Improving Investor Accountability

This chapter explores how international standards, especially those for protecting the environment, may be more effectively enforced, in relation to international economic activity and corporate behaviour. It argues that measures to create more open and competitive world markets, such as the proposed MAI, must be accompanied by arrangements to strengthen the enforcement of environmental standards. Although the international community has made great strides, in the past two decades, in recognizing the importance of the principle of sustainable development, and embodying it in more specific standards, effective enforcement is too often lacking. To a great extent this is because the costs of environmental damage may be external to the firm or state causing it, creating the temptation to free-ride. The consensual nature of international law, and the competitive character of capitalist economic relations, create difficulties for effective enforcement of standards which protect public interests. However, these are certainly not insurmountable. The increased integration of the world economy can and should be accompanied by more effective means for coordinating the enforcement of those standards for environmental protection which are now recognized as essential to ensuring the sustainability of economic development.