Sustainability Law Blog

I recently attended an Oregon Natural Step Network meeting featuring the founder of a local winery speaking about her company's sustainability journey. I was inspired to hear about the sacrifices, successes and lessons learned along the way.

The Oregon Wine Board estimates that about 26% of Oregon's 17,400 acres of planted vineyards are certified biodynamic by the Demeter Association , organic by Oregon Tilth, or sustainable by Low Input Viticulture & Enology, Inc. (LIVE) . That's an impressive number and it continues to grow as more consumers seek out wines that are made using sustainable practices.

I learned about what sounds like a great tool. The Oregon Wine Board, recognizing that sustainability is part of the Oregon wine identity, is developing an "Oregon Certified Sustainable" or "OSC" label to be rolled out late this year or early 2009. According to the Wine Board's website, it has been working in partnership with Oregon Tilth, LIVE, the Demeter Association and Salmon Safe to create "a unifying platform and certification logo to help consumers easily identify sustainable wines." The idea is that if a vineyard has already met the rigorous requirements of one or more of these agencies, they would be allowed to use the OSC logo on their wine bottles. Given that earning any of these certifications is no easy task, consumers would be assured that wine with this new logo is not guilty of greenwashing.

Post authored by Kimberlee A. Stafford, attorney practicing in the Real Estate and Land Use and Sustainability Groups at Tonkon Torp.

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Oregon Governor Ted Kulongoski recently outlined his policy proposals for boosting energy efficiency (Click here for a summary of the Governor's remarks). His proposals include net-zero greenhouse gas emissions by 2030 for all new residential and commercial buildings, energy performance certificates on all homes sold in Oregon, a new public awareness campaign, and expansion of the Oregon Business Energy Tax credit (BETC) and the State Energy Efficient Design program (SEED) .

The net-zero energy emissions goal is likely the most important of the Governor’s proposals because buildings are big energy consumers and have a big impact on the environment. The National Renewable Energy Laboratory (NREL) reports that commercial and residential buildings use almost 40% of the primary energy and roughly 70% of the electricity in the U.S. Energy demand is also on the rise, with commercial sector demand doubling in size between 1980 and 2000 and expected to grow another 50% by 2025.

In contrast, net-zero energy buildings produce the majority of their own energy needs over the course of a year. Designed to be exceptionally energy efficient, these buildings are powered by renewable energy sources such as solar panels or wind turbines located on site. Ultimately, net-zero energy buildings could result in less energy consumption despite an expected boom in demand.

Nevertheless, the Governor’s plan will encounter challenges beyond his worries of how to finance the policies. To begin with, there is no single definition of net-zero energy efficient building.

Another concern is that a net-zero energy buildings are not necessarily green or sustainable structures. Builders are not required to use green building methods, such as reducing waste or using recycled building materials, to earn a net-zero structure certification.

All this goes to show that gaining energy efficiency isn't easy. Oregon will have many choices to make, on energy efficiency and other green options, as it marches into a sustainable future.

Posted by Marc Sanchez, Summer Associate at Tonkon Torp LLP.

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Erin Flynn, Economic Development Director of the Portland Development Commission, made that comment at the recent Portland Leadership Summit’s breakout session on Economic Development and Prosperity.

Ms. Flynn said that Portland economic development faces two challenges: the need for new development tools, and institutional fragmentation. She noted that while the city has good tools for development, they are place-based and real estate-dependent. She argued for creating complementary economic development tools that will encourage entrepreneurship and micro business development. She also suggested making manufacturing more visible and cautioned that as we develop the city, we not displace profitable businesses from their current locations.

Ms. Flynn also believes that accountability for economic development is spread too thin over many city agencies. Good ideas can languish or get lost in translation when one agency is responsible for developing an idea but another agency is responsible for implementing it. Ms. Flynn suggested that the city must systematically coordinate economic development resources and activities across bureaus in order to improve delivery and impact as well as identify remaining gaps.

For someone who's been arguing that the city spends too much time boasting about sustainable development and not concentrating enough on developing a sustainable economy - of which sustainable development is a vital component (see blog post November 27, 2007) - I welcome Ms. Flynn’s point of view.

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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.

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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.

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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.

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People think of Oregon, or at least Oregonians think of Oregon, as the cradle of the sustainability movement. And why not? Portland has more hybrid cars and "green buildings," per capita, than any other American city.

But, the Oregon legislature has taken Oregon’s Sustainability leadership to another level. When Governor Ted Kulongoski signed HB 2826 into law, Oregon became the first state to recognize legislatively the triple bottom line. The triple bottom line measures a corporation’s success according to the business’s impact on the environment, its contribution to the community, and its economic profitability.

Dick Roy, whose organization, Oregon Lawyers for a Sustainable Future, drafted the legislation, often compares the triple bottom line to a three-legged stool. Before HB 2826, corporate business practices could legally stand on only the profitability leg. Corporations have traditionally operated under the guiding legal principle that a corporation’s primary purpose is to maximize shareholder wealth.

HB 2826, codified at ORS 60.047(2)(e), places environmental and social issues on par with shareholder wealth and corporate profits. Now, articles of incorporation may include a specific statement that enables a corporation to conduct its business “in a manner that is environmentally and socially responsible.” In Oregon, a corporation can legally pursue sustainable business practices.

I’m sure Governor Kulongoski hopes that HB 2826 will attract business and investment to Oregon. If you’re a socially responsible business, Oregon is a great and welcoming place to call home.

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As one of the original nine lawyers who joined Tonkon Torp when the firm was founded 30 years ago, I have always been attracted to the firm’s core values of leadership, client service and community involvement. These values remain a vital part of who we are today.

Doing business in one of the nation’s “greenest” states, we have a long track record of helping clients build and grow organizations based on sustainable principles and practices. That’s why I am especially pleased that our interdisciplinary Sustainability Practice Group has launched this blog. You’ll have the benefit of hearing a variety of legal perspectives about a variety of topics.

At Tonkon, sustainability has been at the forefront of our thinking as individuals and as a firm. Our internal Sustainability Committee, composed of partners, associates and staff members, establishes policy, educates and motivates lawyers and staff to implement and measure our own sustainable practices. These range from purchase of sustainable and recyclable supplies, equipment and services to our current testing of an electronic file management system that will minimize our use of paper and CDs for data storage.

Our lawyers and staff members also actively participate in sustainability-focused organizations such as Oregon Lawyers for a Sustainable Future, Oregon Natural Step Network and PDX Lounge. This is all by way of saying that we’re committed to the principles of sustainability and we consider it essential, when advising clients on their sustainability issues, that we understand and live those principles ourselves.

Enjoy the blog.

Post contributed by our managing partner Michael M. Morgan.

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