The Limitations of Business Case Logic for Societal Benefit & Implications for Corporate Law: A Case Study of ‘Climate Friendly’ Banks

Abstract

A common refrain within the sustainability literature is that voluntary ‘green’ corporate reforms can benefit a company’s bottom-line even as they serve broader social goals. The question of whether private incentives are aligned with broader socio-environmental benefits has been vigorously debated by advocates, but remains under-examined empirically. This paper provides a qualitative empirical examination of whether and to what extent voluntary corporate greening (and its concomitant social benefit) is driven by business case logic. My analysis focuses on an illustrative but important sector: banking. Specifically, I explore whether private sector banks have the means and motives to facilitate climate change mitigation by supporting low-carbon economic activities in the global economy. I frame my inquiry against the backdrop of theoretical insights from organizational change and management literatures in combination with critical accounting theory and legal and regulatory scholarship. Using interview data obtained from a purposive sample of senior managers within seven early-moving transnational banks and also from non-government organizations and external consultants, I find that business-case-driven corporate change can facilitate societal benefit, but the extent to which it actually does so in practice is extremely limited. Consequently, my analysis underscores the importance of the institutional role played by corporate law and governance norms in influencing socially beneficial corporate behavior. Specifically, I conjecture the potential impacts of directors’ duties in each of the United States, United Kingdom and Australia on ‘climate friendly’ finance sector behavior.