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Back | Programme Area: Markets, Business and Regulation (2000 - 2009)

Rethinking Business Regulation: From Self-Regulation to Social Control

One of the greatest challenges in the contemporary era of globalization and economic liberalization is how to ensure that the freeing-up of markets and the increasing dominance of transnational corporations (TNCs) in global trade, investment and value chains do not undermine patterns of development that are socially inclusive and ecologically sustainable. Several decades ago, many policy makers, activists and scholars looked to the state to protect against the perverse effects of markets and the concentration of capital. With the rise of neoliberal orthodoxy in the 1970s, perversity was not only downplayed in certain circles but also associated more with “state failure”. Markets, it was assumed, could be kept in check largely by a minimalist state and corporate self-regulation. A discourse and a set of policies, practices and institutions associated with corporate social responsibility (CSR) gained ground in the 1980s and went global in the 1990s. This CSR agenda centred heavily on the promotion of 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.

This paper examines contemporary aspects of business regulation associated with CSR with a view to understanding its considerable influence in business, civil society, governmental and multilateral circles; as well as to assessing its potential to counter the perverse effects of economic liberalization and corporate-led globalization, and reassert social control over markets. Section 1 describes the increasing role of both private and non-governmental authority in the social regulation of business, and how the CSR agenda has evolved to embrace a broader range of issues and practices. Section 2 examines the gradual hardening of regulatory approaches, from softer voluntary initiatives that characterized corporate self-regulation to “co-regulation” and multistakeholder initiatives; and, more recently, the renewed attention to legalistic approaches within the emerging corporate accountability agenda.

Section 3 focuses on the potential for regulating business through forms of “articulated regulation”, a term used to refer to the coming together of different regulatory approaches in ways that are complementary and synergistic, or less contradictory. While this is an important feature of the emerging corporate accountability agenda, it has received little attention in conceptual and strategic thinking. Four forms of articulated regulation are identified. They include complementarity between different non-governmental regulatory systems, the interface between confrontational and collaborationist forms of civil society activism, linkages between voluntary and legalistic approaches or public policy, and greater policy coherence at both the micro level of the firm and the macro level of government and international policy.

As a basis for understanding and assessing the potential and limitations of ratcheting-up and scaling-up CSR and corporate accountability, the paper considers, in section 4, the theory and practice of progressive institutional reform. The discussion focuses on the way in which different elements and contexts related to crisis, agency, ideas, institutions and structure intervene and interact to explain processes of institutional change, and how these aspects have shaped the CSR and corporate accountability agendas.

This discussion cautions against broad generalizations about the future trajectory of CSR and corporate accountability, noting that outcomes are likely to vary considerably in different enterprise, industrial, societal and capitalist settings. The concluding section does suggest, however, that the major obstacles confronting these different agendas are structural and political. Referring to three periods in the twentieth century when more socially sensitive forms of corporate capitalism emerged, the analysis suggests that the structural and political conditions that were conducive to such developments are far less in evidence today. Indeed, while the mainstream CSR agenda has amassed considerable political momentum, its proponents generally ignore the extent to which the scaling-up and deepening of CSR confronts a contradictory macroeconomic environment. The corporate accountability movement, for its part, attempts to address these structural issues but confronts the major political challenge of not only overcoming powerful opposition but also building alliances and networks within and across societal groups and regions.
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  • Pub. Date: 1 Sep 2005
    Pub. Place: Geneva
    ISSN: 1020-8216
    From: UNRISD/UN Publications