Sustainability Regulation and Multinational Enterprise Behaviour

Mandated corporate social responsibility (CSR) is an increasingly important fixture in our institutional environment, as governments re-assert their role in establishing and policing transnational responsibility boundaries, defined as the border where firms must accept responsibility for their and their suppliers’ social and environmental actions. Sustainability policies such as the European Union’s recently passed Corporate Sustainability Due Diligence Directive and Canada’s Modern Slavery Act put multinational enterprises (MNE) in their crosshairs, as both pieces of legislation demand MNEs accept responsibility for the social and environmental actions of suppliers with whom they only have indirect contact. In three papers in this dissertation, I explore this conundrum, showing why responsibility boundaries emerge as they do, as well as how MNEs can respond to these new regulatory imperatives, and thereby contribute to addressing grand challenges (e.g. climate change, modern slavery). \nChapter two takes the regulatory environment as its core focus and I build on rhetoric and logics scholarship to explain the dynamics around responsibility boundary construction. I show how the contours of responsibility boundaries emerge from rhetorical contests in which a regulatory agency’s need for ongoing legitimacy is paramount. Chapter three turns to how MNEs respond once this new regulatory environment is established, and I build a conceptual framework based on new internalization theory that reveals how MNEs can better “cascade compliance” across their global value chains (GVCs). In the fourth chapter, which draws on convention theory, I discuss one common strategy MNEs have used in the past to improve social and environmental outcomes: sustainability certifications. To reveal how sustainability certifications can remain legitimate even while diffusing norms across different institutional environments and national contexts, I generate a model based on both interviews and document analysis that shows how legitimate certifications successfully mitigate many differently perceived sustainability risks. \nMy work has important implications for both theory and practice. In the broadest terms, I add to our understanding of new internalization theory, rhetorical legitimation, and CSR. Practically, across these chapters, I help MNEs see what capabilities to build to respond to our new regulatory environment. I also show how policymakers and MNEs can maintain their legitimacy with diverse stakeholders when communicating their ideas about sustainability.

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