Sustainable Governance and Corporate Due Diligence: The Shifting Balance Between Soft Law and Hard Law

Guido Ferrarini ()
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Guido Ferrarini: University of Genoa

Chapter Chapter 2 in The Palgrave Handbook of ESG and Corporate Governance, 2022, pp 41-57 from Springer

Abstract: Abstract Regulation and international standards constrain value maximization on sustainability grounds by requiring firms to internalize their negative externalities as to the environment and society. In this paper, I show that the borders between soft law and hard law in this area are shifting as a result of legislative initiatives of the EU Commission and the European Parliament, which aim to transplant the international standards on corporate due diligence into EU law so as to reduce the impact of business activities on the environment and society. I also argue that a similar shift towards public regulation may improve firms’ compliance with international sustainability standards but should not cause uncertainty as to the firms’ precise obligations. I conclude that a clear distinction should be made in the proposed directive between general standards, substantive law rules that companies should comply with and organizational rules which serve the purposes of risk management and compliance.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-99468-6_2

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DOI: 10.1007/978-3-030-99468-6_2

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