American Business Law Journal (forthcoming)
The multifaceted role of multinational corporations as quasi-regulators is of growing importance to international business. Corporations increasingly participate in two kinds of international rulemaking: (i) non-binding “soft” law standard setting; and (ii) self-regulation through private rules and standards. Soft law and private regulation often fill governance gaps left by incomplete and/or ineffective governmental regulation. One of the most prominent examples is sustainability rulemaking, in which corporations have become increasingly active due to their growing awareness of the directly-borne costs of environmental degradation and the potential strategic benefits of corporate social responsibility.
However, as Professor Park and Professor Berger-Walliser describe, the participation of MNCs in these public and private forms of rulemaking also raises legitimacy, accountability, and responsiveness concerns. To address these concerns, they outline a regulatory framework based on the concept of corporate-regulatory feedback loops, or CRFLs. CRFLs consist of feedback loops between corporations, regulators, and other governmental entities that enhance the visibility, identification, and internalization of social costs and the potential collective gains of sustainability practices and policies. While drawing from current examples of public-private governance to illustrate the components of the CRFL model, the authors focus their analysis on the German Sustainability Code (a voluntary multi-stakeholder initiative that coordinates with the German government) as a template for future CRFL-based regimes.