Institutional Deficit or Institutional Failure?

Abstract

The paper rests on the premise of a priori rationale for the sustainable development goals- SDG-driven governance of multinational corporations- MNCs -as these are the foremost non-state actors in the world economy.

The research question it addresses is whether there has been an institutional deficit or institutional failure in directing the MNCs toward SDGs. The latter aspect, institutional failure, gained prominence in view of the Indian Prime Minister’s address at the G20 Ministers’ Meet on Thursday, the 2nd of March 2023.                 

The paper draws on the institutional theory of multinational corporations to delve into the research question it addresses.

It notes that institutional theory de-emphasizes the role of individual actors (MNCs), focusing instead on the influences or rules of the game external to and transcending the organisational boundaries.

The paper argues that multilateral institutions in the era of economic liberalisation, privatisation and globalisation did not envisage the challenge of climate change. These rather myopically focused on growth in trade and investment.   Thus, whereas trade and investment did grow under the extant institutional regime, their ecological sustainability was compromised.

The ability of the MNCs to wrestle national policy regimes in their favour only worsened things.

The paper argues that the debate about whether MNCs are a boon or bane for sustainable development anywhere has now outlived its utility. Instead, there is a need to contemplate institutional change that will foster the pro-planet behaviour of the MNCs. It then proceeds to elaborate on the contours of institutional changes for the SDG-driven governance of MNCs.