Beyond Climate Risk. Integrating Sustainability into the Corporate Board

Abstract

While the heat records and wildfires of 2018 brought climate change firmly into the spotlight, what we face is a convergence of environmental, social and economic crises. The grand challenge of our time is how to achieve social progress for all without destroying the very basis of our existence, with climate change being one of several such existential threats. Finding out how business can be a part of the shift to sustainability has never been more crucial. This article starts out with presenting the results of a multi-jurisdictional comparative analysis of corporate law seeking to investigate the barriers to and possibilities for sustainable business in the dominant form for doing business: the corporation. The social norm of shareholder primacy is identified as a main barrier. Shareholder primacy has taken over the space that corporate law leaves open for the discretion of the individual corporate board. Increasing warning signs concerning the financial consequences of climate change and of pressure on other planetary boundaries, as well as of social inequality across and within countries, may signal a change in the mainstream perception of the role of the corporation. The financial risks of ignoring the impacts of unsustainability have the potential for bringing sustainability full circle into the core of profit-seeking purpose of the corporation. Nevertheless, boards will need guidance on how to integrate sustainability into their decision-making. The article concludes with a brief presentation of a work-in-progress Sustainable Governance Model, which can be a starting point for businesses wishing to transition towards sustainability. It can also form the basis for a corporate law reform proposal, which is arguably a necessary step to shift business away from the unsustainable ‘business as usual’ and onto a sustainable path.