Green Building Law Update

Environmental Law and Sustainability for Business

Rooney Rule Revised Provides ESG Opportunity

By Stuart Kaplow on April 3, 2022 Posted in ESG, Sustainability

Last Monday the NFL announced at the owners meeting that it had approved adjustments to the Rooney Rule, first adopted in 2003, “to enhance opportunities for people of color and women for nearly all league and team jobs.”

As companies, most that are far afield from the NFL, look to have a positive impact on the world, in increasing numbers addressing ESG governance factors, many businesses are striving to address inequality, including matters of unequal access, historical racism, gender discrimination, lack of inclusion and more.

It strikes us that the response to inequality should be as easy as “treat others the way they want to be treated” (.. yes, the Platinum Rule is the Golden Rule, where you treat people the way ‘you’ want to be treated, gone one step further).

But, we well recognize that ESG is an emergent and fast growing space where there are few laws, so in addressing matters of inequality, it is often ideal that companies seek out a good example of a race neutral measure that promotes business diversity and can be replicated. The Rooney Rule is widely suggested, and while not perfect, can be adapted for use by many organizations.

The Rooney Rule, named for Dan Rooney, the late owner of the Pittsburgh Steelers, responds to the problem within the NFL where despite that more than 70% of the league’s players are Black, with no Black owners and only two minority owners, and minority candidates do not have equal access to coaching and front office opportunities. The rule encourages “hiring best practices to foster and provide opportunity to diverse leadership” throughout the NFL, with the specific aim of increasing the number of minorities hired in head coach, general manager, and executive positions.

The NFL has tinkered with the Rooney Rule several times since the embarrassing hiring cycle following the 2019 season when just one of five coaching vacancies was filled by a person of color.

In 2021, the NFL approved changes requiring every team to interview at least two external minority candidates for open head coaching positions and at least one external minority candidate for a coordinator job. Additionally, at least one minority and/or female candidate must be interviewed for senior level positions (e.g., club president and senior executives). Practices like this are easily emulated across business sectors looking for good ESG governance practices.

With the most recent 2022 change to the Rooney Rule, beginning this season, all 32 football teams must actually employ a female or a member of an ethnic or racial minority to serve as an offensive assistant coach.

It may be a fair criticism of the Rooney Rule that today there is one fewer Black coach than when the rule was implemented in 2003.

Another commonly cited example of a race neutral measure that responds to inequality and promotes corporate diversity is the Security and Exchange Commission’s own internal self-assessment tool, available on its website, for evaluating the diversity policies and practices of entities regulated by the agency. Some businesses, including companies not subject to SEC regulation use the agency’s tool.

We do caution that all that has come before is not good or ideal including by way of example, a company may not want to emulate California’s racial, ethnic and LGBT quotas for company boards created in AB 979 that have Equal Protection Clause problems and recently been ruled unconstitutional. Maryland’s HB 2021-1210, currently with its regulations still pending is also constitutionally challenged. So, maybe stay away from government mandates and look to good private section initiatives.

We are regularly asked if there is a checklist for ESG compliance and while there is not, good guidance is often available by emulating best practices in other industries and copying what others have done before also mitigates risk while addressing the “G” in ESG.

As companies look to repair the world, whether their immediate interest is ESG disclosure or not, in 2022 businesses must strive to address inequality, including matters of unequal access, historical racism, gender discrimination, lack of inclusion and more. And maybe we all should treat others the way they want to be treated.

ESG has become such a large component of my law practice that I am now collaborating with a fabulous group of attorneys in ESG Legal Solutions, LLC, a new law consulting firm. Nancy Hudes and I are now publishing a new blog at www.ESGLegalSolutions.com (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from policy to project implementation (.. including GHG emission disclosures in response to the new SEC rule), do not hesitate to reach out to me.

SEC Climate Risk Rule is Transformative At a Cost

By Stuart Kaplow on March 27, 2022 Posted in ESG, GHG, greenhouse gas

Last Monday, the U.S. Securities and Exchange Commission voted 3 to 1 to issue a long awaited proposed new rule to mandate climate risk disclosures by public companies and other businesses in their supply chains.

The 510 page proposed rule will require public companies to include climate related disclosures in their registration statements and periodic reports such as 10-K annual reports, including information about climate related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate related financial statement metrics in a note to their audited financial statements. Most significant in this rule is that for the first time SEC mandated information about climate related risks will expressly include disclosure of a business’ greenhouse gas (GHG) emissions.

There are of course existing SEC rules that require companies to disclose material risks regardless of the source or cause of the risk, including climate risks. In 2010, the SEC issued guidance to companies advising how to apply existing disclosure rules in the context of climate change and last year supplemented that with additional climate change disclosure guidance. SEC staff, in reviewing nearly 7,000 annual reports submitted in 2019 and 2020, found that a third included some disclosure related to climate change risk (where presumably after consideration the other two-thirds concluded there was no material climate change risk requiring disclosure).

In point of fact, for more than 10 years we have been advising companies and their consultants about SEC climate change disclosures, and last year wrote a blog post describing how in anticipation of this now published rule there had been, A Sea Change in SEC Climate Change Disclosure.”

But a sea change is too modest a characterization of this new rule. This is profound and transformative potentially dwarfing all other existing SEC required disclosures. SEC Commissioner Hester M. Peirce, the sole Republican and dissenter having voted against this rule, said, “We are here laying the cornerstone of a new disclosure framework that will eventually rival our existing securities disclosure framework in magnitude and cost and probably outpace it in complexity.”

The rule, which SEC Chair Gary Gensler acknowledges is based on the U.K. Net Zero Strategy, will require companies to disclose information about (1) the company’s governance of climate related risks and relevant risk management processes; (2) how any climate related risks identified by the company have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short, medium, or long term; (3) how any identified climate related risks have affected or are likely to affect the company’s strategy, business model, and outlook; and (4) the impact of climate related events (severe weather events and other natural conditions) and transition activities on the line items of a company’s consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements.

But the reason this rule is consequential for business is that it will also require a company to disclose information about its direct GHG emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2). In addition, a company will be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3, and not defined in this rule), if material or if the company has set a GHG emissions target or goal that includes Scope 3 emissions (e.g., including if a company has committed to be carbon neutral by 2030, or the like [something that is today de rigueur]). The rule proposes a safe harbor for liability from Scope 3 emissions disclosure and an exemption from the Scope 3 emissions disclosure requirement for smaller reporting companies.

Under the rule accelerated filers and large accelerated filers would be required to include an attestation report from an independent attestation service provider covering Scopes 1 and 2 emissions disclosures, with a phase-in over time, “to promote the reliability of GHG emissions disclosures.” We have provided those services reliably for more than a decade and will be providing them under this mandatory rule.

The proposed rules would include a phase-in period for all companies, with the compliance date dependent on the company’s filer status, and an additional phase-in period for Scope 3 emissions disclosure, starting for fiscal year 2023 filed in 2024.

Nearly all, if not every company, including non public companies that are in the supply chain of a public company, will incur new and significantly greater time, effort and costs in complying with this new rule, including at a minimum in calculating GHG emissions.

Addressing ESG governance factors, this rule specifically requires disclosure of, among other matters, processes for how boards and management are informed of and make determinations about climate risks; all in a similar structure as the recent cybersecurity rule.

Comments on this proposed rule are due 30 days after publication in the Federal Register or May 20 (which is 60 days after issuance), whichever is later.

This rule is maybe best described as a big hairy audacious goal toward mandatory ESG disclosure. There are very real questions about what will ultimately be implemented after judicial challenges, complimentary actions by other nations, not to mention what the SEC will do after what is expected to be robust public comment.

What is clear, is that nearly all, if not every business will incur new and significantly greater costs in complying with this new rule, including at a minimum calculating GHG emissions that will dwarf the cumulative existing SEC disclosure requirement for public companies. Climate change will no longer be reduced to a footnote in a third of annual reports, but rather will require yearlong work efforts that will result in more robust annual reporting by all businesses.

All of which makes this new environmental rule an overarching environmental disclosure mandate all embracing of ESG, the biggest business opportunity in history, waiting to be unlocked.

If there is a takeaway, today, businesses across America should begin to read the more than 500 page rule, or better yet immediately begin to quantify their GHG emissions or in the alternative engage a consultant to develop a plan for GHG disclosures. Give us a call.

ESG has become such a large component of my law practice that I am now collaborating with a fabulous group attorneys in ESG Legal Solutions, LLC, a new law consulting firm. Nancy Hudes and I are now publishing a new blog at www.ESGLegalSolutions.com (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from policy to project implementation, do not hesitate to reach out to me.

Modern Slavery a Key ESG Factor

By Stuart Kaplow on March 20, 2022 Posted in ESG, Solar Panel, Sustainability

Slavery exists today. The British government recently reported there are more enslaved people today than there have been at any time in history!

And if you doubt that modern slavery is here and now, 20 days ago, on March 1st, U.S. Customs and Border Protection officers seized four shipments of palm oil at the port of Baltimore because the palm oil was produced at the Sime Darby Plantation Berhad in Malaysia by forced or indentured labor, a form of modern slavery.

“There is no place for forced labor in today’s world, and Customs and Border Protection stands firm against foreign companies that exploit vulnerable workers,” said Marc Calixte, CBP’s Acting Area Port Director in Baltimore. “CBP will continue to ensure that goods made with forced labor do not enter our nation’s commerce and we will help to root out this inhumane practice from the U.S. supply chain.”

Modern slavery is broadly defined to cover all forms of forced labour. This exploitation involves a lack of consent, with victims unable to refuse or leave because of threats, violence, coercion, deception or abuse of power.

There are more than 40 million people in modern slavery.”

One in four victims of modern slavery are children.

And less than two tenths of one percent of victims of modern slavery are rescued each year.

The UK Independent Anti Slavery Commissioner describes that modern “slavery exists in every industry, in every country in the world,” yet in the United States where slave labour valued at more than $150 Billion annually exists, there is a low level of awareness of the prevalence of slavery.

A business having a statement on its website that it is concerned about human rights or slavery may sound nice, but in 2022 when so many are talking about ESG, that mere averment will not resonate and quite frankly falls short of decency and what a private enterprise should be doing to protect this most basic human right.

Claims by businesses about human rights including that no slaves or indentured servants are involved in manufacturing a product or its supply chain are not new, and have been prevalent in some form since at least the 1660s when the Quakers in England included those representations in promoting their confectionary businesses.

But today more is expected of business.

We work with companies giving them the tools to “stop slavery in our lifetime” from initial baseline risk assessments to confidential business audits including supply chain roadmapping and drafting written policies and modern slavery statements as well as to trainings and a broad breadth of other services to support antislavery processes.

But those tools are little utilized in the U.S. even as ESG is a cause celebre. The “S” (social) factors in ESG are among least measured factors in corporate sustainability despite being among the most impactful.

Widely cited as a checklist for Social factors are the first six of the ten principles of the UN Global Compact with human rights and labour rights being key. For example, among the Compact principles is “the elimination of all forms of forced and compulsory labour.”

That sounds simple enough, but how then are there more enslaved people today than there have been at any time in history?

Moreover, the widely accepted definitions of modern slavery expressly exclude “state imposed forced labour”, one of the issues most impactful and widely discussed ESG factors this year: As companies look to their supply chains for violations of human rights and slavery, companies are including express language overcoming the presumption under the new Federal Uyghur Forced Labor Prevention Act (still being phased in) under which all “products produced in the Xinjiang region of China [where more than 80% of the world’s solar panels are sourced] are barred from importation into the United States” and concerned about the S (social) in ESG where China’s repression of the Uyghur minority is such that it amounts to genocide according to the U.S. government and The Group of Seven.

There are few laws in the ESG space, but we have for years worked with businesses in their disclosures required by the California Transparency in Supply Chains Act of 2010 describing their “efforts to eradicate slavery and human trafficking from [their] direct supply chain for tangible goods offered for sale.”

Despite that the California law is more than a decade old it is only in 2022 that modern slavery is becoming a litmus test for investors, consumers and other stakeholders in the U.S.

The British and the EU currently lead the world in these concerns and the EU Parliament voted a year ago this week, on March 10, 2021, to adopt mandatory legislation requiring human rights due diligence including for many U.S. companies selling in the EU.

On the day this blog was drafted, the state of Maryland adopted the requirement that all public funded construction,

be designed and constructed to not include goods made with forced labor in supply chains. The project must seek to address human rights, protecting against social justice abuses (the “S” in ESG) at every stage, from extraction of raw materials to building erection.”

And human rights and ethical labor are becoming widely considered and articulated in ESG disclosures in 2022 by clients of this firm.

But today’s ESG statements are only a quick dopamine hit for the individual business, and quite frankly are not doing enough as is clear that there are more slaves than at any time in history. The ideal of social equity can be traced back to the works of Aristotle and while definitions vary and have evolved over thousands of years, nearly all would agree humanity has not done enough, including purporting to address Social as one of the three component parts of ESG.

Slavery has existed since ancient times and despite having been outlawed in every country in the world, contemporary slavery exists. At a time when ESG has become synonymous with sustainability and companies are coming to recognize that investors and stakeholders want to buy into businesses that protect the environment, those companies must aggressively consider not only the legal risk, reputational risk, but also the financial risk that people also want to buy into companies that protect people. Additionally, it is suggested in the U.S. it is better to do the right thing, now, rather than be forced to do so by impending ESG laws.

There is no morally defensible reason for not doing everything in our power to end modern slavery and human trafficking. All businesses, whether in pursuit of the S in ESG or in striving to repair the world, must examine and assess their business practices now.

ESG has become such a large component of my law practice that I am now collaborating with a fabulous group attorneys in ESG Legal Solutions, LLC, a new law consulting firm. Nancy Hudes and I are now publishing a new blog at www.ESGLegalSolutions.com (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from policy to project implementation, do not hesitate to reach out to me.

SEC Chair Tweets about Upcoming ESG Regulation

By Stuart Kaplow on March 13, 2022 Posted in Codes and Regulations, ESG, Federal, Sustainability

ESG law is emergent and fast evolving such that today, the best sources are blogs and Twitter, not bound statutes and printed law reviews.

Last week U.S. Securities and Exchange Commission Chair Gary Gensler Tweeted about the future of ESG regulation.

You do not need to be a futurist to know that SEC regulation of ESG is coming although precisely when has been unclear, however, it is now apparent that the SEC will release a proposal at its March 21 Open Meeting. The last formal remarks on ESG by Gensler were on July 28, 2021 before the European Parliament and focused almost exclusively on greenhouse gas emissions to the detriment of other ESG factors. So, much can be gleaned from his Tweet last week, just days before the Open Meeting announcement about the “Enhancement and Standardization of Climate-Related Disclosures for Investors.”

Gensler Tweeted, with an embedded video from the SEC’s YouTube channel,

If it’s easy to tell if milk is fat-free by just looking at the nutrition label, it might be time to make it easier to tell if “green” or “sustainable” funds are really what they say they are.”

Significantly, he did not suggest new statutes or legislative action by Congress, but rather a regulatory act by the SEC. It is worthy of note the SEC has broad authority and it is difficult to conceive that the independent agency could exceed the powers granted to it (.. which is very different than the current Supreme Court challenge in West Virginia v. EPA that the executive agency exceeded its authority granted in 1970, when it was created, by now regulating greenhouse gases a pollutants).

Gensler’s Tweet describes that the new SEC effort might “build upon” the existing naming rules and conventions authorized by the Investment Company Act of 1940. Those rules prescribe that an investor should be able to tell what an investment firm does by the name of the fund.

And it should not be lost on anyone that the ESG space is far larger than only investment funds so this action all but certainly portends more and additional regulation by the Federal government, by states and by sovereigns around the globe. This may be a good step toward striking a balance by modifying and updating existing regulations versus enacting entirely new statutory systems.

Continuing with the analogy to fat free milk, Gensler described that an investor in a fund making ESG claims should be like a supermarket shopper reading a food box label for the “ingredients underlying these funds.” In the earlier talk to the European Parliament committee he spoke approvingly about the U.K. Net Zero Strategy, which may well be the basis of a new SEC requirement for funds to “disclose the criteria and underlying data they use in” in ESG investing. Which is consistent with his Tweet now describing that the public should be able to determine, “is a fund really what they say they are?”.

Gensler reported that there are currently more than 800 investment funds making ESG claims over trillions of dollars of assets. Those funds, including those making “green” or “sustainable” claims will be the first targets of the soon to be announced ESG regulations. And such may be well received by the business community that is already subject to regulation, from the Federal Trade Commission to the Department of Agriculture, defining terms of green, sustainable and the like.

We expect Gensler will answer his own question, “so what do investment funds have in common with fat free milk?” .. on March 21. And you can read about it here or get a jump on where the SEC may be going by reading the U.K. Net Zero Strategy.

ESG has become such a large component of my law practice that I am now collaborating with a group of daring, innovative and creative attorneys in ESG Legal Solutions, LLC, a boutique ESG driven non-law and consulting firm “powering sustainability, today, for tomorrow’s business.” Nancy Hudes and I are now publishing a blog www.ESGLegalSolutions.com (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from specific project implementation to fractional fully managed services, do not hesitate to reach out to me.

Ukraine is Now a Real ESG Issue

By Stuart Kaplow on March 6, 2022 Posted in ESG, Sustainability

While there has been near universal condemnation of the war against Ukraine by Russia, and our empathy is unequivocally with the people of Ukraine, this invasion of a sovereign nation, something that echoes the darkest days in European history, today presents issues of ESG.

This blog post is being written 9 days after Putin’s war began (although the Russian Duma just criminalized calling it anything other than a “special military operation”).

Russia’s invasion of Ukraine has already triggered a humanitarian crisis far wider than only the fleeing refugees and international sanctions are beginning to ripple across the world’s economies impacting businesses large and small.

When matters of ESG are considered, in the vast majority of instances, what is being discussed is the ESG rating of a company, but there are also ESG rating of countries, from the highest AAA all the way down to CCC. The government ratings generally track how a nation state’s exposure to and management of ESG risk factors might affect the sustainability and competitiveness of its economy. While there is some variation among advisors, the methodology often applies a 50%, 25% and 25% weight for governance, social and environmental factors, respectively.

Two days ago, several key investment advisors downgraded Russia and Belarus in response to Russia’s invasion of Ukraine. MSCI, among the largest players in this space, said it cut Russia to “B” from “BBB” and Belarus to “B” from “BB” adding that both had a negative outlook.

It may appear unseemly to capitalize on the misery of the people of Ukraine to discuss matters of ESG, even with a blog post like this, but as ESG has exploded on the scene over the past 12 months it is evolving to a point where in encompasses nearly everything? But we are comfortable with this post because at the core of ESG is the oldest moral guidepost that exits, the Golden Rule,

Do unto others as you would have them do unto you,”

and there is no doubt that has been violated in Ukraine.

We are seeing a business response to this conflict with more good, like possibly never seen before including articulating the social and governance violations, including the governance factors of decision making by a sovereigns’ policymaking that this act of aggression represents. The business community appears to understand that protecting freedom and democracy (.. Putin reportedly “despises” democracy) is part of their ESG responsibility. We wrote in a blog just some days ago about a company’s relationship with supporting democratic values, The ESG Benefit of Paying Employees to Work at the Polls. In this instance companies appear to be aware of the critical role they must play if advocating for key ESG values like rule of law, good governance and human rights.

It is one thing for companies to comply with U.S. government imposed sanctions, but companies are now making voluntary elections to retreat from doing business with Russia.

The cynical will see businesses seeking to protect their reputations. Optimists will see this as aligning company values and taking an activist stance, even at some cost. We suggest companies are and will be judged on how they respond to this moment and that is real. The Ukraine invasion could be the 21st century equivalent of the late 20th century anti-apartheid movement, in which business banded together through boycotts to counter the racism of the white nationalist South African regime, but this time accelerated, with responses coming in hours not years, and amplified by social media, making it harder for us all to look away.

This is not the Cesar Chavez boycott of table grapes in the 1960’s that divided American businesses and people across our country. In the last 9 days, the response has been all but universal from a local liquor store removing Russian vodka from the shelves to a symphony orchestra cancelling performances by a renowned Russian violinist to major oil companies, that are an industry expressly exempt from sanctions, self sanctioning by not bidding on Russian oil at auction this week to overnight package delivery services suspending deliveries in Russia. With no good end to this war in sight, there are already issues of the efficacy in cancelling all things the Russian people versus the Communist leader Putin.

And there are other complicated issues here, including that many companies in the defense industry had been shunned by ESG investors, but as the Latvian deputy prime minister said this week “is national defense not ethical” so how are weapons manufacturers going to be viewed as their armaments defend Ukraine? Also complicated are the Export Administration Regulations that essentially prohibit U.S. companies from complying with aspects of other country’s boycotts that our government does not sanction and while in this instance action by the government seems unlikely, the regulation exists.

In 2022 companies supporting democratic values will not only be awarded with high ESG scores, but also championed by the overwhelming number of people shocked and dismayed by the Russian invasion of a smaller sovereign state, who want to see more good and humanity do better at repairing the world.

To misappropriate the powerful words from 1963, “Ich bin ein Ukrainian.“

Zero Waste in an Era of Net Zero Everything

By Stuart Kaplow on February 26, 2022 Posted in ESG, LEED

Despite that the Zero Waste movement peaked in about 1998, in the modern context of Net Zero from Net Zero Energy to Net Zero Carbon, we are today with surprising frequency asked about a business being able to claim it is Zero Waste.

In a widely accepted definition, Zero Waste is,

The conservation of all resources by means of responsible production, consumption, reuse, and recovery of products, packaging, and materials without burning and with no discharges to land, water, or air that threaten the environment or human health.”

Despite that this definition does not expressly state that Zero Waste is ”a goal” to guide behavior as opposed to an achievable absolute, earlier definitions did, including the first approved definition by the Zero Waste International Alliance. Working toward a world without waste is unquestionably a worthy mission.

But regular readers of this blog will know that we believe any business claiming “zero” anything is indefensible, fraught with risk and likely to lead to litigation. By analogy, nearly all businesses choose to include a warning label that nearly everything from a padlock, to jewelry, to a dish to a flashlight may cause cancer, to comply with California law that defines “no significant risk” (.. a lot less than zero risk) as a level of exposure that would cause no more than 1 extra case of cancer in 100,000 people over a 70 year lifetime.

No company should claim to be Zero Waste.

There is a lot of waste out there. Numbers are hard to come by and made even more difficult during the pandemic, but a recent presentation to the World Bank estimated more than 2 Billion tonnes of solid waste (.. actually municipal waste not including in water or air) was disposed of last year. Accurate recycling rates are not available and even those that are available are suspect, but it is widely claimed that only 9% of plastic (one of the most reused materials) is recycled. So, reducing waste is a good thing. But it is not easy.

Governments in the U.S. that collect most of the solid waste have tried to outlaw waste, including the San Francisco Mandatory Recycling and Composting Ordinance which may have been the first such municipal ordinance in the country and with the nation’s highest diversion rates one of very few that have worked at all. But that success may owe itself more to he law’s roots in the creation of the City’s Scavengers Protective Union in 1879, than any modern effort at repairing the world.

There have been valiant attempts at popularizing conservation of resources including, “Cradle to Cradle” trademarked by McDonough Braungart Design Chemistry, and also the name of their book, introducing as far back as 1991 the idea that cradle to grave (or landfill) should be replaced with cradle to cradle where at the ends of their lives, products are recycled into new products, so that ultimately there is no waste, but that is where the manifesto fails when is claims waste need not to exist at all. Bill McDonough and Michael Braungart later acknowledge flaws in their reasoning in their not nearly as popular follow up book, The Upcycle. Their ideas never scaled and much of their work was transferred to the Green Building Certification Inc., who incorporated it into some LEED credits.

But there are reasonable paths many businesses can pursue while mitigating risk. A company could claim it is certified under the GBCI True Certification program where “a TRUE project’s goal is to divert all solid waste from the landfill, incineration (waste-to-energy) and the environment.” The TRUE Certification program is a third party assessor based program that rates how well a company or its facilities perform in minimizing their non-hazardous solid wastes and maximizing their efficiency in the use of resources. And there are other third party verified programs, but we suggest GBCI’s TRUE is efficacious in helping a company achieve its Zero Waste goals.

That said, focusing on waste alone is a very much last millennium idea involving only one late stage of life cycle analysis at a time when doing less harm is not good enough for most companies. In 2022, business needs to move faster and farther toward repairing the world.

All of that observed, Zero Waste should not be relegated to a 20th century ash heap when the conservations of resources is a key factor in ESG allowing a company to implement their goals for managing risk, saving money, reducing pollution, decreasing greenhouse gas emissions, and reinvesting resources locally, all adding value for the company, its community and the world.

The ESG Benefit of Paying Employees to Work at the Polls

By Stuart Kaplow on February 20, 2022 Posted in ESG, Solar Panel, Sustainability

The “S” in ESG is among the most impactful sustainability factors despite being among the least measured.

There are a myriad of Social factors in sustainability, but what they have in common is they are about “social relationships.” A company’s relationship with its employees is key, but so is its relationship with the community and the broader society.

We recommend, in our firm’s proprietary NET+ ESG Reporting Framework, that one positive and almost universally well received practice to respond to those ESG Social factors is “giving employees a paid day off to work at the polls on Election Day.”

In the 2020 election year, to encourage employees to vote, it was widely reported in the media that more than 800 companies signed the “Time to Vote” pledge allocating time for staffers to vote during their workday. However, many saw that as little more than pandering given that more than 30 states require by law employers give workers time off to vote on election day. And while nice, allowing employees to leave work 2 hours early to vote does not create the culture shift needed to increase participation in our democracy, and this is not what we advocate for our ESG clients (.. and might even be characterized as greenwashing).

The 2020 “Power the Polls” initiative to recruit polling place workers at a time of a poll worker shortage where most poll workers are over age 60 and stayed away during the pandemic, is of course a good thing (.. even at a time more states are moving to a vote by mail option), but again not enough to move large numbers of people toward action in our representative democracy, not enough to satisfy those participating in the recent protests and larger unrest across America, and not fast enough or far enough to heal the world.

In addition to those efforts, in the last election cycle, amid the pandemic, there was a push among companies to encourage employees to work at the polls on election day. Companies are encouraging employees to be active citizens. And this is at the same time increasing numbers of people want their voices to be heard even if they were not personally participants in protests in the streets, large numbers of Americans were sympathetic to the causes, maybe more than at any time since the anti-war marches of the 1970s. Moreover, this push has been popular with younger workers who often wear their greater ethical awareness on their sleeves.

So, to respond to the contemporary belief that companies should improve the well-being of everyone they impact (.. yes, in the face of the old Milton Friedman view of ‘companies exist for the stockholder only’), to drive a culture shift needed to increase participation in and strengthen our democracy, bigger numbers of forward thinking companies are giving employees “a paid day off to work at the polls on election day” without condition or limitation. That is, allowing the employee to choose to be a poll worker for the local election board, to work for a politician on the ballot on election day, to campaign for an issue or cause at a polling place on election day, or however else the employee chooses to work at the polls.

The company benefits in paying employees to work at the polls, with what will ultimately be a more sustainable world when it allows, if not encourages, employees to serve civil society improving government and helping them repair the world.

The UK Sets the Scene for Mandatory ESG Laws in the Western World

By Stuart Kaplow on February 13, 2022 Posted in Climate Change, Codes and Regulations, ESG

As we in the U.S. await action by the federal government on mandatory ESG laws, the United Kingdom has become the first European Union country to enact mandatory ESG disclosure laws.

These new reporting requirements are of import beyond the shores of Great Britain in that they portend what government mandates are to come across the EU and in the U.S. And maybe of greatest import, these new laws provide a map and compass for businesses believing that profit should come not from creating the world’s problems, but from solving them.

Two separate regulations were “laid before Parliament by Command of Her Majesty and approved by a resolution of each House of Parliament” .. “made on January 17, 2022 coming into force on April 6, 2022” in order to support the UK’s transition toward net zero.

On their face the two new statutory instruments apply to all UK registered companies and LLPs with over 500 employees with an annual turnover of more than £500 million; and also all UK Public Interest Entities, being companies currently required to produce a non-financial information statement under existing reporting laws. However, the impact will not only be on the UK’s 1,300 largest companies and financial institutions, but also thousands of businesses in their supply chains.

These new laws are the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 and the Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022.

The new regulations now require certain companies to provide a “sustainability” information statement on climate-related disclosures in their annual strategic report.

The regulations require certain LLPs to provide a similar sustainability information statement on climate-related disclosures in their annual strategic report or their energy and carbon report.

Under these new requirements the sustainability information statement means a description of:

the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;
how the company identifies, assesses, and manages climate-related risks and opportunities; and
how processes for identifying, assessing, and managing climate-related risks are integrated into the company’s overall risk management process;

As well as a description of

the principal climate-related risks and opportunities arising in connection with the company’s operations, and
the time periods by reference to which those risks and opportunities are assessed;
a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy;
an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios;
a description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and
a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.

So, the new statutory instruments set out how companies across sectors and geographic areas, in order to support the UK’s transition toward net zero, can assess and disclose their governance, strategy, risk management and metrics and targets related to sustainability including climate change. The aim of the statutory instruments is to require these disclosures to promote the management of climate-related financial risk and opportunities across the British economy.

The UK has done much more than merely be the first EU country to enact mandatory ESG disclosure laws; it has set the scene for mandatory ESG regulation in the Western world whilst driving a London double decker bus toward repairing the world.

And significantly, beyond the prescriptive mandate, these new laws provide a road map for businesses believing that profit should come not from creating the world’s problems, but from solving them.

ESG has become such a large component of my law practice that I am now collaborating with a group of daring, innovative and creative attorneys in ESG Legal Solutions, LLC, a boutique ESG driven non-law and consulting firm “powering sustainability, today, for tomorrow’s business.” Nancy Hudes and I are now publishing a blog www.ESGLegalSolutions.com (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from specific project implementation to fully outsourced managed services, do not hesitate to reach out to me.

ESG is an Opportunity for Commercial Landlords

By Stuart Kaplow on February 6, 2022 Posted in Climate Change, ESG, Green Building, Green Globes, LEED

At first blush the California Climate Corporate Accountability Act requires only a small number of the nation’s biggest corporations generating more than $1 Billion in annual revenue to report their greenhouse gas emissions, but a thoughtful consideration makes clear that if enacted SB 260 will require carbon reporting by thousands if not tens of thousands of businesses that are indirect sources or otherwise in the “supply chain” for those largest companies.

This is much more than only applying to Amazon and Walmart, .. and their supply chains. Carbon reporting will be required by organizations, people, activities, information and resources involved in supplying a product or service in California.

There has been a lot of talk in recent months about supply chain including that during the pandemic supply chain delays and shortages are real. The ‘just in time’ delivery supply chain mantras of the 1980s promising lower costs through no inventory and efficient logistics seem a distant memory.

And businesses large and small have come to appreciate that supply chain is key to ESG. How a company should measure supply chain ESG is today ill defined. But we know with certainty it is much more than only the Scope 3 indirect GHG emissions downstream in an organization that received much lip service in the last decade.

Pendent to those Scope 3 downstream businesses, many more will be impacted by this California law and other coming ESG regulation, enabling a large number of businesses to do their part to repair the world while taking advantage of ESG opportunities.

Increasing numbers of businesses are today wary of solar panels, requiring supply chain contracts to comply with the new Uyghur Forced Labor Prevention Act by including express language overcoming the presumption under the (still being phased in) law that all “products produced in the Xinjiang region [where more than 80% of the world’s solar panels are sourced] are barred from importation into the United States” and concerned about the S (social) in ESG where China’s repression of the Uyghur minority is such that it amounts to genocide according to the U.S. government and The Group of Seven.

Commercial real estate may be the best ESG supply chain opportunity. It offers a positive that the supply chain contract, the lease, is in writing. Additionally, the fixed asset supply is multi-year, easy to monitor and verify. Moreover, that interest in real estate is often the largest component of a business’ total assets, allowing it to be properly heavily weighted in ESG disclosures.

LEED, Green Globes and other third party verified green building rating systems provide certainty able to satisfy the E (environmental) in ESG for many organizations. Even a building owner not pursuing green certification can take advantage of benchmarking against specific credits within those green building rating systems (e.g., making a claim that a company’s building is constructed with bird collision deterrence features, as evidenced by compliance with that particular LEED credit, but not the entire LEED rating system).

The overwhelming number of businesses that exist in a supply chain rent the real estate their business occupies presenting an opportunity for commercial landlords both to lure prospective tenants with ESG disclosures that the tenant may leverage for its ESG purposes and provide value added and greater ROI for that premises.

Whether or not the California bill becomes law and whatever the form of other ESG laws expected in 2022, modern society has come to expect that the correct role of companies is not the 1980s Milton Friedman only creating stockholder value, but to take responsibility to work toward achieving a more perfect world, from the natural environment to inequality.

Rabbi Tarfon’s admonition in the first century CE has as much application for individuals and businesses today as it did then, “It is not your responsibility to finish the work [of perfecting the world], but you are not free to desist from it either.”

ESG has become such a large component of my law practice that I am now collaborating with a group of daring, innovative and creative attorneys in ESG Legal Solutions, LLC, a boutique ESG driven non-law and consulting firm “powering sustainability, today, for tomorrow’s business.” Nancy Hudes and I are now publishing a blog www.ESGLegalSolutions.com (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from specific project implementation to fully outsourced managed services, do not hesitate to reach out to me.

ESG Poll Results Drive Strategies for Business

By Stuart Kaplow on January 30, 2022 Posted in Environmental, ESG, Sustainability

The use of ESG to evaluate companies is the cause celebre in early 2022 and while still in an early phase, primitively and ill defined, it is reaching nearly all corners of the economy at a fever pitch. The appeal of ESG is compelling. People want to save the planet while they make a profit.

But the statistically most compelling result of our recent poll among business stakeholders is that 86% of respondents believe there will be mandatory ESG disclosures and more ESG regulation within the next 12 months including that 82% of respondents are concerned about financial penalties arising from non-compliance with those new ESG regulatory requirements.

With that dichotomy between people’s expectations versus business concerns noted and with the ESG umbrella covering such a broad spectrum of subjects, we undertook a survey seeking to report on current perceptions in matters of ESG such that our clients and friends can use these results for company strategies for ESG in 2022.

As attorneys helping businesses with law and non law professional services in company ESG reporting ourselves, this poll has buttressed our belief that the market for ESG work is very strong with a growth rate in double digits.

ESG is such a new space that there are few authoritative sources of information, including that with no scholarly treatises and few if any peer reviewed published papers, blogs like this one are the best source of reliable information. Concomitantly, readers of this blog are a target rich environment for current business ESG activity and a group ripe for this modest survey effort.

The poll is not a truly statistical canvassing of people in that, after piloting a questionnaire, we curated the survey methodology, sample design, and data collection with the aim of providing essential strategies that will on a timely basis offer predictive accuracy, in the emergent and fast growing space of ESG, helping businesses better prepare themselves for now and into the future.

Here are the meaningful insights we can report:

In a compelling result over 81% of our poll respondents said that in the last 12 months they have witnessed an increased demand on their company to report ESG data.

Maybe not surprisingly 52% reported their company’s ESG priorities today were more heavily weighted on environment factors (.. which have been a priority since the first Earth Day in 1970), 37% on social and 11% on governance.

Only 39% responded that their company has a formal ESG program, but 47% plan to have a program, portending a huge growth rate for helping companies with corporate ESG reporting.

In a disappointing result, only 11% were highly confident that their company’s ESG program is sufficiently robust. Only 30% were moderately confident, 30% minimally, and 29% not at all.

12% of companies consider ESG metrics in executive compensation.

24% believe other companies will achieve their stated ESG commitments.

16% believe companies frequently overstate or exaggerate their ESG progress when disclosing data, but only 7% said such was intentional.

Interestingly 64% believe companies will face increasing litigation arising out of their stated or failure to makes ESG disclosures.

Very significantly 80% are concerned about the potential impact ESG matters may have on their brand perception or brand value.

In the second highest polling response in the survey, 82% are concerned about financial penalties resulting from non-compliance with future ESG regulatory requirements.

44% expect most companies will establish and communicate a net-zero plan in the next 12 months.

62% expect investors will reward companies that have communicated a net-zero plan with a premium.

In the most compelling response, 86% believe there will be mandatory ESG disclosures and more ESG regulation within the next 12 months.

Particularly forward thinking and looking for certainty, 62% favor mandatory ESG disclosures and more ESG regulation within the next 12 months.

51% believe law firms should be doing more to support companies with ESG matters.

Only 21% responded the law firm their company uses offers ESG capabilities to its clients.

And 78% of companies engage outside consultants and other professionals for ESG matters.

While highly informative, again be aware this poll is not a truly statistically pure survey. Including in an effort to keep true to our sample design but allowing all who are interested to participate via survey monkey, we permitted self selected stakeholders to respond to 10 key questions and to be up to 10% of the sample size.

In conclusion these results can assist companies and as they strategize to boost their ESG activities in 2022. In the highest numeric response, respondents believe there will be mandatory ESG disclosures and more ESG regulation this year and the respondents are concerned about financial penalties arising from non-compliance with those ESG laws and policies. And not to be lost among this poll data, a near similar number of respondents are concerned about the potential impact ESG matters may have on their brand perception or brand value.

In 2022 when a broad breadth of stakeholders want to save the planet and make a profit, our poll results make clear businesses need to accelerate their ESG efforts, now.

ESG has become such a large component of my law practice that I am now collaborating with a group of daring, innovative and creative attorneys in ESG Legal Solutions, LLC, a boutique ESG driven non-law and consulting firm “powering sustainability, today, for tomorrow’s business.” Nancy Hudes and I are now publishing a blog www.ESGLegalSolutions.com (.. yes, this blog will continue). This post originally appeared in that blog. If we can assist you or someone you work with in ESG strategy and solutions, from specific project implementation to fully outsourced managed services, do not hesitate to reach out to me.