Abstract
Based on the previous discussions of finance and capital market theory and their links to ethics and morality, a sketch of the pivotal role of the theory of external effects on many areas of corporate social responsibility and sustainability is presented. It is argued that the internalization of external effects in a globally integrated world faces severe shortcomings due to a governance vacuum in the enforcement of national laws and taxes. The upcoming paradigm of sustainable development together with corporate social responsibility in conjunction with stakeholder theory allows a civil society-based approach to cope with the challenges of external outcomes. Stakeholders and nongovernmental organizations are discussed as agents that could stimulate and even sanction firms to act sustainably. The threat to withdraw their licenses to operate or to co-operate plays a major role in this approach.
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Notes
- 1.
- 2.
The following part is based on the interpretation of Cheung (1973).
- 3.
“Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED 1987, p. 54).
- 4.
“A green economy (GE) can be defined as one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities” (UNEP 2011, p. 4).
- 5.
The original interview was given in German language. The English translation was done by the book’s author, Henry Schäfer.
- 6.
EC (2011, p. 6).
- 7.
Corporate sustainability, corporate social responsibility, corporate responsibility, or (good) corporate citizenship are often used in the same meaning (Berry et al. 2003, p. 2).
- 8.
The term “ESG” was coined by Ivo Knoepfel in his report “Who Cares Wins” (2004), which was initiated by the former UN Secretary-General Kofi Annan. The report was the first in which asset managers, bankers, and insurance manager explained why environmental, social, and governance (ESG) factors in capital markets are able to combine business with a better environment and welfare in societies.
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Schäfer, H. (2019). Key Points of Sustainability and CSR: Stakeholder Theory and the Theory of External Effects. In: On Values in Finance and Ethics. SpringerBriefs in Finance. Springer, Cham. https://doi.org/10.1007/978-3-030-04684-2_4
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