The role of sustainable corporate governance for EU climate policy
In light of the newest evidence from the natural sciences, human-induced climate change is increasingly being understood as the defining global challenge of our age. This has unleashed a profound societal and cultural transformation process – a sustainability revolution – which calls into question many basic organizing principles of economic activity.
In particular, notions on the role of companies within society are progressively being challenged. Climate policy ranks high on today’s global political agendas. International commitments like the Paris Climate Agreement or the UN 2030 Agenda for Sustainable Development shape the global course of sustainability policy. In the EU, alongside treaty-based obligations, the European Green Deal, with its climate neutrality commitment, sets the blueprint.
Companies are naturally at the centre of lawmakers’ attention. Their essential part in mitigating climate change by reducing their net emissions and by driving the innovation and adaptation that are necessary to bring about a net-zero economy is widely recognized. In the search for adequate policy mechanisms, the question of the role of corporate governance in the aspired transition toward sustainable capitalism is highly pertinent.
Whereas public law instruments, for example, direct regulatory controls on emissions or market solutions, have a long-standing tradition of serving as policy instruments for protecting the environment, most recent developments are increasingly emphasizing the role of private law, particularly company law, in implementing sustainability-driven policy goals. Fundamentally, a stronger responsibilization of companies for meeting sustainability objectives is being pursued. Consequently, the question arises whether company law institutions could reshape corporate governance frameworks to align companies’ conduct with climate policy objectives. ‘Corporate sustainability’ is the flag under which the emerging debate sails.