Sustainability Oriented Transformation of Corporate Governance

Abstract

The master thesis examines the adverse consequences of the profit-driven business model and its impact on environmental and social degradation. The paper begins with an exploration of the root cause of the existing generation's problems, attributing them to the all-encompassing pursuit of profit within the economic and business paradigm. It highlights the urgent necessity for the sustainability transformation in the prevailing business model. The author examines the limited effectiveness of conscientious business leaders' efforts and emphasizes the role of governments and international institutions in implementing binding regulations to ensure the incorporation of sustainable practices within business operations through transformation of corporate governance. Further research provides analysis of the formulation of corporate purpose and its impact on the business strategy setting and decision-making policy. The paper proposes a novel formulation which integrates the concept of responsibility and ethical conduct within corporate purpose to shape companies' and directors’ behaviour and encourage sustainable practices. The author also explores the implications of corporate purpose on directors' duties, advocating for the inclusion of social, moral, and ethic responsibilities as an obligation. Moreover, the paper critically evaluates existing soft law measures and underscores the need for stringent legal mechanisms for the effective enforcement of the current and upcoming binding regulations on the due diligence obligations in supply chains, including the introduction of the criminal liability, to hold companies’ directors accountable for their actions in running unsustainable business operations and foster a culture of responsibility within the corporate sector.