Corporate social responsibility (CSR), has evolved throughout the 20th century as a means of private governance, where corporations voluntarily hold themselves accountable for their activities under changing social norms. In terms of environmental responsibility, there is a global trend towards the “greening of the industry,” which also aids in steps towards positive public image and fewer lawsuits. A niche of international environmentally responsible investors recognize that the long-term threats of climate change can be offset by investing responsibly. However, this greening of the industry is largely compliance-oriented. Depending on the jurisdiciton, corporations are required follow a minimum compliance level under the laws and regulations where they operate and conduct buisiness to avoid legal recourse.. Environmental law can regulate a corporation’s activities in production of goods from raw materials, distribution, marketing, transportation, and disposal, and be consequential for both corporations as well as their directors and officers.
This compliance-oriented approach towards environmental responsiblility is limiting towards environmental protection both because it is reactive to issues as they occur, and sets only minimum standards for the protections they must enforce. Therefore, further development of sustainable practices is often not encouraged. Especially with multi-national corporations, applying a single jurisdiction’s laws and expecting an effect on the entity’s global behavoir on that issue is often unrealistic. One line of reasoning suggests that external regulations will never successfully achieve corporate environmental protection until internalized within corporate governance. This stems from the idea that the corporation is treated legally as a person, and must make its own decisions and internally govern the environmental implications of its actions .
A debatably effective approach to environmentalism in the corporate world is the voluntary aspect of going beyond legal obligations to fill regulatory or enforcement gaps. Companies around the world, including 95% of the Global Fortune 250, voluntarily report their CSR impacts. Corporations can integrate CSR concerns into their operations on a sliding scale. This ranges from being out of compliance with relevant environmental law, complying with the law as a bottom floor, only using voluntary responsible practices for profit, integrating CSR for the benefit of stakeholders, or fulling integrating CSR by finding the underlying causes that have created the need for responsibility in the first place. However, it is debatable whether the motivations of a company in generating profit or satisfying stakeholders as opposed to genuinely integrating CSR into their buisiness models matters if the measures still result in a tangible positive environmental impact.
Increasing environmental consciousness amongst the public has consequently influenced corporations because of the need to respond to the global marketplace, as well as increased legal environmental protections. Initiatives on sustainability from the public such as shareholder resolutions can be a tool to pressure companies to shift from the tradtional view that they must increase profits at any expense. Institutional investors are also showing increased interest in managing downside risk by investing in corporations that engage in sustainable responsibility and divesting from ones that do not, creating a finnancial driving force for CSR.
Public governance is also showing signs of having more legal backing for CSR practices. Since 2001, publicly listed companies in France are required to report social and environmental consequences of their activities, as well as financial risks stemming from climate change and how they are reducing such risks. In Germany, where corporations are encouraged to take in the interests of their stakeholders, the governemnt implemented a CSR Action Plan in 2010. The Action Plan established a committee which now advises the German government on CSR strategy and individual areas of social concern. Meanwhile, the Netherlands has recently encouraged company environmental management systems to be internalized in an attempt to reform the corporate governance system regime. Internationally, reporting of CSR can be voluntarily monitored by third parties such as the Global Reporting Initiative (GRI), where companies agree to specific corporate disclosures. GRI reporting is beneficial in that it gives consumers and investors a framework by which companies can be compared, as well as structuring how voluntary reporting occurs.
By implementing substantial and effective environmental CSR, a corporation has the potential to benefit financially and be a step ahead of regulations. Creating strong social responsible behaviors can be especially helpful to corporations by preempting future regulations, improving public image, and saving costs related to energy usage and waste management. External monitoring by third parties such as certification programs can also encourage buisiness by attracting consumers. Because these certifications are uniform, consumers and investors can more accurately compare companies in deciding which to favor for long-term finnancial performance and social impacts.
CSR as a form of private governance, while not a substitute for public regulations, is still an effective method of creating change in the corporate world’s environmental practices. Particularily in countries such as the U.S., where federal commitments to addressing climate change have largely been repudiated, private governance is necessary to address growing environmental problems. Creating and maintaining a positive stance on environmental responsibility in the corporate realm is also helpful to companies because having a healthy society and environment allows corporations to expand consumer’s demand for buisiness.
Boards of directors and management of corporations should have a role in addressing environmental issues, whether their motivations are saving costs from sustainable practices such as energy-efficiency, satisfying shareholders and investors, or actual concern for environmental responsibility and stakeholder interests. Environmental governance towards corporations is mounting in many jurisdictions in response to public outcry, but is still lacking and without resources to have the substantial impact required. With more demand for credibility, adhering to and creating confidence in company’s ability to follow their codes of conduct becomes more relevant. Therefore, private governance management systems that create procedures and policies to manage environmental impacts and ensure compliance with law have proven as effective measures towards moving from greenwashing to actual environmentalism. Through standardized reporting of sustainable CSR practices and making specific commitments to goals in their codes of conduct, companies can comply with regulations, mitigate risks and liability for environmental disasters, boost public appearance, and increase long-term profits from investors.
Megan Paschke is a 2L at University of Denver Sturm College of Law and a tech editor on the Denver Journal of International Law and Policy.
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