply chain contracting discourages government action. For instance, if information

about environmental supply chain contracting discourages development of viable

government measures, it could be harmful on net. This could occur if the information

reduces support among voters or the advocacy groups that mobilize them. It also

could occur if it increases resistance by companies to public governance. These are

plausible concerns and the assumption that this is a genuine risk appears to underlie

many critiques of private environmental governance initiatives such as supply chain

contracting requirements.

284

But this is an empirical question, and there is little or no evidence that the

growth in environmental supply chain contracting requirements reduces support

among voters or advocacy groups. In fact, the most relevant empirical study on this

topic concludes that focusing on private sector climate change mitigation activities

can bypass solution aversion by moderates and conservatives and increase support

for climate mitigation.

285

As discussed in Part I, in the U.S. mobilization of

moderates and some conservatives is necessary because the primary system combined

with polarization now undermines the ability of support from liberals, moderates,

and moderate-conservatives to be reflected in electoral or regulatory outcomes.

286

In addition, advocacy groups such as CDP, the Environmental Defense

Fund, and the Natural Resources Defense Council have become leaders in pushing

firms to adopt supply chain requirements.

287

They could become co-opted if personal

283. As discussed above, levels of compliance by suppliers are only a rough surrogate for changes

in environmental performance. A high level of compliance with a weak or misdirected standard is often of

little value.

284. See Cary Coglianese, Environmental Soft Law as a Governance Strategy, 61 J

URIMETRICS 19, 51

(2020).

285. Ash Gillis et al., Convincing Conservatives: Private Sector Action Can Bolster Support for Climate

Change Mitigation in the United States, 73 E

NERGY RESEARCH & SOCIAL SCIENCE 101947 (2021).

286. See supra note 41 and accompanying text.

287. See CDP, T

RANSPARENCY TO TRANSFORMATION: A CHAIN REACTION, (Feb. 2021)

https://cdn.cdp.net/cdp-production/cms/reports/documents/000/005/554/original/CDP_SC_Report_202

0.pdf?161416076; About, EDF S

UPPLY CHAIN SOLUTIONS CENTER https://supplychain.edf.org/about/

(last visited Jan. 10, 2022) (describing EDF’s Supply Chain Solutions Center as a “digital hub for

sustainability resources, best practices, thought leadership and news”); Sustainable Development: Green

Supply Chain, N

ATURAL RESOURCES DEFENSE COUNCIL (last visited Jan. 10, 2022)

http://www.nrdc.cn/work?cid=25&cook=1; Natural Resource Defense Council, NRDC’s Green Supply

Chain Initiative to Clean Up the Fashion Industry, C

LEAN BY DESIGN (May 2015)

https://www.nrdc.org/sites/default/files/cbd-initiative-fs.pdf.

Fall 2022 Environmental Governance By Contract

or financial relationships undermine their willingness to pursue government

regulation or litigation against corporations. Similarly, if the funds they use on

supply chain contracting could otherwise be used for government lobbying or

litigation, that could reduce the funds available for lobbying governments or

litigating. Again, this is a legitimate concern, but the obverse also could occur – these

efforts could attract new levels of funding and generate insights that NGOs could

use in government or litigation initiatives. The NGO displacement critique at this

point lacks empirical support. In short, to have a beneficial effect, environmental

supply chain contracting does not need to yield perfect compliance or completely

solve environmental problems, but it must produce greater net environmental gains

than other viable alternatives, and it cannot displace those other alternatives.

CONCLUSION

This Article demonstrates that roughly 80 percent of the largest

corporations in seven global sectors are engaging in environmental supply chain

contracting. This supply chain contracting is not only very widespread but also

growing: the share of these firms that include environmental requirements in supply

chain contracts has increased from roughly 50 percent fifteen years ago. The research

results are consistent with anecdotal observations about the growth of ESG

commitments by corporations, private sector activity on climate change, and the

emergence of supply chain initiatives by major global environmental NGOs. When

combined with other recent research, these results suggest that many large firms are

not simply making climate and other ESG commitments regarding their own

operations without the means to induce their supply chains to improve their

behavior.

The study did not directly examine the effects that procurement

requirements are having on the environmental behavior of firms or on environmental

quality. The growth in environmental contracting, the contract terms used, the

increasing availability of environmental information, and the motivations of change

agents including NGOs, retail customers, investors, lenders, insurers, employees, and

local communities, however, all suggest reasons for optimism. With the limited

progress by international, national, and subnational governments on climate change

and other environmental issues in the last several years, major gaps exist in public

governance. Private responses are not a panacea, but the Article demonstrates that

global contracting networks are emerging that have the potential to fill important

gaps in public environmental governance.

Appendix A

The left-hand column lists the original companies used in “The New Wal-

Mart Effect: The Role of Private Contracting in Global Governance.”

288

The column

288. Vandenbergh, supra note 25.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

on the right lists the recommended companies for a side-by-side comparison of

contracting policies between 2007 and 2020. Footnotes indicate any major

reorganizations and account for the sometimes wholly different company name in

the second column. If the company name has changed significantly but is not

footnoted, the company has simply changed its name without reorganizing. Mergers

and reorganizations that did not change the way the study was catalogued in the Dun

and Bradstreet database were not accounted for in the study and are therefore not

reflected here.

289

Original Company Current Company

Discount and Variety Retail

Wal-Mart Stores, Inc. Walmart, Inc.

The Kroger Co. The Kroger Co.

290

Costco Wholesale Corp. Costco Wholesale Corp.

Target Corp. Target Corp.

Walgreen Co. Walgreen Co.

291

Albertsons Albertsons Cos., Inc.

Safeway Safeway, Inc.

292

CVS Corp. CVS Pharmacy, Inc.

293

Ahold Ahold Delhaize USA, Inc.

294

289. See supra note 96.

290. Purchased Axium Pharmacy Holdings in 2012. Kroger Announces Merger with Axium Pharmacy,

NEWSWIRE, Nov. 15, 2012, https://www.prnewswire.com/news-releases/kroger-announces-merger-

with-axium-pharmacy-179486181.html..

291. Now U.S. subsidiary of Walgreens Boots Alliance following 2014 merger of Walgreen and

Boots. Ellen J. Hearst, Walgreen-Alliance Boots deal is complete, C

HICAGO TRIBUNE (Dec. 31, 2014),

https://www.chicagotribune.com/business/ct-walgreen-completes-merger-0101-biz-20141231-story.html.

292. Sold its Canada Safeway division to Sobeys in 2013. Marina Strauss & Steve Ladurantaye,

Sobeys snaps up Safeway in western push, T

HE GLOBE AND MAIL (June 12, 2013),

https://www.theglobeandmail.com/report-on-business/sobeys-to-buy-safeway-in-58-billion-deal/article1

2499648/.

293. Acquired AETNA in 2019. DealBook Briefing: Is U.S. Ready to Rein in Big Tech? N.Y.

TIMES

(Sept. 9, 2019), https://www.nytimes.com/2019/09/05/business/dealbook/tech-youtube-

pfine.html?searchResultPosition=8.

294. Koninklijke Ahold, N.V., merged with Delhaize Group in 2016 to become Ahold Delhaize.

Jon Springer, Ahold, Delhaize Deal to Close This Month, S

UPERMARKET NEWS (July 12, 2016),

https://www.supermarketnews.com/ahold-delhaize-merger/ahold-delhaize-deal-close-month.

Fall 2022 Environmental Governance By Contract

Loblaw Cos., Ltd. Loblaw Cos., Ltd.

295

Home Improvement and Hardware Retail

Home Depot The Home Depot, Inc.

Lowe’s Lowe’s Cos., Inc.

296

Wolseley Ferguson, PLC

297

CCA Global Partners CCA Global Partners, Inc.

Menard Menard, Inc.

Sherwin-Williams The Sherwin-Williams Co.

298

Stock Building Supply BMC Stock Holdings, Inc.

299

84 Lumber 84 Lumber Co.

Ace Hardware Ace Hardware Corp.

300

Do It Best Do It Best Corp.

Office Products Retail and Distribution

Staples Staples, Inc.

301

Office Depot Office Depot, Inc.

302

295. Acquired T&T Supermarket in 2009. Marina Strauss, Loblaw buys Asian grocery chain, THE

GLOBE AND MAIL (July 24, 2009), https://www.theglobeandmail.com/globe-investor/loblaw-buys-asian-

grocery-chain/article4389458/.

296. Acquired ATG Stores in 2010. Chris Burritt, Lowe’s Acquires ATG Stores to Boost Sales From

Websites, B

LOOMBERG (Dec. 29, 2011), https://www.bloomberg.com/news/articles/2011-12-29/lowe-s-

acquires-atg-stores-to-increase-revenue-from-websites.

297. Wolseley, PLC changed its name to Ferguson, PLC in 2017, but retained the brand name

Wolseley in its Canadian and U.K. incarnations. Sam Dean, Wolseley to Rebrand as Ferguson as it Departs

from Scandinavia, T

HE TELEGRAPH (Mar. 28, 2017), https://www.telegraph.co.uk/business/2017/03/28/

wolseley-rebrand-ferguson-departs-nordic-region; Esha Vaish, Wolseley to change name to U.S. brand

Ferguson, reflecting regional focus, R

EUTERS (Mar. 28, 2007), https://www.reuters.com/article/us-wolseley-

results/wolseley-to-change-name-to-u-s-brand-ferguson-reflecting-regional-focus-idUSKBN16Z0LV.

298. Made a number of acquisitions from 2010-2013. See, e.g., S

HERWIN-WILLIAMS, 2012 ANNUAL

REPORT 51-52 (2013), https://www.sec.gov/Archives/edgar/vprr/1300/13000788.pdf.

299. Stock Building Supply merged with BMC in 2015. BMC, BMC History,

https://www.buildwithbmc.com/bmc/s/bmc-history (last visited June 16, 2020).

300. International division reorganized into its own company, Ace Hardware International

Holdings (Ace is still the majority shareholder). Sold its paint manufacturing division to Valspar in 2012..

Ace Hardware Opens First Store Under New Franchise Model in Mexico, PR

NEWSWIRE (Dec. 1, 2021),

https://www.prnewswire.com/news-releases/ace-hardware-opens-first-store-under-new-franchise-model-

in-mexico-301434296.html; Valspar Inks Supply Deal with Ace Paint, P

AINTSQUARE (Jan. 4, 2013),

https://www.paintsquare.com/news/view/?8938.

301, Acquired by Sycamore Partners in 2017. Lauren Hirsch, Staples in $6.9 billion sale to private

equity firm Sycamore, R

EUTERS (June 28, 2017), https://www.reuters.com/article/us-staples-m-a-

sycamorepartners/staples-in-6-9-billion-sale-to-private-equity-firm-sycamore-idUSKBN19J2QH.

302. Sold Office Depot Israel stores to New Hamashbir Lazarchan in 2010. Shira Horesh,

Hamashbir signs Office Depot Israel acquisition, G

LOBES (Nov. 7, 2010), https://en.globes.co.il/en/article-

1000599341.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

Office Max - removed -

303

Unisource Veritiv Corp.

304

IKON - removed -

305

United Stationers Essendant, Inc.

306

Corporate Express Corporate Express US Finance, Inc.

307

S.P. Richards S.P. Richards Co.

School Specialty School Specialty, Inc.

Global Imaging Systems Global Imaging Systems, Inc.

308

Automobile Manufacturing

General Motors General Motors Co.

DaimlerChrysler Daimler AG

309

Toyota Toyota Motor Corp.

Ford Ford Motor Co.

Volkswagen Volkswagen AG

Nissan Nissan Motor Co., Ltd.

Honda Honda Motor Co., Ltd.

303. Office Max is now a subsidiary of Office Depot, and not listed independently on D&B

Hoovers. Dhanya Skariachan, Office Depot Closes Deal to Buy OfficeMax, R

EUTERS (Nov. 5, 2013),

https://www.reuters.com/article/us-officedepot-officemax-results/office-depot-closes-deal-to-buy-office

max-idUSBRE9A418720131105.

304. Established in 2014 from merger of Unisource and International Paper’s xpedx division. See

Michael Sheffield, Merged xpedx and Unisource company will be Veritiv, MEMPHIS BUS. J. (Jun. 11, 2014),

https://www.bizjournals.com/memphis/news/2014/06/11/merged-xpedx-and-unisource-company-will-be-

veritiv.html.

305. IKON Office Solutions is now a subsidiary of Ricoh Co., Ltd., and not listed independently

on D&B Hoovers. S&P Summary: Ricoh Co. Ltd., R

EUTERS (Mar. 29, 2012),

https://www.reuters.com/article/idUSWLA550620120329.

306. United Stationers changed its name to Essendant in 2015 and was acquired by Staples in 2019.

Our Company History, E

SSENDANT, https://www.essendant.com/about-us/our-history (last visited June 17,

2020); see Eric Beech, U.S. FTC Approves Staples’ Acquisition of Essendant with Conditions, R

EUTERS (Jan.

28, 2019), https://www.reuters.com/article/us-essendant-staples-m-a-ftc/u-s-ftc-approves-staples-

acquisition-of-essendant-with-conditions-idUSKCN1PM2NF.

307. Acquired by Staples in 2008. See Foo Yun Chee, Staples Wins Corporate Express in $2.65 Bln

Deal, REUTERS (June 11, 2008), https://www.reuters.com/article/us-corporateexpress/staples-wins-

corporate-express-in-2-65-bln-deal-idUSL1141489020080611.

308. Purchased by Xerox in 2007. See Kenneth Li, Xerox to buy Global Imaging Systems for $1.5 bln,

EUTERS (Apr. 2, 2007), https://www.reuters.com/article/us-globalimaging-xerox/xerox-to-buy-global-

imaging-systems-for-1-5-bln-idUSN0239279620070402.

309. DaimlerChrysler sold Chrysler in 2007 and rebranded. Name change to Daimler AG, D

AIMLER

AG, https://www.daimler.com/company/tradition/company-history/1995-2007.html (last visited June 17,

2020).310. Hewlett-Packard split into Hewlett-Packard Enterprise and HP, Inc. in 2015. HP, Inc. is the

printer and PC half of the business. Hewlett-Packard Revenue Falls in Last Report Before Split, R

EUTERS

(Nov. 24, 2015), https://www.reuters.com/article/hp-results/hewlett-packard-revenue-falls-in-last-report-

before-split-idUSL3N13J4L520151124.

Fall 2022 Environmental Governance By Contract

Peugeot Peugeot Citroen Sochaux SNC

Fiat Fiat Chrysler Automobiles N.V.

Renault Renault SAS

Personal Computers

Hewlett-Packard HP, Inc.

310

Sony Sony Corp.

311

Dell Dell Tech., Inc.

Toshiba Toshiba Corp.

NEC NEC Corp.

Apple Computer Apple, Inc.

312

Acer Acer, Inc.

313

Fujitsu Siemens Computers Fujitsu Technology Solutions

GmbH

314

Gateway - removed -

315

Lenovo Group Lenovo Group, Ltd.

Lumber and Wood Production

310. Hewlett-Packard split into Hewlett-Packard Enterprise and HP, Inc. in 2015. HP, Inc. is the

printer and PC half of the business. Hewlett-Packard Revenue Falls in Last Report Before Split, R

EUTERS

(Nov. 24, 2015), https://www.reuters.com/article/hp-results/hewlett-packard-revenue-falls-in-last-report-

before-split-idUSL3N13J4L520151124.

311. Sold Sony Manufacturing Systems, its measuring equipment business, to Mori Seiki in 2010.

Mori Seiki and Sony Sign Definitive Agreement Regarding Transfer of SMS Measuring Systems Business, S

ONY

(Jan. 8, 2010), https://www.sony.com/en/SonyInfo/News/Press/201001/10-0108E/. Acquired remaining

50% stake in subsidiary Sony Ericsson in 2012 and renamed it Sony Mobile Communications. Sony

completes takeover of Sony Ericsson, renames it Sony Mobile, L.A.

TIMES (Feb. 12, 2012),

https://www.latimes.com/business/la-xpm-2012-feb-16-la-fi-tn-sony-takeover-of-sony-ericsson-complete

-20120216-story.html.

312. Purchased P.A. Semi in 2008 and Intrinsity in 2010. Bryan Gardiner, Four Reasons Apple Bought

PA Semi, W

IRED (Apr. 23, 2008), https://www.wired.com/2008/04/four-reasons-ap/; Ashlee Vance &

Brad Stone, Apple Buys Intrinsity, a Maker of Fast Chips, N.Y.

TIMES (Apr. 27, 2010),

https://www.nytimes.com/2010/04/28/technology/28apple.html.

313. Sold Sertek (electronic components distribution subsidiary) and acquired Gateway in 2007.

Acquired E-TEN in 2008. Yosun acquires an Acer distribution unit, R

EUTERS (Mar. 28, 2007),

https://www.reuters.com/article/acer-yosun/update-1-yosun-acquires-an-acer-distribution-unit-idUSTP1

9046320070328; see Dan Nystedt, Acer to acquire smart-phone maker E-Ten, C

OMPUTERWORLD (Mar. 3,

2008), https://www.computerworld.com/article/2537320/acer-to-acquire-smart-phone-maker-e-ten.html.

314. Fujitsu Ltd. bought out Siemens in 2009, renaming company Fujitsu Technology Solutions

GmbH. Fujitsu to Acquire Siemens's Stake in Fujitsu Siemens Computers, F

UJITSU (Nov. 4, 2008),

https://www.fujitsu.com/global/about/resources/news/press-releases/2008/1104-01.html; Fujitsu

Technology Solutions GmbH, B

LOOMBERG https://www.bloomberg.com/profile/company/7575612Z:GR?le

adSource=uverify%20wall (last visited Oct. 11, 2022).

315. Gateway is now owned by Acer and no longer independently listed in Hoovers. See supra note

96.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

International Paper International Paper Co,

316

Georgia-Pacific Georgia-Pacific, LLC

317

Weyerhaeuser Weyerhaeuser Co.

318

Office Max - removed -

319

MeadWestvaco WestRock

320

Bowater Resolute Forest Products, Inc.

321

Louisiana-Pacific Louisiana-Pacific Corp.

Universal Forest Products Universal Forest Products, Inc.

Potlatch Potlatchdeltic Corp.

322

Sweetheart - removed -

323

Aluminum Production

Alcoa Alcoa Corp.

324

316. Acquired Temple-Inland in 2012. Michael Sheffield, International Paper completes Temple-

Inland deal, M

EMPHIS BUS. J. (Feb. 13, 2012), https://www.bizjournals.com/memphis/news/2012/02/13/i

nternational-paper-completes.html.

317. Sold its European tissue business in 2012. EU approves SCA's acquisition of Georgia-Pacific's

European tissue business, G

LOBENEWSWIRE (July 05, 2012), https://www.globenewswire.com/news-

release/2012/07/05/269942/0/en/EU-approves-SCA-s-acquisition-of-Georgia-Pacific-s-European-tissue-

business.html.

318. Merged its fine paper operations with Domtar in 2007. Weyerhaeuser to Combine Fine Paper,

Papergrade Pulp, Related Assets with Domtar; Creates Largest North American Fine Paper Company,

PRN

EWSWIRE-FIRSTCALL (Aug. 23, 2006), https://investor.weyerhaeuser.com/2006-08-23-Weyerhaeu

ser-to-Combine-Fine-Paper-Papergrade-Pulp-Related-Assets-With-Domtar-Creates-Largest-North-

American-Fine-Paper-Company.

319. See supra note 161.

320. MeadWestvaco merged with Rock-Tenn Co. in 2015 to form WestRock. Arno Schuetze, U.S.

Packaging Group Westrock Puts Dispensers Unit Up For Sale, R

EUTERS (Nov. 18, 2016),

https://www.reuters.com/article/us-westrock-divestment/u-s-packaging-group-westrock-puts-dispensers-

unit-up-for-sale-sources-idUSKBN13D1ZS.

321. Merged with Abitibi-Consolidated in 2007 to become AbitibiBowater, then changed its name

to Resolute Forest Products after emerging from bankruptcy in 2011. Bowater completes merger with Abitibi,

HARLOTTE BUS. J. (Oct. 29, 2007), https://www.bizjournals.com/charlotte/stories/2007/10/29/daily3.h

tml; AbitibiBowater Changing Name to Resolute Forest Products, PRN

EWSWIRE-FIRSTCALL (Oct. 11, 2011),

https://www.prnewswire.com/news-releases/abitibibowater-changing-name-to-resolute-forest-products-

131508313.html.

322. Merged with Deltic Timber Co. in 2018, becoming Potlatchdeltic Corp. History, P

OTLATCH,

https://www.potlatchdeltic.com/Page/ViewPage/12 (last visited Oct. 3, 2022).

323. Parent Solo Cup was acquired by Dart Container, primarily a rubber and plastic products

manufacturer, in 2012. Solo History, D

ART, https://www.dartcontainer.com/about-us/solo-history/ (last

visited Feb. 1, 2022).

324. Alcoa Corp. is the larger of two companies formed by the 2016 split of Alcoa Inc. Alcoa

Separates into Two Independent Companies: Alcoa and Arconic, A

LCOA,

https://www.alcoa.com/global/en/who-we-are/history (expand the “In the Last 5 Years” header) (last

visited Oct. 4, 2022); compare Alcoa Corporation Reports Fourth Quarter and Full Year 2021 Results,

Alcoa (Jan. 19, 2022), https://investors.alcoa.com/news-releases/news-release-details/2022/Alcoa-

Corporation-Reports-Fourth-Quarter-and-Full-Year-2021-Results/default.aspx (revenue of $12.2 billion

in 2021) with Arconic Reports Fourth Quarter 2021 and Full Year 2021 Results, A

RCONIC (Feb. 18, 2022),

Fall 2022 Environmental Governance By Contract

Alcan Rio Tinto Alcan, Inc.

325

Hydro Aluminum Hydro Aluminum Metals USA, LLC

Nippon Light Metal Nippon Light Metal Co., Ltd.

Industrial Machinery and Equipment Manufacturing

United Technologies Raytheon Technologies Corp.

326

Caterpillar Caterpillar, Inc.

Mitsubishi Heavy Industries Mitsubishi Heavy Industries, Ltd.

John Deere Deere & Co.

ABB ABB Ltd.

MAN Group MAN SE

Komatsu Komatsu Ltd.

Illinois Tool Works Illinois Tool Works, Inc.

CNH Global CNH Industrial, NV

327

Parker Hannifin Parker-Hannifin Corp.

Appendix B

The chart below shows the original sectors with the top ten companies as

identified in 2007,

328

as well as the 2020 sector that is most similar to the former

sector. The top ten companies in the left-hand column were included in the original

study based on U.S. sales, or global sales if U.S. sales were unavailable. Where sales

data were unavailable, the original study used the “key companies” listed in the

industry description in Hoovers. The right-hand columns contain the current sectors

identified as most similar to the 2007 sectors, based on the number of companies

present in both the 2007 and current sectors. Although this was relatively clear in

most instances, as discussed in Part III the firms in the original discount and variety

retail sector were split roughly equally between department stores and grocery stores.

https://www.arconic.com/financial-release/2022-02-18/arconic-reports-fourth-quarter-2021-and-full-

year-2021-results/ (revenue of $7.5 billion in 2021).

325. Acquired by Rio Tinto in 2007 and is now a subsidiary. Rio Tinto to buy Alcan for $38.1 billion,

N.Y.

TIMES (July 12, 2007), https://www.nytimes.com/2007/07/12/business/worldbusiness/12iht-

rio.4.6634247.html.

326. Formed in 2020 from merger between United Technologies and Raytheon. United Technologies

and Raytheon Complete Merger of Equals Transaction, R

AYTHEON TECH. (Apr. 3, 2020),

https://www.rtx.com/news/2020/04/03/united-technologies-and-raytheon-complete-merger-of-equals-

transaction.

327. Formed in 2013 from merger of CNH Global N.V. and Fiat Industrial. Our History, CNH

INDUSTRIAL, https://www1.cnhindustrial.com/en-us/know_us/who_we_are/Pages/our_history.aspx

(select “2013” in timeline) (last visited Oct. 20, 2022).

328. With the exception of the aluminum sector, for which only four companies were identified as

having aluminum as their principal business. See Vandenbergh, supra note 25, at 934.

Michigan Journal of Environmental & Administrative Law Vol. 12:1

In addition, an attempt to analogize office products retail and distribution to the

current paper wholesale category provided an unsatisfactory comparison, as shown

in the chart below. Similarly, the closest approximation to the original aluminum

production sector is the metal products manufacturing sector, but this sector is

dominated by steel rather than aluminum production. These two metals have very

different environmental impacts, making the comparison unsuitable for assessing

comparable uses of and motivations for environmental supply chain contracting, so

this sector was also removed from the sector-to-sector analysis.

Original Sector Current Sector

329

Discount and Variety

Retail

Department Stores Grocery Stores

Wal-Mart Stores, Inc. Walmart, Inc. The Kroger Co.

The Kroger Co. Costco Wholesale Corp. Albertsons Cos, Inc.

Costco Wholesale Corp. Target Corp. Publix Super Markets,

Inc.

Target Corp. The TJX Cos., Inc. Ahold Delhaize

Walgreen Co. Dollar General Corp. H.E. Butt Grocery Co.

Albertsons Macy’s, Inc. Target Stores, Inc.

Safeway Dollar Tree, Inc. Whole Foods Market, Inc.

CVS Corp. Kohl’s Corp. Safeway, Inc.

Ahold BJ’s Wholesale Club

Holdings

Supervalu, Inc.

Loblaw Cos., Ltd. J.C. Penney Co., Inc. Southeastern Grocers

Home Improvement and Hardware

Retail

Home and Garden Retail

Home Depot The Home Depot, Inc.

Lowe’s Lowe’s Cos., Inc.

Wolseley Menard, Inc.

CCA Global Partners Volt Parent, LP

Menard Fortive Corp.

Sherwin-Williams Ace Hardware Corp.

Stock Building Supply Snap-On Inc.

84 Lumber Fred Meyer Stores, Inc.

Ace Hardware UfpWarrens, LLC

Do It Best LBM Borrower. LLC

329. See supra note 96.

Fall 2022 Environmental Governance By Contract

Office Products Retail and

Distribution

Paper Wholesale

Staples Staples, Inc.

Office Depot Hallmark Cards, Inc.

Office Max Veritiv Corp.

Unisource Pactiv LLC

IKON Uline, Inc.

United Stationers Essendant, Inc.

Corporate Express Central National Gottesman, Inc.

S.P. Richards McLane Foodservice Dist., Inc.

School Specialty The Havi Group Ltd. Partnership

Global Imaging Systems S.P. Richards, Co.

Automobile Manufacturing Motor Vehicle Manufacturing

General Motors Volkswagen Aktiengesellschaft

DaimlerChrysler Toyota Motor Corp.

Toyota Ford Motor Co.

Ford General Motors, Co.

Volkswagen Honda Motor Co., Ltd.

Nissan SAIC Motor Corp., Ltd.

Honda Nissan Motor Co., Ltd.

Peugeot FCA Venezuela L.L.C.

Fiat PSA Automobiles, SA

Renault Audi Aktiengesellschaft

Personal Computers Computer and Peripheral Equip. Mfg.

Hewlett-Packard Dell Tech, Inc.

Sony Hitachi, Ltd.

Dell HP, Inc.

Toshiba Cisco Sys., Inc.

NEC Denali Intermediate, Inc.

Apple Computer Toshiba Corp.

Acer EMC Corp.

Fujitsu Siemens Computers Canon, Inc.

Gateway Cloud Network Tech. Singapore PTE Ltd.

Lenovo Group Wistron Corp.

Lumber and Wood Production

Michigan Journal of Environmental & Administrative Law Vol. 12:1

International Paper International Paper Co.

Georgia-Pacific Georgia-Pacific, LLC

Weyerhaeuser WestRock Co.

Office Max Kimberly-Clark Corp.

MeadWestvaco Graphic Packaging Intl., LLC

Bowater Avery Dennison Corp.

Louisiana-Pacific Packaging Corp. of America

Universal Forest Products Sonoco Products, Co.

Potlatch Domtar Corp.

Sweetheart Bemis Co., Inc.

Aluminum Production Metal Products Manufacturing

Alcoa New Arts & Gems FZCO

Alcan CVG Industria Venezolana de Aluminio CA

Hydro Aluminum Dominguez & Cia La Victoria, S.A.

Nippon Light Metal Nippon Steel Corp.

Siderurgica Zuliana, C.A.

Baoshan Iron & Steel Co., Ltd.

Alambres y Cables Venezolanos C.A.

Jiangxi Copper Co., Ltd.

Pdsva Industrial S.A.

POSCO

Industrial Machinery and

Equipment Mfg.

Construction Machinery Manufacturing

United Technologies STA Services Technicques Alpins SA

Caterpillar Caterpillar

Mitsubishi Heavy Industries Deere & Co.

John Deere Komatsu Ltd.

ABB Huarun Concrete (Longyan) Co., Ltd.

MAN Group Liebherr-Intertrading AG

Komatsu Dingsheng Tiangong Engineering Mach.

Sales, Co., Ltd.

Illinois Tool Works IHI Corp.

CNH Global Hitachi Construction Machinery, Co. Ltd.

Parker Hannifin Sany Heavy Ind. Co., Ltd.