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Ethics and Sustainability

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Presentation on theme: "Ethics and Sustainability"— Presentation transcript:

1 Ethics and Sustainability
by Jeff Civins* (512) April 15, 2010 Air & Waste Management Association Central Texas Chapter Austin, Texas *Thanks to Walt Shelton for his valuable insights.

2 Overview Corporate Sustainability Carbon Management
Ethical Considerations Legal Corporate Ethics, Sustainability, and Business

3 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 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 Presently there is no common currency for quantifying social and environmental aspects of CSR and weighing them against each other.

6 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 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 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 ISO (cont’d) 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 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 company’s environmental footprint, minimizing its impact on future generations

11 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 Section 102 of NEPA directs that,
“to the fullest extent possible,” the policies, regulations, and laws of the US be interpreted and administered with NEPA’s policies.

13 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 EMS includes: Eco-Labeling Environmental auditing
Life cycle assessment Environmental performance evaluation Environmental aspects in product standards

15 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 Presently there is no common currency for quantifying various aspects of sustainability and weighing them against each other.

17 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 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 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 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 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 Voluntary Measures to Reduce Carbon
Low CO2 Emission Fuel Energy Conservation & Efficiency - CO2 Raw Materials & Fuel Transport Low CO2 Emission Fuel or Alternative Energy Alternative Energy - CO2 Manufacturing + CO2 Fossil Fuel Energy Product Distribution, Use & Disposal + CO2 + CO2 + CO2 + CO2 - CO2 - CO2 - CO2 Material Reuse & Recycle Other Transportation-related Options Carbon Capture Treatment Creation or Purchase of Offsets or Renewable Energy Credits - CO2 Waste Transport & Disposal Carbon Storage Beneficial use, e.g., Enhanced Oil Recovery + CO2

23 Presently there is no common currency for quantifying carbon offsets and weighing them against each other.

24 How does ethics relate to sustainability?

25 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-anthropocentric—what intrinsic value does a resource have, e.g., do or should trees have standing? Perhaps more consistent with views of eastern religions.

26 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 The Relationship of Morals, Ethics, and Law

28 Examples of Differences
It may be moral for a lawyer to disclose a client’s conduct regarding that client’s 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 individual’s 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 Legal Ethics

30 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 (9th Cir. 1999). “Responsible Corporate Officials” may be held personally responsible criminally based on their authority to exercise control over a corporation’s activity. See U.S. v. Iverson, 162 F.3d 1015 (9th Cir. 1998).

31 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 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 A sampling of Ethical Issues confronting Environmental Attorneys (cont’d)
Whom does the environmental lawyer represent when the client corporation’s 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 What are ethical issues relating to ex parte communications?
A sampling of Ethical Issues confronting Environmental Attorneys (cont’d) 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 Corporate Ethics

36 Historical Hierarchy of Corporate Environmental Policies
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 Defensive Proactive

37 Corporate Ethics Despite the Supreme Court’s 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 Who are the stakeholders in corporate decision-making?
Investors Customers Non-governmental Organizations (NGOs) Lenders Insurers Media Public at Large Under customers make sure we touch on the ideas of (1) the ultimate consumer making buying decisions and how FTC plays into that; and (2) the Wal-Mart situation of a company driving a standard onto its suppliers

39 Arguments Against CSR/Corporate Sustainability
A corporation’s focus should be on increasing shareholder value and those other stakeholders, such as governments, individual, and NGO’s, 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 company’s 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 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. It’s the right (ethical) thing to do.

41 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 don’t do well by doing good.”

42 Risks associated with Green Marketing
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.

43 Reputational Issues Associated with Green Marketing

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


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 Ethics and Sustainability
by Jeff Civins (512) April 15, 2010 Air & Waste Management Association Austin, Texas

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