Planetary Boundaries and Company Law: Towards a Regulatory Ecology of Corporate Sustainability

Abstract

Regulatory approaches to promoting environmentally and socially sustainable behavior by companies are undergoing a radical reassessment. There is now no question as to the severity of the risks to people and the planet posed by continued inaction on the part of the private sector. The assumption of many leaders in business and government is that the transformation of the private sector can be achieved through a hands-off approach, one which encourages growth combined with a social transformation of company practice (CSR). Yet, traditional public policy approaches to encourage this sustainable transformation – for example, incentives for investment combined with reputational risks based on transparency – have yet to deliver the necessary widespread changes in corporate practice, let alone verifiable impacts in terms of social responsibility or climate gas emissions. As a result, there are increasing calls for a heavier regulatory burden, including liabilities to deter unsustainable behavior by companies. This paper suggests an analytical framework for the regulatory reassessment now underway. Drawing on polycentric approaches to regulation (Lessig 1998; 1999; Black, 2008; Murray 2007) we propose a regulatory ecology of corporate sustainability which integrates the regulatory effects of law with the regulatory effects of markets, social norms and architecture (material constraints). We place the company at the centre of this regulatory ecology and consider the modalities of regulation which affect corporate respect for people and the planet. We focus in particular on company law and sustainability, building on the results of a comparative law research in 26 countries (Sjafjell and Richardson 2015), and on the emerging field of business and human rights (Taylor, 2011; Ruggie, 2013). The paper identifies the increasing influence of external regulation on internal company regulation and suggests directions for further legal research to better understand – and regulate – the transition to a sustainable private sector.