The chapter explains the importance of stakeholder relations in supporting the achievement of Sustainable Development Goals, focussing on the essence of stakeholder engagement management in financial firms, for in their case, relational capital is of particular importance, given the importance of mutual trust between an entity and its stakeholders. We begin by explaining the concept of interest groups, linked to contract theory and corporate social responsibility. Both the micro context (corporate stakeholder theory) and the macro context (the concept of stakeholder capitalism) are pointed out. Contemporary corporate governance codes emphasise a company’s accountability to a wide range of its stakeholders, which is especially important in the case of financial firms – due to the specific nature of their activities. Therefore, different dimensions of financial institutions’ responsibilities are discussed, stressing those aspects that justify strengthening stakeholder relationship management in those firms. The chapter emphasises the process of managing relationships with stakeholders. The core part is a discussion of the key stages of stakeholder engagement management: from the identification of main interest groups, their analysis and segmentation, prioritisation of stakeholders, and selection of an engagement strategy, to monitoring and evaluation of engagement.

Finance that does not take sustainability seriously is finance that does not take finance seriously. The financial risks of continued unsustainabilities bring sustainability issues into the heart of any well-founded financial decision, whatever view one might have on the role of finance and business in society. In this chapter, the relationship between finance and sustainability is explored through a broadening of the approach to understanding financial risks of unsustainability. This goes beyond the established recognition of the financial risks of climate change – and the emerging recognition of financial risks of biodiversity loss. The analysis presents new risk categories, including the risk of business model change, societal risk and global catastrophic risks. The chapter also exemplifies new categories of unsustainability that should be encompassed in such a broader and systemic approach, including ‘novel entities’ and tax evasion. The chapter concludes with brief reflections on the necessity of and the legal basis for implementing a research-based approach to risks of unsustainability in law and policy reforms and in practice.

In this chapter, I analyse the main trade-offs between the economic value of the firm and its social value, exploring how they are solved through corporate governance and regulatory constraints. To begin with, I show how firms generate social value while also increasing their long-term value under the enlightened shareholder value approach. Thanks to organizational and technological innovation, firms are led to change their business models and organization to enhance environmental and social sustainability and increase long-term profitability. In addition, managers promote their firms’ sustainability in compliance with ethical standards which are part of corporate culture. In similar situations, generating social value may determine pure costs to the enterprise. I argue therefore that the perspective of instrumental stakeholderism appears too narrow, for situations exist where non-economic values are also relevant to the firm. The importance of ethics is especially underlined by CSR and stakeholder theory. Moreover, management studies emphasize the role of corporate governance and organizational theory in the promotion of social value. The board of directors should identify the ethical and cultural values of the firm and monitor their application at all levels. In addition, organizational purpose plays a fundamental role for the ‘intrinsic’ motivation of people in corporations. The international soft law on corporate due diligence further contributes to the design of corporate purpose and to the motivation of managers and employees. Once corporate due diligence is recognized by European hard law through the proposed Directive, specific obligations will arise for companies which will impact their governance and could become a source of civil liability. As a result, the corporate purpose orientation to sustainability will be reinforced by the regulation of environmental and human rights externalities and by the due diligence obligations deriving from it.

Offering two case studies – the economic transformations of Sohar and Duqm – this chapter grounds the book’s argument about Oman’s global labour market in material cases of spatial transformation and the integration into global value chains through which both commodities and labour circulate. The chapter argues that millennial citizen expectations take shape in these developments, from the interaction of ostensible outcomes of economic globalisation, neoliberalism, and government responsibilities of governing hydrocarbon windfalls. Citizen reactions emerge from their perceived right to, or exclusion from, these returns. The chapter further substantiates two points through these cases. First, both neoliberal reform and oil wealth explicitly or implicitly make promises to populations about an improved economic life, which, when unrealised, results in disenfranchisement and discontent. Second, capital needs labour and pursues supplies from the global labour market not only because it is cost effective but deliberately because it is both flexible and controllable. It seeks to avert potential labour disruption and secure seamless operations. Together, these findings show the ways Omani labour organises and the power of labour through the threat of its resistance.

This chapter aims to inform reflection on business self-regulation (or corporate social responsibility, CSR) in addressing climate change by drawing on developments in ‘business and human rights’ and the experience accumulated in the European Union (EU). Despite dissimilarities in addressing the environmental and human right impacts of business operations, there are commonalities around incentives, impacts and regulatory dynamics of CSR that help clarify its expected place in global governance. This analysis revisits long-standing claims about CSR in light of current legal and market evolutions. The main finding is that the notion of CSR has been fundamentally transformed in the last 20 years. What is the change, what are the drivers enabling such change, and what are the expected impacts on corporate compliance and sustainability performance? The analysis contributes to the regulatory governance area, including regarding climate change, and promotes cross-fertilisation among the social and environmental areas in CSR.

In discussing Islamic banking and finance (IBF), I first provide a brief overview of its development in Gulf monarchies, before turning to an investigation of particularities of its form and substance. I address a set of issues related to, on the one hand, the adoption, governance and regulation of IBF and on the other hand, the conformity of its practice with its alleged purposes. My aim is to uncover the actual goals of IBF, that has become prominent in the Gulf (and in the global economy) in recent decades. The analysis shows that IBF is a means for regimes to both appease their restive populations and respond positively to the material interests of key segments of society. Thus, ruling priorities related to enrichment and social management cohere; these are the principal purposes, even though ruling elites cloak their intentions in religiosity and ethical commitments. Like the other institutionalized practices discussed in this book, IBF represents the conjoined instrumentalization of (oil) wealth and Islamic doctrine for the sake of social control, and beyond that, the ongoing political domination and material enrichment of the royal family.

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.

The ever-increasing disclosure requirements we impose on public companies are, at best, not read, and at worst, are likely reducing the quality of investor decision-making. More environmental and social (ESG) disclosure has been touted as a popular solution to climate change and social issues. However, the evidence suggests this is highly unlikely, as it is very difficult for shareholders to understand the impact of corporate actions and the viable alternatives. Making matters worse, the very information shareholders require is information that assists a firm’s competitors and therefore is information that, if disclosed, has the effect of reducing the incentives for ESG innovation. Shareholders possess few legal tools capable of constructively engaging with corporate behavior. The empirical evidence about these theoretical points is evaluated, along with an examination of the real-world evidence about the outcomes of shareholder ESG interventions.

Corporate governance reforms are increasingly promoted as a method of materially improving social and environmental (ESG) outcomes. This chapter clears up the conceptual confusion about what counts as an action taken primarily for ESG purposes, then considers the incentives, resources, and market constraints that compel corporate actors to avoid unnecessary expenses or lower-value investments. The empirical evidence suggesting corporations are unlikely to voluntarily pursue ESG includes: (1) the revealed preferences of managers, particularly those that emphasize their ESG commitments; (2) the impact of ESG-friendly governance practices on corporate outcomes; and (3) the actual outcomes generated by giving ESG-friendly constituencies (such as socially responsible investors or employees) more power in corporate governance arrangements.

This chapter examines investment-related aspects of the energy–environment nexus. State actions against fossil fuel investments often have an environmental cause, raising the issue of policy space under the investment regime. The doctrine of ‘police powers’ provides grounds for qualifying some pro-environmental interventions as non-compensable non-expropriatory measures. In addition to seeking policy flexibilities, many States wish energy investors to voluntarily bear social responsibility on the environmental front. As a result, a number of IIAs provide for responsible business conduct, bringing some changes to the ‘investor vs. State’ asymmetry in the investment system. A surge in renewable energy ISDS cases in the last ten years is another noticeable trend. High upfront costs of renewable energy projects recoupable in a long run necessitate FIT or other long-term benefits to investors. But when the government suddenly cancels or cuts promised incentives, this frustrates investors’ legitimate expectations under IIAs but may also be welcomed under trade law as a way of getting rid of distortive subsidies. Thus, some discrepancy or tension between the trade and investment regimes can arise.

When corporations engage in misconduct, we rely on two types of sanctions to discipline them: legal and reputational. For various reasons, both types of sanctions have limitations. This chapter argues that a combination of legal and reputational sanctions for corporate misconduct can help to improve the effectiveness of blame attribution, deliver meaningful punishment for misconduct, and foster organizational change. For example, legal sanctions through lawsuits and government fines can trigger reputational sanctions that can unleash a subsequent wave of monetary costs because the publicity associated with the lawsuit or government fine can lead a corporation’s stakeholders to re-evaluate their relationship with it. Alternatively, legal rules can facilitate the operation of reputational markets by increasing information flows and thereby improving attribution of conduct to particular companies.

The debate over whether corporate social responsibility should comprise soft law responsibility or legally binding obligations is inadequate to address the legal relationship between corporations and society. The corporate social responsibility movement addresses only an economic agency problem and overlooks a fundamental gap between economic agency and legal agency, or attribution. The former is the problem of potential divergence of interests between a principal and an agent, and the latter concerns the laws regulating the relationship between a person and his or her representative. Corporate social responsibility is meant to respond to the first of these— – the economic agency problem – —as scholars have analyzed at length. However, the legal structures needed to address attribution and legal accountability are still far from established. The chapter proposes an attribution framework that can appropriately address the legal agency problem, in other words, to address corporate social accountability. It suggests that creating a new form of fictitious legal entity could help address this problem by resolving collective action issues.

This chapter explores the relationship between a firm’s informal nonmarket strategy, reflected in its reputation for social responsibility, and stakeholders’ support for formal nonmarket strategy targeting government officials. We argue that a firm’s informal nonmarket performance shapes stakeholders’ willingness to enable its formal nonmarket strategy by funding its corporate political action committee. In this way, a reputation for social responsibility operates as a social license for a firm to politically engage. We examine how a firm's overall reputation and reputation for employee relations affect employees’ contributions to firms' PACs. Through analyses of a hand-collected dataset of employees’ contributions to corporate PACs, we find that a firm’s reputation for employee relations, but not its overall social reputation, is positively associated with employee support of a firm’s formal nonmarket strategy. These findings illustrate a link between a firm’s informal and formal nonmarket strategies and demonstrate a potential constraint on corporate political influence.

Transnational corporations have come under pressure to show that their lobbying behavior is consistent with their corporate social responsibility (CSR) policies. Few empirical studies, however, have examined how companies coordinate their CSR and public policy activities or how aligned these activities are towards common goals. We address these questions by evaluating the testimony that large corporations have given to relevant UK parliamentary committees. Using an original coding frame, we assess the extent to which companies with strong CSR credentials align their testimony with the norms of the sustainability field as well as how supportive high CSR companies are of state interventions into the market. We find consistent differences in how high and low CSR companies lobby before these parliamentary committees. High CSR companies are more likely to discuss and support specific policy measures than their low CSR counterparts and to offer more fleshed out justifications for their policy positions.