As touched upon in Chapter 1, contemporary commentary on corporate governance can be divided into two main approaches: stakeholder primacy, and the narrower shareholder primacy. This chapter focuses on the first of these objectives. We commence the chapter by pointing out that an approach that accentuates the differences between a shareholder versus a stakeholder theory of the corporation is probably a contradiction and a false dichotomy. We then deal with the important aspect of corporate social responsibility (‘CSR’) and the related issue of disclosure of and reporting on non-financial matters. As part of this discussion we focus on the controversial and highly topical issue of companies exaggerating their image as environmentally friendly corporations (greenwashing) to please investors and to attract more investments, as well as smartening their image on other issues (greenscreening). This chapter then looks at the ‘social licence to operate’ before shifting to CSR and directors’ duties. The chapter concludes by considering the meaning of ‘stakeholders’ and how all corporate stakeholders have vested interests in the sustainability of corporations.

Companies’ social and environmental performance has not kept pace with rising pressure for greater contributions to social and environmental improvements. Much of the this pressure comes from nonmarket stakeholders – the environmental groups, community activists, governments, and other actors who engage with companies in a variety of venues to improve their environmental performance. Much of companies’ engagement with these stakeholders involves creating and managing various types of formal and informal institutions. Effective institutions can mitigate collective action problems among companies and their stakeholders, leading to sustainable environmental improvements.

Chapter 4 assesses the history of companies in the international environmental law movement.Traditional voluntary-only approaches of industry groups to international environmental law led to a burgeoning of largely voluntary corporate social responsibility (CSR) initiatives. A review of the United Nations Framework Convention on Climate Change and the Kyoto Protocol are provided, along with a detailed examination of the Paris Agreement. Unlike previous experiences with international environmental law, many non-state actors supported the Paris Agreement, and some even wanted to become a party to it. While it remains a state-based treaty, non-state actors have become a main pillar of its implementation, particularly its long-term temperature goals. This international consensus shifting on climate change has led to new CSR and private environmental governance initiatives, specifically around climate change. These are eliciting a compliance reaction from many companies, with net-zero emissions targets announced by a variety of industry actors. Examples of Canadian Supreme Court decisions around corporate citizenship, the King IV Report from South Africa and CSR provisions in the Indian Companies Act 2013, as well as new corporate climate reporting requirements in the United Kingdom based on the recommendations of the Task Force on Climate-Related Financial Disclosures, are illustrative of this shift.