"Business, Institutions and Climate Change"

Corporations and private self-regulatory initiatives have taken on regulatory functions in the global economy once assumed to be the domain of the state and inter-governmental organizations. Private regulation, defined as voluntary efforts by firms to restrain their own behavior, include systems that target business operations ranging from financial reporting and carbon accounting, to sustainable agriculture practices and more. It has been suggested that private regulation has not only pressured firms to green their business operations, but that firms can use modest private regulations as a political strategy to preempt more stringent public regulations. The aim of this paper is to provide a broad business history perspective on the evolution of private sector initiatives in global environmental governance, and to identify its main development characteristics and limitations to business sustainability.
The paper traces two different developments in private regulation. The first path was originally created to support the growth of green industries and was driven by entrepreneurs who required standards and certifications schemes to define their new product or service categories in the market. The second path grew out from the interest of large incumbent firms, who sought an alternative route to governmental interventions which they regarded as costly and as a threat to international trade. The boundaries between these two paths subsequently came to merge, as sustainability became business mainstream around the new millennia. Although private regulation helped firms to expand markets for greener products and inspired incumbent firms to commit to eco-efficiency programs and reducing carbon in value chains, structures within the political economy militated against action to limit carbon emissions. The absence of governmental interventions, such as global carbon pricing in some form, made it difficult for companies live up to their voluntary commitments, even as the scientific alarms about global warming grew stronger from the 1990s onwards.