ESG and finance: the role of economic instruments in implementing international environmental standards in business practices

Abstract

According to the stakeholder theory, individuals who, for one reason or another, have an interest in a company’s activities, referred to as stakeholders, exert influence on the company’s decision-making, including decisions related to the implementation of international environmental standards in its business practices, as well as on its position in the market. Scholars tend to assess the effectiveness of the implementation of these standards based on ESG ratings or the dynamics of the financial performance of the company, primarily analysing the views of its managers and investors. This article applies an integrated managerial approach to identify criteria for the effectiveness of companies’ implementation of international environmental standards from the perspective of management, investors, regulators and legislators, credit institutions, self-regulatory organisations, stock exchanges, and consumers — that is, all parties with whom most companies interact in the course of conducting their activities. This approach uses stakeholder theory to determine how stakeholders influence the decision-making process in the company and understand the effectiveness of the implementation of international environmental standards in its business practices. It also integrates elements of the legal method to analyse the views of the developers of these standards on the effectiveness of their implementation. In the course of the research, several tendencies that affect international law have been identified. One of these tendencies is decentralisation. It manifests itself in the fact that stakeholders such as regulators and stock exchanges increasingly prefer to accept international ecological standards as primary standards instead of developing their own. Decentralisation leads to soft law regulation being more prevalent than binding norms. In addition, in recent years, the developers of international ecological standards have been increasingly taking the interests of the company and its stakeholders, particularly investors, into account. The paper concludes that the trend of integrating the economic element into these standards will continue and may affect other branches regulating relations involving business.