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©2004 Haynes and Boone, LLP Ethics and Sustainability by Jeff Civins* (512) 867-8477 April 15, 2010 Air & Waste Management.

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Presentation on theme: "©2004 Haynes and Boone, LLP Ethics and Sustainability by Jeff Civins* (512) 867-8477 April 15, 2010 Air & Waste Management."— Presentation transcript:

1 ©2004 Haynes and Boone, LLP Ethics and Sustainability by Jeff Civins* jeff.civins@haynesboone.com (512) 867-8477 April 15, 2010 Air & Waste Management Association Central Texas Chapter Austin, Texas *Thanks to Walt Shelton for his valuable insights.

2 © 2004 Haynes and Boone, LLP Overview Corporate Sustainability Carbon Management Ethical Considerations –Legal –Corporate Ethics, Sustainability, and Business

3 © 2004 Haynes and Boone, LLP What does sustainability mean? Sustainability means meeting the needs of the present without compromising the ability of future generations to meet their own needs. Sustainability entails: The continual improvement of business operations to ensure long term resource availability through environmental, socially sensitive, and transparent performance as it relates to consumers, business partners, and the community. - U.N. Brundtland Commission Report (1987)

4 © 2004 Haynes and Boone, LLP Corporate Sustainability & Corporate Social Responsibility The term sustainability as applied to corporations is often used interchangeably with the term corporate social responsibility (CSR). Both are sometimes described as addressing financial, social, and environmental concerns - - the so-called triple bottom line. The notion is that corporations should have objectives that sweep more broadly than making money.

5 © 2004 Haynes and Boone, LLP Presently there is no common currency for quantifying social and environmental aspects of CSR and weighing them against each other.

6 © 2004 Haynes and Boone, LLP Trends -- Wal-Mart Sustainability Index On July 16, Wal-Mart, with $406 Billion in revenues in 2009, announced it is developing a sustainability index using a sustainability consortium. It will result in uniform labeling that will focus on: –Energy and Climate (GHG emissions) –Material Efficiency –Natural Resources –People and Communities

7 ©2004 Haynes and Boone, LLP Supplier Sustainability Assessment: 15 Questions for Suppliers Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions 1. Have you measured your corporate greenhouse gas emissions? 2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)? 3. What is your total annual greenhouse gas emissions reported in the most recent year measured? 4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets? Material Efficiency: Reducing Waste and Enhancing Quality 1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured. 2. Have you set publicly available solid waste reduction targets? If yes, what are those targets? 3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured. 4. Have you set publicly available water use reduction targets? If yes, what are those targets? Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials 1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety? 2. Have you obtained 3rd party certifications for any of the products that you sell to Walmart? People and Community: Ensuring Responsible and Ethical Production 1. Do you know the location of 100 percent of the facilities that produce your product(s)? 2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production? 3. Do you have a process for managing social compliance at the manufacturing level? 4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements? 5. Do you invest in community development activities in the markets you source from and/or operate within?

8 © 2004 Haynes and Boone, LLP ISO 26000 (Draft) Social Responsibility ISO, the International Organization for Standardization, has launched the development of an International Standard providing guidelines for social responsibility. The standard is intended to insure that organizations take responsibility for the impact of their activities on society and the environment. It provides guidance on conducting activities in a manner that is consistent with the interest of society and sustainable development and is based on ethical behavior and compliance with applicable law.

9 © 2004 Haynes and Boone, LLP ISO 26000 (contd) The standard addresses social responsibility issues related to: –the environment –human rights –labor practices –organizational governance –fair business practices –community involvement –social development –consumer issues

10 © 2004 Haynes and Boone, LLP Corporate Sustainability v. Corporate Responsibility For our purposes, we will use the terms corporate social responsibility or CSR to refer to the broader concept of the triple bottom line, and corporate sustainability to focus on environmental aspects, minimizing the companys environmental footprint, minimizing its impact on future generations

11 © 2004 Haynes and Boone, LLP Sustainability as a National Policy Section 101 of the National Environmental Policy Act (NEPA) Declares it the continuing policy of the federal government to, among other things, create and maintain conditions under which man and nature can exist in productive harmony. Directs federal agencies to carry out their responsibilities so that the Nation may, among other things, fulfill the responsibilities of each generation as trustee for the environment for succeeding generations.

12 © 2004 Haynes and Boone, LLP Section 102 of NEPA directs that, to the fullest extent possible, the policies, regulations, and laws of the US be interpreted and administered with NEPAs policies.

13 © 2004 Haynes and Boone, LLP ISO 14000 Environmental Management Standards (EMS) ISO developed EMS that focus on policies and management rather than on performance The standard contemplates commitment to compliance, continued improvement, and prevention of pollution It involves –Planning –Implementation and operations –Checking and corrective action –Management review

14 © 2004 Haynes and Boone, LLP EMS includes: Eco-Labeling Environmental auditing Life cycle assessment Environmental performance evaluation Environmental aspects in product standards

15 © 2004 Haynes and Boone, LLP Aspects of Sustainability Waste reduction, reuse, and recycling Reduction in impacts on environment Use and generation of less toxic materials Reduction in water use Reduction in energy use Reduction in use of resources Carbon management

16 © 2004 Haynes and Boone, LLP Presently there is no common currency for quantifying various aspects of sustainability and weighing them against each other.

17 © 2004 Haynes and Boone, LLP Sustainability of Energy Sources Fossil fuel energy cannot be sustainable. Solar, biomass, wind, and tidal energy are sustainable. Nuclear is less sustainable than alternatives but more so than fossil fuels.

18 © 2004 Haynes and Boone, LLP What is the relationship of carbon management to sustainability? Carbon management is but one aspect of sustainability, but carbon management is the present focus of regulatory attention. A carbon-only focus may result in unintended impacts on other aspects of the environment. Companies should take a holistic view and consider overall environmental impacts of their activities in the development of their carbon management strategies.

19 © 2004 Haynes and Boone, LLP What is meant by the term carbon? Greenhouse gases (GHGs) are commonly referred to collectively as carbon. Carbon is shorthand for carbon dioxide, which is considered to be the most important GHG and which is the GHG to which other GHGs are compared.

20 © 2004 Haynes and Boone, LLP Indirect v. Direct Sources of GHGs Direct sources of GHGs generally will be subject to regulation, e.g., refineries, power plants, chemical plants. Indirect sources of GHGs generally are driven to control carbon by market forces rather than by regulation, e.g., big box retailers.

21 © 2004 Haynes and Boone, LLP Examples of voluntary measures to reduce carbon Alternative Energy* Alternative Fuels* Energy Conservation* Energy Efficiency* Recycle/Reuse* Carbon Treatment Carbon Capture –Storage –Beneficial Use, e.g., enhanced oil recovery* Carbon Offsets –Controlled Emissions –Alternative Projects *Of value independent of climate change considerations

22 © 2004 Haynes and Boone, LLP Voluntary Measures to Reduce Carbon Low CO 2 Emission Fuel Energy Conservation & Efficiency Product Distribution, Use & Disposal Carbon Capture Treatment Creation or Purchase of Offsets or Renewable Energy Credits Carbon Storage Beneficial use, e.g., Enhanced Oil Recovery - CO 2 + CO 2 Alternative Energy Fossil Fuel Energy Material Reuse & Recycle Waste Transport & Disposal Raw Materials & Fuel Transport Manufacturing Low CO 2 Emission Fuel or Alternative Energy + CO 2 - CO 2 Other Transportation- related Options - CO 2

23 © 2004 Haynes and Boone, LLP Presently there is no common currency for quantifying carbon offsets and weighing them against each other.

24 © 2004 Haynes and Boone, LLP How does ethics relate to sustainability?

25 © 2004 Haynes and Boone, LLP From what perspective do we view the concept of sustainability? Anthropocentric--what instrumental value does a resource have, i.e., what does or can a resource do for man? –a Judeo-Christian view –a regulatory view, e.g., NRD assessments focus on, among other things, services a resource provides Non-anthropocentricwhat intrinsic value does a resource have, e.g., do or should trees have standing? Perhaps more consistent with views of eastern religions.

26 © 2004 Haynes and Boone, LLP Morals, Ethics, and Law Morals--of, pertaining to, or concerned with the principles or rules of right conduct (by an individual) or the distinction between right and wrong; may be grounded in religion Ethics--the rules of conduct recognized in respect to a particular class of human actions or a particular group or culture, e.g., legal or business ethics Law--any written or positive rule or collection of rules prescribed under the authority of the state or nation

27 © 2004 Haynes and Boone, LLP The Relationship of Morals, Ethics, and Law Morals Law Ethics

28 © 2004 Haynes and Boone, LLP Examples of Differences It may be moral for a lawyer to disclose a clients conduct regarding that clients involvement in a crime, but it may be unethical. It may be legal to eat meat or other living things, but whether it is moral will depend on the individuals values and whether it is ethical, on the group to which the individual belongs. It may have been moral for an individual to engage in a sit-in to protest segregation, but it may have been illegal.

29 © 2004 Haynes and Boone, LLP Legal Ethics

30 © 2004 Haynes and Boone, LLP Environmental Law involves Public Health and Welfare Administrative and civil penalties are based on strict liability. Criminal liability for some statutes, e.g., the Clean Water Act, is predicated on simple negligence. See U.S. v. Hanousek, 176 F.3d 1116 (9 th Cir. 1999). Responsible Corporate Officials may be held personally responsible criminally based on their authority to exercise control over a corporations activity. See U.S. v. Iverson, 162 F.3d 1015 (9 th Cir. 1998).

31 © 2004 Haynes and Boone, LLP Ethics and Environmental Law The ethics rules that apply to the legal profession should also serve the public interest generally... Issues of Legal Ethics in the Practice of Environmental Law, Irma Russell, ABA SEER (2003) p. xix. The practice of environmental law, because it involves public health and welfare, may impose additional ethical responsibilities on lawyers. Environmental laws reflect philosophical values and the need to conserve and protect the environment for its inherent value as well as for utilitarian reasons. Id. at xvi.

32 © 2004 Haynes and Boone, LLP A Sampling of Ethical Issues Confronting Environmental Attorneys What role does moral judgment apply in resolving ethical issues? Do governmental attorneys have greater ethical responsibilities than their peers in private practice because of their mission to protect the public interest? TDRPC §1.12 What are unique ethical issues in-house counsel face? TDRPC §1.12

33 © 2004 Haynes and Boone, LLP A sampling of Ethical Issues confronting Environmental Attorneys (contd) Whom does the environmental lawyer represent when the client corporations contact is responsible for violations and what reporting obligations does the lawyer have to the corporation? TDRPC §1.12 What ethical responsibilities/conflicts do environmental lawyers have when they obtain knowledge that the conduct of their client or a condition of which their client is aware may endanger public health or, the environment? TDRPC §§1.02(d) and 1.05(e) What ethical responsibilities does an environmental lawyer have when his/her client ignores his/her advice?

34 © 2004 Haynes and Boone, LLP A sampling of Ethical Issues confronting Environmental Attorneys (contd) What ethical responsibilities does attorney have to court and agency? TDRPC §3.03 What are ethical issues relating to ex parte communications? See Ethics Opinion 587 TDRPC §3.05 Texas Penal Code §36.04

35 © 2004 Haynes and Boone, LLP Corporate Ethics

36 © 2004 Haynes and Boone, LLP Historical Hierarchy of Corporate Environmental Policies Compliance Risk Management Corporate Sustainability Compliance focus on avoiding regulatory liability Risk Management focus on avoiding regulatory, common law, and Superfund- type liabilities Corporate Sustainability focus on integrating environmental considerations into corporate decision- making with objective of minimizing environmental footprint Proactive Defensive

37 © 2004 Haynes and Boone, LLP Corporate Ethics Despite the Supreme Courts recent ruling in Citizens United v. Federal Election Commission, corporations are not individuals. Corporations are subject to laws that arguably deal with right and wrong, e.g., Sarbanes Oxley, but whether they are or should be subject to ethical codes is not clear. For example, some say the business of business should be business; others say businesses do have social responsibilities. Corporations have responsibilities to shareholders to increase profits; the issue is whether and to what extent they may consider other interests, including those of other stakeholders.

38 © 2004 Haynes and Boone, LLP Who are the stakeholders in corporate decision-making? Investors Customers Non-governmental Organizations (NGOs) Lenders Insurers Media Public at Large

39 © 2004 Haynes and Boone, LLP Arguments Against CSR/Corporate Sustainability A corporations focus should be on increasing shareholder value and those other stakeholders, such as governments, individual, and NGOs, are better equipped to address social and environmental concerns. Social and environmental benefits are more likely to be realized if corporations focus on what they do best. There is the potential for legal exposure if a companys social and environmental programs undercut its ability to profitably conduct its core business or are inconsistent with shareholders reasonable expectations, based on prior representations.

40 © 2004 Haynes and Boone, LLP Arguments For CSR/Corporate Sustainability Socially and environmentally progressive policies positively affect the bottom line--in numerous ways: –preempting of potentially burdensome regulatory requirements; –improvement of public image; –increased sales, investment, productivity, and employee satisfaction; –development of new business opportunities; and –cost-savings in reducing energy demands and environmental risks and expenses. Its the right (ethical) thing to do.

41 © 2004 Haynes and Boone, LLP NY Times (1/19/2008) article suggests: There is only a very small correlation between socially responsible behavior and good financial results and Companies can do good and do well, even if they dont do well by doing good.

42 © 2004 Haynes and Boone, LLP To realize business advantage of these policies, corporations must publicize them. But there are risks associated with public representation. To the extent a company falls short of written public commitments, including commitments regarding suppliers, there is the potential for regulatory and private litigation based on, among other things, fraudulent statements involving securities, as well as for negative publicity and reputational risk. Risks associated with Green Marketing

43 © 2004 Haynes and Boone, LLP Reputational Issues Associated with Green Marketing

44 © 2004 Haynes and Boone, LLP Legal risks associated with green marketing? State Deceptive Trade Practice Acts/Common Law, e.g., Nike v. Kasky FTC – Green Guides SEC – Interpretive Guidance

45 © 2004 Haynes and Boone, LLP

46 Conclusions Sustainability may include economic, social, and environmental aspects Environmental aspects of sustainability include a number of factors. Corporate sustainability may make good business sense. Sustainability may be an ethical imperative. There are business and legal risks associated with a commitment to sustainability.

47 ©2004 Haynes and Boone, LLP Ethics and Sustainability by Jeff Civins jeff.civins@haynesboone.com (512) 867-8477 April 15, 2010 Air & Waste Management Association Austin, Texas


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