Sustainability Law Blog

The other day someone asked me how I felt about being a green lawyer. I thought about it for a few minutes and responded, "I'm not a green lawyer, I'm a business lawyer." Sustainability is so much more than just being “green.”

We hear about the triple bottom line (depending upon your vernacular): people, plant, profits; or community, environment, business; or equity, environment, economics. If you imagine the triple bottom line as a three-legged stool, as it is often characterized by Dick Roy, founder of Oregon Lawyers for a Sustainable Future, Northwest Earth Institute and the Oregon Natural Step Network, then you realize we must achieve balance among all three components. Remove one of the legs of the sustainable stool and it topples over. We can't achieve sustainability for the community or for the environment if we don’t achieve sustainable economic interests, too.

I recently returned from the Green Building Conference in Chicago. No doubt Portland is very good at building green buildings. But, if Portland wants to establish the standards of the sustainable economy and continue to demonstrate leadership in the sustainability movement, then Portland needs to incubate, develop and promote businesses that create the products and services that actually go into green buildings.

If Portland is happy with just being green, then Portland won't be sufficiently sustainable.

Sustainable clothing maker NAU's financing experience confirms that lofty values can pose challenges to achieving the firm's business goals. To NAU's credit, they believe the triple bottom line business model actually enhances value. But, in an interview in Grist, NAU's Sustainability Officer Eric Brody acknowledged that NAU faced significant pushback to its documented commitment to sustainability. Brodi said, "People advance the view that the language [NAU's rules of corporate responsibility] suggested a greater degree of responsibility and therefore could lead to the company being devalued."

NAU initially rolled its code of corporate responsibility into its organizational documents. But as a result of challenges to raising capital, NAU eventually removed the code from these documents and adopted it as a stand alone set of principles. NAU's articles of incorporation do require that any amendment to its rules of corporate responsibility require approval of at least 75% of NAU's outstanding voting securities. No one knows yet whether or not these rules are binding on NAU or guidelines by which NAU chooses to operate.

Considering NAU's experience, I advise clients to consider carefully how the actions and positions it takes may affect its ability to raise capital and, ultimately, its ability to achieve or realize its business plan. A successful business has a much greater opportunity to impact society than an unsuccessful one.

Measure 37, enacted in 2004, permits landowners whose property has been devalued by a land use regulation enacted since they acquired the property to either obtain compensation for the loss in value or a waiver of the regulation. On November 6, 2007, Oregon voters adopted Measure 49 with about 61% of the vote. Measure 49 makes significant changes to the relief available under Measure 37 and the procedures for making Measure 37 claims. The more significant changes include:

• Eliminating the right to file new claims, or pursue already-filed claims, for non-residential uses or for residential development of more than ten homes.
• Eliminating the right to file new Measure 37 claims for any land use regulations enacted before January 1, 2007. Claims based on regulations enacted after that date must be filed within five years after enactment of the regulation or the date the regulation becomes applicable to the property, whichever is later.
• Exempting from Measure 49 all claimants who received Measure 37 waivers prior to adjournment of the 2007 Legislature and who have engaged in substantial construction in reliance on the waiver. All other claimants with either awarded or pending claims prohibited by Measure 49 may amend their claim to seek the right to develop ten homes or less, but may not increase the number of homes requested in the original claim.
• Providing that claims for three homes or less outside of any urban growth boundary will be processed through a more streamlined procedure requiring less evidence of lost property value and less paperwork. Claims within an urban growth boundary, or for more than three homes outside an urban growth boundary, must meet more stringent evidentiary and filing requirements (including submission of an appraisal) and are not allowed on high-value farmlands, forestlands or groundwater-restricted lands.
• Allowing claimants to include the cost of preparing a claim in the value of the claim.

Continue reading " Measure 49 Adopted by Oregon Voters " »

In a city blessed with natural abundance, and a population committed to enjoying that abundance, Portland, Oregon is a logical home to outdoor clothing and equipment stores. Relatively new on the Portland scene, NAU has differentiated itself by employing a business model that blends profitability and philanthropy. NAU exists, as its website suggests, "to demonstrate the highest levels of citizenship in everything we do: product creation, production, labor practices, the way we treat each other, environmental practices and philanthropy. We believe that companies have a broader responsibility than simply generating profit. That's one reason we're blending profitability and philanthropy, what we believe is the new measure of success."

In other words, NAU practices good corporate citizenship. What is corporate citizenship? I think attorney Robert Hinkley stated it best in his Model Uniform Code for Corporate Citizenship: "The duty of directors shall be to make money for shareholders but not at the expense of the environment, human rights, public health and safety, dignity of employees, and the welfare of the community in which a company operates." NAU included in its corporate documents a set of socially responsible principles, including among other things:
• Permitting directors and officers to consider social and environmental factors in exercising their powers and discharging their duties to the corporation;
• Requiring that 5% of the aggregate purchase price of any product or service sold by the company be contributed to charitable organizations (I always choose Ecotrust); and
• Providing that no officer shall receive cash compensation (exclusive of signing bonuses, stock option grants and other benefits) more than 12 times the compensation of the lowest paid full-time U.S. employee.

These goals are right in line with the newly adopted HB2826 in Oregon that permits a corporation to include a statement in its articles of incorporation about the pursuit of the triple bottom line.

Clients often ask me whether their organizational documents should include similar codes of corporate responsibility. My answer: It depends. While I believe these are noble goals that we and all businesses should aspire to, emerging growth companies only have so many investor opportunities. My experience suggests that investors, even like-minded investors, (and yes there are like-minded investors), struggle with binding statements in organizational documents that may impact a company's ability to achieve its business plan.

Our tax partner Mark LeRoux has analyzed a new transferable Oregon tax credit that could add to your bottom line, particularly for companies in the timber industry.

Under this new credit an "agricultural producer" or "biomass collector" will qualify for an Oregon income tax credit for transfers of "biomass" to a "biomass producer." Qualified biomass includes, among other things,

(i) forest and rangeland woody debris from harvesting or thinning conducted to improve forest and rangeland ecological health and reduce uncharacteristic stand replacing wildfire risk;

(ii) certain wood material from hardwood grown on qualifying tree farms; and

(iii) crops grown solely to be used for energy

The credit is available when the biomass is transferred to a party that either uses it as biofuel or to produce biofuel. The credit amount depends upon the particular type of biomass. For example, for woody debris the credit is equal to $10 per green ton. The credit may be used to offset Oregon taxes for the year in which it was earned and in the succeeding four years.

Biomass credit also may be sold with gain on the sale generating income; a similar Oregon tax credit has been selling for about $.86 per dollar of credit. However, it is import to determine if the credit would create unrelated business taxable income for tax exempt partners. For example, assume that forest harvesting/thinning produced 100,000 green tons from of qualified biomass per year. The transfer of the biomass would generate a $1 million Oregon income tax credit, which could probably be sold for approximately $860,000.

Contact Mark LeRoux if you have additional questions on this new transferable Oregon tax credit.