The burgeoning field of corporate law, corporate governance and sustainability is one of the most dynamic and significant areas of law and policy in light of the convergence of crises that we as a global society face. These include the environmental emergencies ultimately threatening humanity’s existence, notably climate change and catastrophic biodiversity loss; the undermining of the economic bases for functioning societies, combined with rising inequality, leading to populism and unrest; and the lack of resilience and resulting instability of our financial systems, making new financial collapses more likely. As our new Cambridge Handbook explores in considerable depth, corporate law and corporate governance figure centrally in each of these forms of crisis, and accordingly must figure centrally in their resolution. Understanding the impact of the corporation on society and realizing its potential for contributing to sustainability is vital for the future of humanity.
In the corporate law and corporate governance literature, where environmental, social and economic sustainability issues have only begun to make inroads, the approach has tended be at most one of discussing the ‘business case’ for sustainability—that is, for internalising environmental and social impacts in corporate decision-making, but only to the degree that this has a positive effect on long-term financial performance. This resonates with the mainstream approach in economics, which implicitly assumes that financial value can be maximised using natural resources without the setting of any ecological limits. Such an approach effectively represents one of ‘weak sustainability’.
The approach of our Handbook may, by contrast, be denoted a ‘strong’ sustainability approach. However, we emphasise that the concept of ‘strong’ sustainability simply means actual sustainability. Accordingly, real corporate sustainability must ultimately involve corporate legal and governance structures promoting practices that contribute to and, at a minimum, do not undermine society’s potential for achieving the overarching goal of sustainability.
We understand sustainability as a state where the needs of the present generation are met ‘while safeguarding Earth’s life-support system, on which the welfare of current and future generations depends’ (Griggs et al). Accordingly, we take as our starting point the natural sciences concept of ‘planetary boundaries’ within which all human activity must be positioned to ensure a safe operating space for humanity (Rockström et al). Planetary boundaries are not static, hard limits; rather they are continuous work-in-progress precautionary boundaries for which there is a strong consensus among the scientific community (Steffen et al). Further, our understanding of sustainability is informed by recognition of the importance of protecting human rights and securing the fulfilment of fundamental social needs, acknowledging the economic and societal risks that pervasive inequality, globally and within countries, poses. In light of the foregoing, the grand challenge of sustainability is how to secure the social foundation for humanity everywhere, now and in the future, while remaining within planetary boundaries (Leach et al).
Corporate law and corporate governance concern the regulation of the most impactful units in our economies, and grappling with the challenges they present is therefore necessary to achieving sustainability. The idea that law and policy can be compartmentalized, with environmental issues left to environmental law, labour issues left to labour law, and so on, while imagining that the result will somehow become a consistent whole, is outdated and has proven unworkable in practice. In addition to the rampant problem with lack of legal compliance within national borders, the international and fragmented nature of business further challenges this assumption. The size, complexity and power of modern corporations highlight the fallacy of the silo approach to law and policy. Simply put, corporations can easily structure their businesses to evade a given jurisdiction’s regulatory power.
The issues faced in the field of corporate law, corporate governance and sustainability are global by nature, and the Handbook accordingly presents significant developments in this dynamic area around the world to capture different perspectives and innovations. This includes innovations that occur outside of the mainstream and commercially predominant jurisdictions, which themselves have often reinforced pathologies that compromise sustainability. The Handbook provides a global review of sustainability-oriented initiatives pursued through corporate law and corporate governance that is, we believe, more comprehensive in its coverage and rigorous in its analytical framework than prior efforts in this field. Notably, it includes scores of contributors, jurisdictions, and subjects from every inhabited continent, addressing myriad issues and regulatory responses in a wide range of environmental, social, and economic settings.
We define corporate sustainability as business and finance contributing to the overarching aim of securing the social foundation for people everywhere, now and in the future, while remaining within planetary boundaries. More specifically, this involves business and finance creating value in a manner that is (a) environmentally sustainable, in that it ensures the long-term stability and resilience of the ecosystems that support human life; (b) socially sustainable, in that it facilitates the achievement of human rights and other basic social rights, as well as good governance; and (c) economically sustainable, in that it satisfies the economic needs necessary for stable and resilient societies.
Through this lens, the Handbook grapples with a number of pressing questions about corporate law, corporate governance, and the sustainability of resulting modes of corporate production around the world.
- How does the growing mismatch between global markets and territorially rooted national regulation affect the sustainability of corporate production and potential regulatory responses?
- How do shareholder-orientation generally, and widespread commitment to shareholder wealth maximization in particular, affect capacity to achieve corporate sustainability?
- How do trends in the organization of corporate firms, commercial markets, and financial systems affect capacity to achieve corporate sustainability?
- What innovations in corporate law and governance have these challenges prompted, and how effective can we expect them to be in achieving corporate sustainability?
- In light of the foregoing, where is further research required?
The Handbook addresses these questions, marshalling analyses and insights from numerous scholars around the world and reflecting on the potential for the necessary changes in corporate law and governance to meet the grand challenge of our time. The burgeoning field of corporate law, corporate governance and sustainability represents a critically important terrain for scholarly inquiry and public attention around the world. It is our hope that this Handbook will advance scholarship in the area, inform policymakers, and contribute toward the development of models that can truly sustain the environmental, social, and economic ecosystems on which we all depend.
Beate Sjåfjell is Professor of Law at the University of Oslo, Faculty of Law, and Adjunct Professor at the Norwegian University of Science and Technology, Faculty of Economics.
Christopher M. Bruner is the Stembler Family Distinguished Professor in Business Law at the University of Georgia School of Law.