Encouraging Sustainable Business
posted by Judd Sneirson
Sustainability, according to the Brundtland Report, entails “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Businesses can act sustainably by treading lightly on the planet, and by developing products, services, and technologies that contribute to larger societal efforts to live more sustainably. The business literature describes this as focusing on the “triple bottom line”: how the company is doing financially, how the company is doing environmentally, and how the company is doing socially. Thus, sustainable businesses are managed with an eye toward profit, people, and the planet.
If corporate law permits but does not require firms to act sustainably, how can we encourage corporations to be more sustainable? Corporate law reform is one possibility, although I am skeptical whether either Congress or the Delaware legislature would force sustainability on corporations. Tax incentives are more likely, and the forthcoming Senate climate change legislation may well include carbon taxes or a cap and trade system that would increase corporate attention to the environment. The recent SEC guidance on climate change reporting likewise encourages, but does not force, corporations to act more sustainably, and while many companies currently voluntarily engage in triple bottom line reporting, I doubt the SEC would go there any time soon.
The market, for its part, seems to encourage sustainable business practices; energy and resource efficiency are two areas typically ripe for cutting costs, and consumers will often pay more for sustainable goods and services. One interesting trend along these lines is private certification labels that highlight, for consumers mostly, firms’ sustainability commitments. The B Corporation certification and mark is one popular example of this: a firm qualifies according to the organization’s sustainability survey, inserts sustainability language in its corporate charter, and pays a modest fee in exchange for use of the B Corporation mark. (LEED building certifications and the Forest Stewardship Council offer similar examples, and I’ve developed a public law version for state legislatures to consider.) We shall see whether this trend continues to catch on and what other innovations develop to encourage sustainable business.