A Firm‐Driven Approach to Global Governance and Sustainability

Abstract

This Article analyzes the emerging roles of multinational corporations in global governance, focusing on the unique challenges of environmental regulation. In response to the shortcomings of traditional state-centered regulation, MNCs increasingly participate in two alternate forms of rulemaking: (i) international soft law; and (ii) self-regulation through private rules and standards. To address concerns about the participation of MNCs in these public and private forms of rulemaking, this Article outlines a regulatory framework based on the concept of corporate-regulatory feedback loops, or CRFLs. CRFLs consist of feedback loops between MNCs, regulators, and other governmental entities that enhance the visibility, identification, and internalization of social costs and the potential collective gains of sustainability practices and policies. CRFLs preserve the firm- and industry-specific flexibility of voluntary corporate initiatives while facilitating the formalization and institutionalization of such initiatives into norms and legal rules. We apply the theoretical components of our model to the German Sustainability Code, a voluntary multi-stakeholder initiative that coordinates with the German government, and suggest various means to overcome implementation challenges that may arise in the establishment of other public-private regulatory regimes that incorporate CRFL principles.