Principle 4: Fair Payment & Contract Terms

Contents

Commit to fair contracts and timely payments that strengthen financial stability and resilience across your supply chain. 

Overview of Principle 4: Fair Payment & Contract Terms 

Fair and transparent contract terms are a key part of responsible business. They should work for everyone involved, protecting all parties and making sure no one is left carrying an unfair share of the burden.

Principle 4 focuses on setting up and honouring contract and payment terms in a way that supports — rather than undermines — suppliers’ financial stability and ability to uphold labour rights.

This includes:  

  • Transparent and inclusive contract negotiation.
  • Acknowledging mutual responsibilities within contracts.
  • Short payment terms.
  • Paying suppliers in full and on time.
  • Ensuring any penalties are limited, fair, monitored and evidenced, and consider root causes.
  • Multi-party agreements, where appropriate.
  • Compensating suppliers when your practices incur additional costs.

Read Principle 4 of the Common Framework