Technology, Business and Society Programme Paper 15: Rethinking Business Regulation: From Self-Regulation to Social Control

One of the greatest challenges of the contemporary era is to ensure that market liberalization and the increasing dominance of transnational corporations in global trade, investment and value chains do not undermine patterns of development that are socially inclusive and ecologically sustainable.

Since the 1980s, the corporate social responsibility (CSR) agenda has gained ground, centred on voluntary initiatives to minimize malpractice or improve social, environmental and human rights dimensions of business performance, as well as on the regulatory role of non-state actors in standard-setting and implementation.

Both private and non-governmental authorities play a prominent role in the social regulation of business. Regulatory approaches associated with CSR show some signs of hardening, from the voluntary initiatives that characterized corporate self-regulation, to “co-regulation” and multistakeholder initiatives, to the more recent renewal of attention to legalistic approaches within the emerging corporate accountability agenda. The author examines these trends and assesses their potential to reassert social control over markets.

Particular attention is paid to the potential for combining different regulatory approaches in ways that are complementary and synergistic. This is an important feature of the emerging corporate accountability agenda. The author identifies four forms of such “articulated regulation”: complementarity between different non-governmental regulatory systems; the interface between confrontational and collaborative forms of civil society activism; linkages between voluntary and legalistic approaches or public policy; and greater policy coherence, at the micro level of the firm and the macro level of government and international policy.

Is corporate accountability likely to become a prominent feature of “stakeholder capitalism”? The author cautions against broad generalizations about the trajectory of both CSR and corporate accountability, noting that outcomes are likely to vary considerably in different enterprise, industrial, institutional and policy settings. To assess future trends and prospects, he examines the way in which different factors and contexts associated with crisis, “agency”, organized interests, ideas, institutions and structures intervene and interact to shape outcomes. From this perspective, he suggests that some of the major obstacles inhibiting progress are structural and political. While the mainstream CSR agenda has garnered political momentum, its proponents generally ignore the contradictory macroeconomic environment that confronts efforts to scale up and deepen CSR. The corporate accountability movement, for its part, attempts to address these structural issues but must overcome major political challenges, including powerful opposition and building alliances and networks within and across societal groups and regions.

Peter Utting is Deputy Director of UNRISD, and coordinator of the Institute’s programme on Technology, Business and Society.

Order TBS PP 15 from UNRISD, 28 pages, 2005; US$ 12 for readers in industrialized countries and US$ 6 for readers in developing and transitional countries and for students.