Sustainable development: what role for the company law?

It is trite that the manner in which companies do business has a direct relation with the goal of sustainable development. This article examines the role of company law in promoting sustainable development by encouraging (or mandating) companies to do business in a socially responsible manner. Two aspects of company law are specifically examined. First, should directors of a corporation be under any legal obligation to do business in a sustainable way? Second, should a parent corporation be legally responsible for the conduct of its subsidiaries that causes harm to the project of sustainable development? Both these issues are examined with special reference to the company law provisions and practice in Australia and the UK, Hong Kong and the People’s Republic of China.

It is argued that some recent developments seem to suggest that company law all over world is responding, albeit in a limited way, to the societal demands of giving recognition to the legitimate interests of various stakeholders in the institution of the corporation. The response is, however, yet to be seen on the second issue, that is, parent companies taking responsibility for the unsustainable business decisions of their subsidiaries.