The Sustainable Companies Project commenced in 2010 and has involved a team of more than 40 legal scholars mapping the law in 26 jurisdictions across the globe. This document summarises the company law analysis based on that mapping and on further extensive research into the barriers and possibilities company law provides for sustainable companies, conducted by the head of the project, Professor Beate Sjåfjell, together with Professors Andrew Johnston and David Millon, and research assistant Linn Anker-Sørensen. Our focus, like that of the project, is on the environmental dimension of sustainability, with climate change as our case in point. 1

This is a repository copy of Corporate social responsibility as obligated internalisation of social costs.

We propose that corporations should be subject to a legal obligation to identify and internalise their social costs or negative externalities. Our proposal reframes corporate social responsibility (CSR) as obligated internalisation of social costs, and relies on reflexive governance through mandated hybrid fora. We argue that our approach advances theory, as well as practice and policy, by building on and going beyond prior attempts to address social costs, such as prescriptive government regulation, Coasian bargaining and political CSR.

Andrew Johnston examines EC regulation of national corporate governance systems through the lenses of economic theory and reflexive governance. By contrasting the normative demands of the neoclassical 'agency' model with those of the productive coalition model, he shows how their incompatibility required political compromise. Reflexive governance theory is then used to explain how progress has been possible. Through detailed analysis of both case law and positive regulation, the author highlights the move from positive to negative integration; the benefits as well as the limits of regulatory competition; and the significant role of reflexive techniques in both preventing market failure and enabling positive integration to proceed. The workable compromise that has emerged between market integration and continued regulatory diversity at national level demonstrates that procedural regulation can steer autonomous social subsystems towards greater responsibility and a better articulation of the public good.

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