Sustainability in between corporate law and contract law

In today’s global commerce, sustainability has become a common concern of the international society. In some jurisdictions, the regulator is introducing regulations to demand global firms to take appropriate actions, such as the EU’s CSDDD. In others, a legal duty is yet to be established, but the social pressure on firms to care about sustainability is ever more growing. However, it raises a big challenge to transnational commercial law. As the global business today relies on supply chains across borders, which are made up of a series of contracts, the governance of the contractual relationships needs to be examined in order to give guidance to global supply chains. Given that the theory of firms developed by economists suggests that the boundary of a firm is determined by costs, it will be useful to compare corporate governance and governance of contractual relationship. One possibly useful mechanism is to identify the “principal” of the supply chain whose interest becomes the goal of its governance and to introduce a trustee who will act on behalf of the principal. NGOs and NPOs may be in the right place to serve as a trustee. However, the regulator must be careful about the possibility that the motivations of NGOs and NPOs as trustee deviate from the interests of the principal.