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Potential mechanisms for the social regulation of economies on global and local scales: an institutional analysis of ESG investment and community renewables

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Abstract

Under economic globalization, the ruling power of national institutions has been weakened. This poses an important question regarding how social regulation of the economy can be achieved in multilayered spatial scales ranging from local to global. Two recently emerging movements—global ESG investment and local community renewables—warrant attention as potential institutions for such regulation. Drawing on the régulation approach, this article analyzes these two movements to consider their significance and potential. ESG investment, driven by a coalition of NGOs and pension funds, reflects environmental and social concerns in global finance, which is the core of the current finance-led growth regime. Community renewables, meanwhile, by utilizing local natural resources with the participation of the local residents, create businesses that contribute to entrepreneurial regional development, which has been necessary since the end of Fordism. Both of these can be understood as the civil-society-led movements that directly incorporate environmental and social interests into dominant institutional forms under “glocalization.” These two movements can be considered viable, since they are compatible with current growth patterns. However, neither of the movements can achieve transformative changes for sustainability on its own, since each depends on external factors. That said, it is conceivable that individual/local actions and the global competitive environment could interact and produce cumulative change (i.e., coevolve). States will play an important role in this process by advancing such actions through national institutions.

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Notes

  1. Boyer et al. (2018) described the current global economic structure as the “growing interdependence of diverse capitalisms” instead of simple “globalization”.

  2. In this article, we use the term “social regulation of economies” as a synonym for the term “régulation” in the French régulation approach.

  3. Discussing the relationship between global, regional, and national, Boyer et al. (2018) suggested that “[f]inding new ways to reconcile polity and economy is the key challenge.… It sets an ambitious research agenda for the régulation theory, socioeconomics, and almost all social sciences”.

  4. This target is conceptualized in terms of each region making use of regional resources and building a self-reliant and decentralized society. While its official translation is “Circulating and Ecological Economy,” this article uses the term “Circulating and Ecological Local Economy” to better reflect the concept.

  5. This article places its primary focus on developed economies and institutional forms there.

  6. This figure was designed with reference to a table in Peck and Tickell (1992).

  7. This arrangement was made in line with propositions by Becker and Raza (1999) and Okuma (2012).

  8. This paper uses the term “entrepreneurial” as an adjective preceding not only “city” but also “region” to convey that local regions, including rural areas, also adopt policies of an entrepreneurial nature to survive the competitive environment (see Jessop 1997).

  9. For the sake of simplicity, the spatial scale of the region (beyond the nation-state) is not specified in the horizontal axis in the figure.

  10. It should be noted that there still be other ongoing projects in spite of the trend of ESG investment.

  11. This movement, particularly in Japan, while emphasizing renewables as a breakthrough, aims for sustainable local development through the wise use of wider natural resources, including “Satoyama” (village forest) forestry and “Satoumi” (inshore) fishery. Keeping this wider context in mind, we will now focus on community renewables for simplicity.

  12. This method was first used by an NPO in the Hokkaido region in a wind power project and was then applied to solar projects in Iida city.

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Acknowledgements

The author would like to thank anonymous reviewers for valuable comments and suggestions. A part of this study was supported by the Japan Society for the Promotion of Science (JSPS) KAKENHI grant Number JP16K12656.

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  1. School of Public Policy, Tohoku University, 27-1 Kawauchi, Aoba-ku, Sendai, 9808576, Japan

    Kazuhiro Okuma

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Okuma, K. Potential mechanisms for the social regulation of economies on global and local scales: an institutional analysis of ESG investment and community renewables. Evolut Inst Econ Rev 16, 523–541 (2019). https://doi.org/10.1007/s40844-019-00133-5

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