The notion of corporate success lies at the heart of directors’ duties in many corporate laws. Freedom of incorporation conferred considerable discretion on companies to determine the nature of their success and create financial value for their investors, subject to conforming with laws and regulation. However, this increasingly came into conflict with the interests of other stakeholders, in particular employees, supply chains, the environment and societies, and addressing the problem through specific regulatory rules proved inadequate to the task. This raises questions about the nature of the financial incentives that drive and resource corporate activities, namely profits, and the need to align these with the role of business in solving not creating problems for others. In the absence of such an alignment then markets fail and competition can intensify rather diminish the failures. There are three aspects to addressing the problem. The first is the use of corporate law to require companies to consider the interests of stakeholders other than their shareholders. This is already a feature of many corporate laws. The second is corporate governance codes that promote corporate purposes of profiting from solving not causing problems for others. This too is already a feature of some countries’ corporate governance arrangements. The third is the adoption of international standards and firm specific measures of performance that promote accounting and reporting on corporate social and environmental benefits and detriments. These are in the process of being established but need to be more closely related to accounting for specific firm measures of performance that ensure profits derive from solving not creating problems for others.

This introductory chapter sets out the book’s key findings, methodology and structure. It also introduces the principal questions the book seeks to address. How have agents, operating at national, international and transnational levels, attempted to institutionalise the norm of corporate accountability for human rights violations linked to transnational corporate activity? What do these initiatives reveal about the nature of transnational legalisation, and how legalisation should be framed or conceptualised in the twenty-first century? Finally, could a revised framework of legalisation help explain when transnational litigation and soft law initiatives are more likely to succeed in the future?

Some of the most decisive battles over the responsibilities of transnational corporations (TNCs) have been fought in domestic courtrooms – often far from where the alleged abuses occurred. The United States has hosted a substantial proportion of such cases against TNCs, supported by a legal framework that historically provided several plaintiff-friendly avenues. However, the landscape has become more challenging following the Supreme Court’s decisions in Kiobel v. Royal Dutch Petroleum Co. and Daimler AG v. Bauman. In Canada, the absence of an ATS-equivalent and the application of the doctrine of forum non conveniens have limited opportunities for litigation. However, recent decisions suggest more cases may flow to Canada in the future. In the United Kingdom, developments in the law relating to parent company liability have been particularly significant. In Across continental Europe, barriers such as limited access to class actions, prosecutorial discretion, and weak disclosure obligations continue to constrain transnational human rights litigation.

Critics of environmental, social, and governance (ESG) investment have argued that business managers should be concerned with maximizing profits rather than getting involved in politics. Defenders of ESG have responded by arguing that investors are free to put their money wherever they like, and so ESG investment practices represent an ordinary exercise of commercial freedom. This simple response glosses over an important complication, which is that the relationship between investors and business managers is mediated by a set of agency relationships, between investors and fund managers, and between fund managers and corporate boards. These agency relations are not completely open-ended but rather are subject to constraints. A question arises about whether any of the political demands associated with ESG investment practices exceed the proper limits of these agency relationships. This chapter assesses this question in order to determine whether ESG leads agents to violate any duties arising from their relations to principals.

Firms operating in environmentally vulnerable contexts will inevitably face difficult cases where long-term profits clash with environmental values. This remains true even with enlightened management and strong regulation. Yet, business models fail to acknowledge this inconvenient truth. This chapter explains why current business models reach an "outer boundary" in their ability to incorporate intrinsic values such as environmental integrity. It introduces two key concepts: the efficiency model and the value gap. Efficiency models use terminology designed either to optimize the allocation of scarce resources toward measurable future goals or to explain the optimal achievement of past goals. A value gap arises when ideal social corporate action diverges from ideally efficient corporate action. The presence of large, recurring value gaps in extractive industries signals the need for fundamental changes – both in corporate decision-making and in the business models that shape it.

Today many have predicted the death of environmental, social, and governance (ESG). Alas, even amidst such predictions, there remains considerable confusion about ESG’s meaning. Some view ESG as synonymous with corporate social responsibility or stakeholderism, others view ESG as a mechanism for assessing risks; some characterize ESG as political, others view ESG as inextricably aligned with business goals. The lack of consensus around ESG’s meaning makes assessing its demise complex. On the one hand, any future version of ESG will be incompatible with alternative – and strongly held – conceptions of ESG, confirming predictions of ESG’s demise while ensuring that ESG’s future will be plagued by controversy and discontent. Nonetheless, there is a version of ESG that is both sustainable because it focuses on economic risks and opportunities, and also beneficial because it may move the needle on improving shareholder value while positively impacting critical social issues.

This chapter explores processes of legalisation in the context of multi-stakeholder initiatives (MSIs) in extractive industries. It analyses three major regimes: the Kimberley Process Certification Scheme (KPCS), launched in 2002 to curb the trade in conflict diamonds; the Extractive Industries Transparency Initiative (EITI), a global standard promoting accountability in natural resource governance; and the Voluntary Principles on Security and Human Rights (VPs), adopted in 2000 to address abuses by private security forces protecting corporate assets. These initiatives display a distinctive focus on implementation. Participants may receive substantial guidance and support to assist with compliance. State and non-state actors contribute to the production of guidelines, toolkits and performance indicators designed to assist corporations in rule implementation on the ground and in specific contexts. When violations occur, members may support the offending party in implementing reforms before resorting to sanctions.

This chapter analyses efforts within the United Nations to develop legal and normative frameworks for transnational corporations (TNCs) and human rights, beginning in the 1970s. It first considers the UN Code of Conduct for Transnational Corporations and explains why this initiative failed to materialise despite many years of negotiation. It then examines the Global Compact, which reflects emerging trends in legalisation through its emphasis on implementation, participation by non-state actors, and reliance on consensus-building and norm promotion. The chapter next reviews the rise and fall of the Draft Norms, before turning to the development of the UN Guiding Principles on Business and Human Rights. This section highlights the innovative nature of Ruggie’s constructivist approach to generating new legal and social norms. A new treaty process, initiated in 2014, remains ongoing and suggests that traditional legalisation strategies continue to retain relevance in certain contexts.

The book examines the various arenas in which actors are making – and breaking – the rules in business and human rights. It advances a framework for analysing these developments by adapting the liberal institutionalist concept of legalisation articulated in Kenneth Abbott et al.’s article ‘The Concept of Legalization’. Applied in the transnational context, the classic framework appears incomplete: it omits a crucial dimension – implementation – which operates alongside obligation, precision and delegation. The empirical chapters in this book reveal that efforts toward implementation are often pursued with the aim of strengthening one or more of the other dimensions over time. In such cases, actors play the long game: they may accept lower levels of obligation, precision or delegation in the short term, anticipating that early attention to implementation will enhance these dimensions in the longer run. Beyond business and human rights, this revised framework may also illuminate regulatory dynamics in transnational fields such as climate governance, national security, and anti-trafficking.

This chapter argues that fundamental problems limit ESG’s potential benefits for society and can be traced back to ESG’s initial conceptualization in the early 2000s in the advent of the United Nation’s Global Compact initiative. ESG from the very beginning has been built, on the one hand, on the premise of promoting institutional investors’ interests at the expense of critical stakeholders’ concerns and, on the other hand, on quite idealistic assumptions about the proper functioning of markets and states. Drawing from the theory of deliberative democracy, this chapter develops suggestions of how ESG could become more beneficial to people and planet by making the ESG investing system, understood as an organized set of actors and procedures, more inclusive, argumentative, and consequential with a view on societal rather than investors’ benefits. The chapter proposes that incorporating deliberation in the governance structure of rating agencies specifically is one way to do so.

The incorporation of environmental, social, and governance (ESG) criteria into corporate strategies has become a prominent feature of the modern business landscape. As part of this movement, there is an increasing trend toward the monetary valuation of sustainability impacts. While the intention behind assigning monetary values to ESG-related impacts may be to provide a quantifiable basis for decision-making, it raises profound ethical concerns. This chapter explores the ethical dilemmas surrounding the monetary valuation of sustainability impacts, especially within the broader context of ESG performance measurement, in three problem dimensions: (1) the commodification of life and nature, (2) unequal power dynamics and neocolonial features of ESG and valuation, and (3) the marginalization of unquantifiable impacts and intrinsic values. The chapter ends by exploring the moral hazards that come with ignoring these ethical problems, and how corporate responsibility and accountability mechanisms can take these into account.

Unlike previous approaches to sustainable investing, focused primarily on excluding companies from problematic sectors such as tobacco, the aim of environmental, social, and governance (ESG) integration is to incorporate the assessment of ESG characteristics within mainstream investment analysis. This aim has given rise to claims that ESG integration is not about value judgments but focuses only on neutral risk–return calculations. Against such framing, this chapter argue that various ethical concerns inevitably arise when considering the quantification process underlying the generation of data used in ESG integration approaches. Drawing on the literature related to quantification and commensuration, the chapter identifies four areas in which ethical concerns can arise: (1) the strong focus on financial materiality; (2) the aggregation of disparate and often incommensurable ESG data; (3) ESG measurement problems; and (4) the treatment of ESG data as a private good. The chapter shows how quantification processes in these four areas give cause for ethical concerns related to which aspects of sustainability are rendered visible or invisible; how power relations between different field actors are structured by quantification; and which organizations have access to the opportunities that prevailing processes of quantification afford.

This chapter surveys the international legal framework governing transnational corporations (TNCs) and human rights. It begins with a brief history of the corporation, traces the rise of transnational corporate power since the 1970s, and offers a definition of the TNC. It then outlines the various ways in which corporate activities can adversely affect human rights, drawing on some of the most notorious incidents of recent decades. The chapter highlights the persistent difficulty of regulating corporations at the international level and describes the current regime under which states bear primary responsibility for preventing and remedying human rights abuses within their territories, including those committed by businesses. Since 2010, several states have introduced modern slavery legislation requiring companies to conduct due diligence on their operations and supply chains.