What happens when sustainability concerns clash with the company’s bottom line? On paper, various systems should deter unsustainable behavior: fear of liability (legal sanctions), diminished business opportunities (reputational sanctions), or guilty feelings (moral sanctions). Yet, in reality, companies do not take these legal, reputational, and moral sanctions as given. They rather count on their ability to dilute the expected sanctions. Companies reduce the probability of being caught by controlling the information environment and creating plausible deniability. They are often the ones dictating the public perception of whether they behaved sustainably or not. Companies can also dilute the sanction that is imposed once they are caught, by capturing the regulators, and reducing the guilt associated with immoral behavior. Recognizing that all systems of control can be gamed opens up space for rethinking policy implications, such as designing the legal system in ways that balance the non-legal systems’ areas of malleability.

This book tells the story of how we moved from a world in which there was no way for regulators or investors to grasp the risks that rogue financial institutions were taking abroad to one in which international processes govern the most important rules under which financial institutions of any size operate. It is a tale about the creation and evolution of a new form of global governance – the regulatory network – that has provided detailed, organized, and binding governance without adhering to the traditional mechanisms of international or administrative law. International financial regulation works like an administrative agency stretched onto a global multilateral context.

The chapter examines the merits of current and proposed EU regulation in the area of corporate sustainability with a particular emphasis on corporate groups. It provides an overview of the EU approach to corporate sustainability and its perception of sustainability as a legal concept, and then considers the importance of corporate groups in the global market and the inherent challenge of regulating cross-border activity. Building on a heterogeneous perception of groups, the chapter examines the current state of EU sustainability initiatives for corporate groups, and considers the extent to which the EU has managed to harness its influence to steer corporate groups onto a sustainable pathway.

This chapter explores sustainability reporting regimes in six African countries representing sub-regions of the continent – Egypt, Equatorial Guinea, Kenya, Nigeria, Botswana and South Africa. It reveals that Africa is catching up on sustainability reporting as each jurisdiction is found to have a sustainability reporting regime with an identified regulatory model(s). However, the conflicting nature of sustainability reporting standards calls for a broader reform strategy or policy harmonisation. It thus argues that the African Peer Review Mechanism, Regional Economic Communities, and new African Continental Free Trade Area present opportunities for sustainability reporting policy harmonisation in Africa. It is further argued that African regimes should jettison self-regulatory sustainability reporting models and opt for sanctions-based models or hybrid models combining mandatory and voluntary approaches. It observes, however, that the future of sustainability reporting in Africa lies in integrated reporting with its impact not just on corporate performance but also on strong sustainability.

The German system of company law and corporate governance is often referred to as a ‘stakeholder value system’ which places it in opposition to Anglo-American ‘shareholder value systems’. This characterisation suggests more scope for the promotion of corporate sustainability. This chapter analyses to what extent key aspects of German company law and corporate governance constitute barriers and create opportunities for sustainable development. These include the question in whose interest German public limited companies (Aktiengesellschaften) are run, the co-determined supervisory board in the two-tier board system, the fact that the executive remuneration structure should be aimed at the ‘company’s sustainable development’, shareholder rights and mandatory nonfinancial information disclosure. It is argued that there is, contrary to the prevailing perception, little scope in German company law and corporate governance for the promotion of the social and environmental dimensions of sustainable development.

This chapter describes important elements of the corporate governance system in Russia, such as the structure of stock ownership, the basic laws and regulations. Special attention is given to related-party transactions, the use of foreign law and the new Corporate Governance Code. The chapter summarizes the empirical literature on the relation between corporate governance and corporate sustainability in emerging markets and provides evidence on measures of corporate sustainability and the quality of corporate governance in Russia. It is argued that the weakness of civil society and independent media effectively limits the demand for corporate sustainability. This demand is therefore potentially represented only by the government, which in turn faces a conflict of interest as the regulator and as a shareholder of large companies, in particular in the oil and gas sector.

Despite various international initiatives and soft/hard law reforms over the last two decades, concerns abound as the extent to which the sustainability agenda has become embedded in emerging economies. This chapter focuses on Mauritius, specifically the emergence of a sustainability discourse as part of corporate governance reforms, the enactment of a national sustainable development agenda, and the implementation of the first corporate social responsibility legislation in the world, requiring companies to finance related projects. Our empirical analysis, primarily focused on corporate settings, and informed by the country’s socio-economic and political contexts, reveals wide variation in corporate engagement and the advent of a form of state control over the execution of projects. Overall, our implications seek to identify lessons for other emerging economies, particularly in terms of state-level attempts to mandate corporate social responsibility.

The international emergence of alternative corporate forms and certifications has given credence to a new strain of law developing within the corporate sustainability movement, known as social enterprise law. What are some of the trade-offs that accompany such laws? Upon canvassing the development of social enterprise lawmaking initiatives worldwide, two preliminary observations arise. First, the majority of social enterprise laws, particularly in Europe and Asia, are designed to address the targeted needs of special and/or marginalized populations. The miniscule number of these businesses formed to date suggests that concerns over the shrinking of public goods and services remain largely theoretical. Second, U.S. benefit corporation laws may only strengthen erroneous beliefs on existing corporate law and governance – thus creating impediments to broad-scale sustainability change. The aggressive pursuit of a global market by private U.S. entrepreneurs behind the B Corporation certification and benefit corporation laws contrasts starkly with state-led initiatives.

Women have become increasingly central to initiatives aimed at achieving sustainable development and changing corporate practice. Global gender empowerment projects have allowed corporations to expand into new markets, while increasing the number of female leaders is thought to bring business advantages. These initiatives reveal a preoccupation with offering women more opportunities to participate in shareholder-centric corporate life but fail to address the real reason for women’s exclusion and subordination within companies: deep-seated structural barriers and biases. This Chapter explores how gender might be a catalyst for change towards sustainability. It suggests three reforms: changing conceptions of the ideal corporate worker to recognise companies’ dependence on unpaid caring labour; recognising how the process of globalisation is creating fresh patterns of inequality; and replacing the social norm of shareholder primacy with a corporate purpose based around principles of proportionality that may act in pursuit of strong sustainability.

Indonesia is the fourth most populous country in the world and a growing economic powerhouse. Although founded in 1949, it has a significant legal history and distinct legal systems based on race. In this historical context, Indonesia has seen economic boom, bust and reform as well as a more recent change from dictatorship to democracy. This chapter reviews the rich and complex history that sets the foundation for the subsequent analysis of the post-Suharto regulatory efforts to address sustainability. The chapter includes three substantial case studies examining how the central government’s mandatory sustainability for State Owned Enterprises has fared.

As the fastest growing economy in the world, India is uniquely placed to deliver on its commitments to inclusive and sustainable development and ensuring the balance among its three pillars – economic, social and environmental. Since partnerships by companies are expected in this endeavour, a need for companies to consider long-term corporate sustainability arises. In this respect, the chapter covers issues relating to corporate India’s willingness and capacity for such participation, including whether the business environment is facilitative for such participation and whether the experience to date provides reason for optimism. As there are conflicting policy objectives, it becomes imperative to take account of the governance mechanisms that affect corporate sustainability in India and highlight the seemingly unconnected issues that underpin the business environment. The chapter discusses current business practices and impacts of business operations, as well as recent legal and regulatory reforms impacting corporate sustainability.

The board has a crucial role in determining the strategy and the direction of the corporation. However, currently the function of the corporate board is constrained through the social norm of shareholder primacy, reinforced through the intermediary structures of capital markets. This chapter argues that a reform of EU corporate law is key to integrating sustainability into mainstream corporate governance, into the core duties of the corporate board, to change corporations from within. While previous attempts at harmonising core corporate law at the EU level have failed, there are now three drivers for reform that may facilitate a change: the EU’s Sustainable Finance Initiative, which concentrates mainly on the environmental aspects of sustainability; the push to introduce legal requirements for due diligence on human rights; and experimentation by some national legislators within the EU with reforms of their own.

In market economies, sustainability goals can be achieved if sustainable behaviour creates benefits for corporations. Market partners may have preferences for sustainability so that their decisions to buy products, make investments or choose workplaces depend on the good behaviour of corporations, namely on their social, ethical and ecological track record. However, it is difficult for stakeholders to measure sustainable corporate behaviour. Certification schemes can help to overcome this information asymmetry. If designed properly they provide a means for sustainable companies to signal their good behaviour to the market. Such signals make it easier for market actors to differentiate when making their respective market choices. While certificates for products are widespread and thoroughly researched, certificates for good companies have not yet drawn much academic attention, even though various certification schemes have evolved in different jurisdictions. This chapter compares these different certification schemes and analyses them from a regulatory perspective.

This chapter shows that the UK relies on information disclosure and market forces to steer companies towards greater sustainability, leaving company law and corporate governance largely free to focus on shareholder value. It traces the twentieth century regulatory and policy changes which reoriented the UK’s system from managerialist to shareholder-centric, before analysing the 2006 reforms, which are supposed to promote ‘enlightened shareholder value’ through directors’ duties and disclosure. Finally, the chapter considers recent developments that attempt to use information disclosure to promote a long-term approach, including giving shareholders stewardship responsibilities and a ‘say on pay’, making changes to takeover regulation, and requiring companies to make disclosures in relation to modern slavery. None of these recent measures have been successful, and the chapter concludes that far-reaching reforms to corporate governance are urgently needed.

This chapter argues that the legal architecture of the company obfuscates the political relationship between shareholders and employees and transforms captured value from employees into a transferable and fungible property form. It sets out this claim within a Marxian analysis of the political economy mapped onto the legal architecture of the company. Following on from this analysis, the chapter also demonstrates that recent initiatives that exhort shareholders to govern the company and to monitor company executives – through, for example, the rapidly proliferating Stewardship Codes – attempt to subvert the legal and economic nature of modern shareholders as rentiers, to ill effect.