Viewed from Earth Day 2020, there has been a profound expansion in how environmental law is practiced in the private sector. Indeed, business has never felt more central to the global response to society’s biggest challenges. And lawyers and other professionals are increasingly essential in implementing sustainability strategies, assessing the management of ESG (environment, social, governance) risk and disclosure, and working with clients to develop markets for environmentally preferable products.

While some governments are scaling back environmental protection, corporations, banks, and other private institutions are entering center stage — with the financial resources, scale, and transboundary impact that could potentially surmount society’s most challenging issues, with pressure and support from their stakeholders. Firms are also seeing business value not only in reduced operating expenses, but of reward in the marketplace.

This year, Pfizer is advancing development of our next-generation sustainability strategy, incorporating climate action and sustainable science to reduce our environmental footprint. These topics are core to our purpose to deliver breakthroughs that change patients’ lives, yet they are unregulated by most gov­ernments. As we set goals, Pfizer’s environmental professionals and lawyers will need to develop implementation frameworks which may include contract terms with suppliers, governance standards for performance, third-party verification, and disclosure to attest to our progress with customers and investors.

In today’s evolving landscape, lawyers have the responsibility to counsel clients on how to comply with the new rules of ESG. These are the rules set by stakeholders — customers, investors, employees, NGOs, and the public — for how a company should operate in this space. There is no Administrative Procedure Act to follow, no case law, no legislative record to consult, no threat of enforcement to drive compliance. We have, instead, public examples of successes and failures reminding us that the legal license to operate can be dwarfed by loss of a company’s social license to operate, and that corporate reputation is critical to business value.

As environmental lawyers navigate the evolving law of sustainability, there are two concepts that can serve as guideposts.

The first is private environmental governance. PEG occurs “when private organizations perform environmental protection functions traditionally assigned to government,” as stated by Michael P. Vandenbergh and Ben Raker in Natural Resources & Environment Journal. PEG, private advocacy, and private administrative law manifests in third-party certifications, disclosures, and self regulation. The authors explain that while powerful in effecting change, there are vulnerabilities in PEG, including antitrust concerns, charges of greenwashing, and potential stifling of more ambitious government action.

As the onus for setting standards is placed on the private sector, conflict can develop between business priorities and the cost to implement environmental protections. This disjunction means a potential ethical consideration for lawyers who counsel corporate clients in sustainability matters that can impact public health or the environment. This highlights the importance of independent scientific and technical expertise as a neutral benchmark for establishing sound systems of PEG.

The second concept is where companies take an active role in shaping markets. “The era of corporations integrating sustainable practices is being surpassed by a new age of corporations actively transforming the market to make it more sustainable,” according to Andrew Hoffman in the Stanford Social Innovation Review. This is an ambitious new phase for businesses, and there is promise that the old form of capitalism and disinterested markets is shifting.

As corporate sustainability evolves, lawyers and other professionals will have an increasing role in advising their clients on market opportunities, risks, external expectations, and disclosure imperatives, making the case that increased efforts to protect the environment and address public health can be aligned with business purpose. Indeed, being proactive will protect firms not only from the threat of government enforcement, but from the more difficult to predict loss of reputation, investor confidence, and market share.

It is an exciting time to be counseling companies because of the opportunities to help embed sustainability into business strategies in a manner that has the potential to shape markets and reward the more environmentally responsible companies and products.

Since complex challenges require multiple solutions to effectuate change, using PEG in shaping the new sustainability still leaves a much-needed role for all levels of government. When coupled, PEG and government action can result in the win-win scenario we have long been striving toward.

As we enter the third decade of the 21st century, the world is not working out the way many of us hoped. We are witnessing the failure of nations to address the climate crisis, and unrest in many countries over rising inequality and threats to local identity. These trends have generated political instability that has been increasingly exploited by populist demagogues. It is no surprise then that there are growing calls for a political economy that will give greater priority to social cohesion, community, and long-term environmental sustainability.

In the United States, much of the political debate in this election year is focusing on rethinking the purpose of the economy and of business, particularly big business. The Green New Deal is popular in the Democratic party. Last August, the Business Roundtable, representing the CEOs of 181 of America’s largest companies, announced that shareholder value and profits can no longer be the sole goals of the corporation, but must be balanced with “supporting the communities in which we work and protecting the environment.”

To put these aspirations into practice, we could learn something from a small, rich, entrepreneurial nation of a little over two million people. It has a ratio of internationally competitive, high-wage manufacturing compared with GDP that is double that of the United States, and 16 percent higher than Germany or Japan. It has the fifth highest life expectancy on the planet — four years higher than the U.S average. It exports sophisticated machine tools to Germany and high-tech components for space probes to NASA.

Let us take a close look at the Basque Autonomous Region in Spain, known more commonly as the Basque Country, or Euskadi in the local language.

Over the past several decades, the Basque Country has transformed itself into one of the most internationally competitive, socially inclusive, and environmentally progressive economies in the world. It is a polity that welcomes economic globalization as an opportunity, while reaffirming local community and cultural identity. It has achieved a level of income equality higher than Denmark’s and the Netherlands’, and a per capita GDP on approximately the same level as Sweden.

The Basque government has reoriented its budget planning around the 2030 UN Sustainable Development Goals, put forth one of the world’s more ambitious climate mitigation and adaptation plans, and established 55 natural protected areas covering 23 percent of the region’s land area (compared with 14 percent in the United States). Despite inheriting an energy sector heavily dependent on imported fossil fuels, since 1995 the Basque economy has reduced its greenhouse gas emissions by 12 percent while GDP increased 70 percent.

The key to these successes is multifaceted: social solidarity rooted in a persistent local culture of national and linguistic identity, coupled with a long history of entrepreneurship and international trade. The Basque Country also benefits from a unique decentralized, autonomous finance structure where most tax funds are raised, administered, and spent in Euskadi’s three small provinces, increasing the likelihood that ambitious social goals are actually implemented, rather than dissipating through the bureaucratic intermediaries of a larger, centralized nation-state. The resilience and innovation of the Basque way are rooted in a collective project to adapt a strong local culture and history to the globalized challenges of the 21st century.

One of the best guides to understanding the Euskadi success story is the second American president, John Adams, who cited the Basques’ legacy of democratic self-governance in a work published in 1787 calling for a new constitution for the United States. “This extraordinary people have preserved their ancient language, genius, laws, government, and manners,” Adams wrote, noting that the Spanish crown had “left them in possession of those great immunities of which they are so jealous.” Many writers, he continued, “ascribe their flourishing commerce to their [geographical] situation; but . . . that advantage is more probably due to their liberty. In riding through this little territory, you would fancy yourself in Connecticut; instead of miserable huts, built of mud, and covered with straw, you see the country full of large and commodious houses and barns of the farmer; the lands well cultivated; and a wealthy, happy yeomanry.”

The Basques were already recognized as an ancient people in Roman times, and unlike other Iberian groups they conserved their grammatically complex, non-Indo-European language. During the Roman period and afterwards when the Germanic Goths invaded the peninsula, the Basques governed themselves through customary law and practices known as fueros. As the rulers of different fiefdoms, duchies, and other regions in Iberia began to consolidate to form Spain in the late Middle Ages, the Spanish monarchs pledged to respect the Basque fueros, including visiting periodically the village of Guernica to renew this oath underneath an oak tree where neighboring communities would meet to debate local concerns. Over the centuries Guernica became the symbolic ground zero of Basque self-governing traditions and national identity.

Feudalism mostly bypassed the small nation; Basque culture evolved in small, independent farmsteads known as baserri (formed from the Basque word baso, wilderness, and erri, settlement), in turn organized in hamlets (auzoa) of ten to thirty farmsteads, with shared community labor obligations (auzoalana). Basque fishing villages organized cofradia, literally fraternities of fishermen, which also have a cooperative structure; some of them can trace their traditions back more than five centuries.

Indeed, the Basque Country has a long tradition of commerce and trade. For a millennium it was one of the shipbuilding centers of Europe, already incorporating Viking construction techniques in the 10th century, and building most of the Spanish galleons that dominated the world’s oceans in the 16th century. Near the main inland city Bilbao is a small mountain of extremely pure iron ore, first mined by the Romans, which supplied an iron and steel industry that provided much of the metal consumed by Britain in the 19th century.

During that time, the Spanish monarchs continued to respect the Basque fueros, of which the most important was one banning the Spanish state from levying direct taxes. Taxes were collected and spent locally by the Basque authorities, coupled with an agreed upon annual sum to Madrid that was periodically renegotiated. In 1936 the fledgling Spanish Republic restored much fuller autonomy to the Basques, who established a regional government that unfortunately only lasted a few months before Spain was convulsed in civil war between the Republic and a fascist military revolt led by General Francisco Franco.

The victorious Franco regime totally suppressed Basque autonomy, outlawing the teaching and use of the Basque language, criminalizing the display of the Basque flag, and even forbidding parents from giving their children Basque names. Following Franco’s death, a new, democratic Spanish constitution in 1978 restored substantial autonomy — particularly fiscal autonomy — to Euskadi.

Since then, the Basques have pursued policies quite at odds with the neo-liberal market fundamentalism that has influenced many countries. One pillar of Euskadi’s approach was a comprehensive government industrial policy, in close cooperation with the private sector, to support high-tech manufacturing. The policy embraced the promulgation of manufacturing and research clusters of companies, technology institutes, and research centers in areas such as machine tools, electronics, IT and telecommunications, automation, transport and logistics, and environmental industries. By 2005 the Basque Country had 10 applied technology centers, 13 research and development centers, four research laboratories, two public research organizations, and three technology parks. The other main pillar of the Euskadi approach has been expanded social and welfare services to lessen inequality and promote social inclusion at a time when many countries were instead retrenching such support.

Based on these two pillars, Euskadi undertook at the beginning of the 21st century to promote a model of environmentally sustainable human development.

The result was that in 2017, the Basque government set out its ambitious Agenda Euskadi-Basque Country 2030 to harmonize the policies and budgets of public authorities — including the three main provincial governments and over 200 Basque municipalities — with the 17 UN Sustainable Development Goals for 2030. The SDGs build on the previous UN Millennium Development Goals and set ambitious targets such as ending poverty in all forms, gender equality, reducing economic inequality and social exclusion, environmentally sustainable production and consumption, terrestrial and marine habitat conservation, and a variety of cross-cutting, urgent climate mitigation and adaptation goals.

The Agenda Euskadi 2030 builds on environmental and social planning initiatives that have been ongoing in the Basque Country since just before the turn of the century. In 1998, the Basque Country General Environmental Protection Act provided for the preparation of Environmental Framework Programs every four years. The Basque environment ministry has declared that Agenda Euskadi 2030 builds on progress achieved in these EFPs and is “at the heart of all our policies,” since it incorporates and links the major economic, social, ethical, and environmental goals that are at the heart of the Basque welfare model.

The Agenda Euskadi 2030 sets out 93 specific commitments, 80 planning instruments, and 19 legislative initiatives. It identifies 50 indicators for monitoring progress — all oriented toward creating policy and budget coherence and cross-sectoral synergies in the Basque public and private sectors to carry out the SDGs. Euskadi President Iñigo Urkull declared that the Basque Country’s commitment to implementing the UN goals reflects the traditional Basque value of “auzoalana, cooperation, and a shared workload” for the local and global “common good.”

Much of the implementation of the Agenda Euskadi 2030 will be at the most local level of Basque municipalities, which already in 2002 began to develop “Agenda 21 plans” for environmental and social sustainability, inspired by the goals of the 1992 Rio Earth Summit’s manifesto. Over 200 Basque municipalities developed and implemented these action plans through a bottom-up approach, forming the Basque Network of Municipalities for Sustainability, or Udalsarea 21. One of Udalsarea 21’s objectives is to serve as a benchmark framework for best practices internationally in local sustainable development.

The environmental education programs of the Basque government have been identified by the United Nations as leaders in international good practice. For example, the School Agenda 21 program developed environmental sustainability curricula, with a major focus on encouraging students to identify local sustainability recommendations which they share in cooperative meetings with other schools and then present before local mayors and town councils. The Basque environmental ministry is working with the Basque Journalists’ Association to promote accurate reporting on local and global environmental challenges, and has prepared “quick guides” for journalists on climate change and green public procurement, with another on the circular economy in preparation.

Euskadi has established the Circular Basque network that so far numbers 34 companies and organizations that are already undertaking 51 different circular economy initiatives. Already between 2000 and 2016 the Basque economy grew by 26 percent, while the consumption of materials decreased by 25 percent, and the volume of urban landfill waste decreased by 56 percent. The Basque Circular Economy Strategy for 2030 aims to increase economic productivity by 30 percent, increase the circular use of materials (through recycling and remanufacturing) by 30 percent, reduce waste generation per unit of GDP by 30 percent, cut in half generation of food waste, and reduce use of plastic.

In 2015, the Basque government released a “Climate Change Strategy of the Basque Country to 2050.” Known as Klima 2050 colloquially, it sets out a roadmap of 70 separate initiatives for prioritizing and coordinating climate change actions both in the government and in the private sector. It was endorsed at the 2015 Paris climate summit as one of the world’s leading public programs for achieving a climate resilient and low-carbon society.

The preparation of the strategy involved almost all ministries of the Basque government as well as input from provincial councils, municipalities, and the public at large through a number of public forums, including the interactive “open government” website of the Basque government, through which Basque citizens can comment on existing government proposals and suggest new ones.

Klima 2050’s medium-term commitment to reducing greenhouse gas emissions goes beyond general EU commitments and those of some well-known environmentally progressive countries. The government pledges to reduce GHG emissions by 40 percent by 2030 from 2005 levels. It aims to achieve carbon neutrality for Euskadi by 2050. This pledge is particularly ambitious given that the Basque Country is currently over 90 percent dependent on imports of oil and natural gas that account for 80 percent of its energy use. Renewable energy use has increased in recent years but still only accounts for around 13.4 percent of consumption, which is below the EU average of 17.5 percent. The strategy aims to increase the proportion of renewable energy use to 40 percent by 2050.

The heart of the longer-term strategy lies in replacing fossil fuel consumption by electrification of energy, with power supplied increasingly by climate-friendly sources. Klima 2050 also calls for comprehensive initiatives in energy efficiency, including the promotion of cogeneration, smart grids and smart meters in Basque municipalities, and fostering zero-emissions building construction. The government is to lead by example, achieving a “zero emissions public sector” by 2050.

Major adaptation initiatives include increased biodiversity habitat protection and regeneration (including reforestation) to foster regional climate resilience. The strategy promotes “connectivity between ecosystems that allow species migration” — an important but neglected need that has been identified and promoted for years by some U.S. environmental organizations such as the Wildlands Network, but which has yet to see widespread international recognition.

Klima 2050 maintains it will enhance the Basque economy’s international competitiveness. It estimates annual costs for the first five years of 84-91 million euros, more than compensated by 57 million euros a year in additional gross economic activity (including the creation of over 1,000 jobs), yearly energy use savings of 55 million euros, and health savings of as much as 32 million euros per year. The point that many environmental investments more than pay for themselves in advanced economies is one that has been evident for years, but sadly often ignored in politicized debates in other countries.

The Basque experience can serve as a case study, given its small size, but is it replicable, and is it politically sustainable? Like anywhere else, there are problems and challenges. For decades the Basque Country suffered from the terrorism of ETA, a group that pursued total independence through bombings and murders. ETA declared a permanent cease fire in 2011, and announced its disbanding in 2018. The egalitarian ideal still faces increasing pressures from international economic competition and the weakening of traditional solidarity in the face of a global, individualistic consumer culture.

What is incontestable is that in recent years Euskadi has soared in international rankings of well-being. In 2017 the Basque Country ranked 8th in the EU in per capita income, 21 percent above the EU average, ahead of France, the United Kingdom, Belgium, Finland, and Spain as a whole. Euskadi substantially outperforms — apart from per capita GDP — the United States in many areas of social and economic welfare, including life expectancy, access to public health services, and income equality. So far this socially holistic approach has paid off environmentally: already in 2013 Euskadi ranked number four in the world according to 22 environmental indicators in the Environmental Performance Index developed by the Yale Center for Environmental Law and Policy and the Columbia University Earth Institute. Recent Basque opinion polls show virtual unanimity that protection of the environment is “very important” or “quite important.”

As global challenges — environmental, social, and political — become more urgent, the Basque example may have a lesson for all of us: environmental and social solutions inspired by broader national and international agreements are sometimes, and perhaps often, best realized through local empowerment and democracy. Euskadi helped establish the UN Network of Regional Governments for Sustainable Development (today called “Regions 4”) as a global platform for sub-national governments to carry out international environmental initiatives at the 2002 Johannesburg World Summit on Sustainable Development. The Basque Country co-chairs the Regions 4 network, which in 2019 had a membership of 42 regional governments in 20 countries. A recent comparative study of “Minority Self-Government in Europe and the Middle East” cites Basque environmental progress for showing how “autonomous regions . . . are more dependent than central governments on long-term investments, while offering a better record [than larger nation states] of transparency, reliability and political legitimacy.” In the words of former Basque President Juan José Ibarretxe, “Today, in the ‘global society’ it is ‘the local’ that embodies real hopes that another world is possible.” TEF

Professor Sofia Arana and researcher Itxaso Bengoetxea Larrinaga assisted the author in understanding Basque institutions. Any errors are the author’s responsibility.

The National Environmental Policy Act opens with a charge to the government to “use all practicable means” so that the “nation may fulfill the responsibilities of each generation as trustee of the environment for succeeding generations.” This embodied the ethic of sustainability in law, but raises important questions about interpretation and implementation. Once the idea of preserving the entirety of the global environment untouched for future generations is recognized as infeasible, then trade-offs emerge. How should society evaluate whether and how to undertake development given this obligation to future generations?

To inform such evaluations, NEPA requires Environmental Impact Statements to characterize projects undertaken by or subject to the approval of government agencies. The public, other stakeholders, and policymakers would then be aware of the impacts of a proposed project across many environmental, resource, energy, and economic dimensions. These detailed statements, however, do not explicitly assess the trade-offs. This ambiguity often results in an eye-of-the-beholder problem: two people could agree that they each support sustainability, but differ in whether a given project based on these assessed impacts would be consistent with such a concept.

About two decades ago, the Nobel laureate Robert Solow provided “an economist’s perspective” on sustainability. In highlighting that sustainability focuses on our obligations to future generations, we can consider a broad definition of capital. This would include physical capital — factories, power plants, computers, etc. — as well as other forms of capital, such as natural capital, social capital, and human capital and knowledge. These additional types of capital may not be valued appropriately in markets, but the well-being of any generation will depend on the benefits it derives from this broader conceptualization, not the narrow, market-oriented definition.

With this more inclusive definition of capital, one generation serving as the trustee for future generations would meet its obligation if it bequeaths at least as much capital as it inherits. Given the various types of capital, substitution opportunities exist and indeed could be pursued to increase the aggregate amount. For example, with the failure of markets and governments to adequately price climate change risks, future generations would very likely be better off with more climate-related capital and less coal-fired power plant capital. Taken to an extreme, however, such as banning the use of all capital relying on fossil fuels effective tomorrow, could make future generations worse off.

Investing in one type of capital will typically mean forgoing either investment in another type of capital or current consumption. In the case of non-renewable resources, if we exploit them and generate returns that are then invested in other forms of capital, then we may be able to ensure that consumption and well-being increases over generations even as the stock of such resources declines. On the other hand, if these returns are consumed by the current generation instead of invested in other forms of capital, then the use of non-renewable resources would yield a near-term increase in consumption followed by a decline over time.

These insights hold three implications for policy practice that can build on NEPA’s legacy. First, as Solow emphasized, we need to recognize the importance of choosing robust policies to avoid potentially catastrophic errors. This appears all the more important today with the growing risks posed by climate change, which could reduce the value of natural, physical, and social capital.

Second, accounting for the full social value of the impacts of projects — not just the profits a firm realizes, but also the stream of environmental benefits or costs — can help implement this vision of sustainability. If the full spectrum of the benefits to society of a project exceeds its social costs, then it would make a good investment. Rigorous benefit-cost analysis can serve as a guide at the micro level on a project-by-project and policy-specific basis. This would represent a new step forward in the transparent provision of information that would build on the foundation of the EISs.

Third, expanding the narrow and incomplete manner in which we measure economic activity can provide a more accurate macro-level evaluation of progress on sustainability. Gross domestic product implicitly prices clean air, a stable climate, and a vast array of ecosystem services as zero. Incorporating how people value these elements of our environment can ensure a more thoughtful consideration of the trade-offs when decisions are made about future development and public policy.

Companies are finding transparency is creating value by helping them effectively respond to the evolving expectations of investors, customers, and employees. Today, 86 percent of S&P 500 companies regularly publish corporate responsibility reports, up from just 20 percent in 2011, according to the Governance and Accountability Institute.

This increased reporting is leading to innovative approaches to environmental, social, and governance risks and opportunities. These range from climate and water risk to supply chain responsibility and diversity and inclusion.

But today, there are also discussions of what changes are needed to make the reporting process more efficient and effective, as companies and investors struggle with the increasing volume of data.

At Intel, we have long recognized the benefits of transparency and reporting. We were an early mover on the topic, issuing our first voluntary environmental, health, and safety report back in 1994. Since that time, we have evolved our reporting, utilizing stakeholder outreach and integration of leading external voluntary reporting frameworks, such as the Global Reporting Initiative, the International Integrated Reporting Council, the Sustainability Accounting Standards Board, and the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. We have also assessed our performance on a select number of third-party sustainability ratings most used by our stakeholders as a measure for how well our disclosure is aligned with their priorities.

During the past quarter century, we’ve learned how to improve our reporting and overcome some of the inherent challenges in the process, helping us to get the right information, to the right audiences, at the right time. First, recognizing that one size does not fit all, we now use a modular approach. We produce a full 68-page Corporate Responsibility Report, and then use that content to build a 16-page executive summary, a summary data-sheet, and a “report-builder” website where stakeholders can build their own report by selecting topics of greatest interest to them.

We also integrate the report across other Intel communications, including our Annual Report on Form 10-K and Proxy Statement, our social media content, and internal employee and employer brand communications. As more investors rely on data in corporate responsibility reports, we have taken additional steps to strengthen our data quality and review processes, adding independent assurance as part of our reporting process.

Not surprisingly given our industry, we have found opportunities to apply technology to drive innovation in our processes and enable real-time data collection, insights, and reporting. For example, we created an interactive website for our local communities.

And finally, and perhaps most importantly, we have found that the report itself is just the starting point. For us, the real value comes with the robust engagement that reporting and transparency enables. Our reporting is now a key part of our year-round outreach with investors on environmental, social, and governance issues. It helps us to efficiently respond to surveys and data requests from our customers and also to demonstrate how our actions help them to meet their own ambitious sustainability goals. The report is also an increasingly important resource for engaging our employees and future talent; 85 percent of our employees surveyed reported that Intel’s corporate responsibility efforts contribute to their pride in the company.

Our latest Corporate Responsibility Report and updated website highlight the many ways that our focus on environmental sustainability, supply chain responsibility, diversity and inclusion, and social impact create value for Intel and our stakeholders by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities.

For example, since 2012 we have invested more than $200 million in energy conservation projects in our global operations, resulting in more than 4 billion kilowatt-hours conserved and approximately $500 million saved through the end of 2018. We also reached full representation in our U.S. workforce, two years ahead of our original goal, and in early 2019, achieved global gender pay equity — both helping us to drive greater effectiveness in our human capital management and talent development strategies.

We believe reporting is at an inflection point, as companies, investors, and other stakeholders can come together to assess what is and isn’t working, where there are opportunities to further streamline and standardize data, and where flexibility is needed at both the industry and country level to put data in the right context. At Intel, we are committed to transparency and will continue to look for ways to drive innovation and hope that more companies will do the same.

Once a niche concern, corporate sustainability reporting has over the last two decades become a practice increasingly expected of major companies. A number of factors have driven such transparency into the business mainstream. In the United States, shareholders and other stakeholders such as communities who prize information about a company’s nonfinancial impacts have been a driving force. So have pointed new regulations in countries where many American companies operate — although no such requirements exist in the United States, except a few limited state guidelines. But will such forces continue to sustain, indeed nurture, sustainability?

In 2018, The Conference Board analyzed worldwide corporate sustainability reporting to uncover trends in nonfinancial disclosure and identify issues that companies should keep on their radar screens. There is a lot of encouraging news to report about companies based in the United States and elsewhere. We drew information from more than 5,000 firms in 23 countries, spanning the Asia-Pacific region, Europe, and North America. Focusing primarily on data disclosed by American companies in comparison to peers in other regions, we analyzed data on 91 environmental and social practices — including greenhouse gas emissions, workplace diversity, and human rights policies, among others — to reveal how companies are responding to increased pressure to disclose their nonfinancial impacts.

While there are currently no broad, nation-wide sustainability reporting requirements in the United States, in some cases companies based here are subject to reporting requirements imposed by other jurisdictions. For example, certain American companies operating in Europe are subject to new EU reporting requirements on disclosure of nonfinancial and diversity information that went into effect last year.

Sarah Dadush, professor of law at Rutgers University, finds value in what she calls “disclosure regulation experimentation” in different jurisdictions. “Not all disclosure rules are created equal,” she says. “For example, the EU directive goes much farther than the disclosure requirements applicable in the United States.” She notes that the California Transparency in Supply Chains Act, a rare example of a U.S.-based requirement, “requires only that companies disclose whether or not they have a sustainability policy in place, not to adopt such policies or to take remedial action if an adverse environmental or social event occurs in their supply chain.”

Not so in Europe, where the directive “requires companies to identify sustainability risks in their supply chains and to disclose the measures they are taking to address those risks, as well as outcomes,” Dadush notes. “More demanding disclosure rules coming from the EU could help to ratchet up U.S. rules, a dynamic that would be particularly helpful if domestic efforts to improve disclosure fail.” Otherwise put, “Experimentation is important because higher regional standards for sustainability disclosure could lead to regulatory upgrades across the globe.”

Thus, even in the absence of widespread domestic reporting requirements or a federal mandate, this combination of pressure from key stakeholders, along with required reporting from some overseas jurisdictions, means U.S.-based companies are increasingly active in nonfinancial disclosure. Actually, more than active: we found that American firms tend to be more transparent than their peers in much of the world. For example, U.S. corporations in the research sample on average disclosed information on one-quarter of the 91 environmental and social practices covered. This is the second-highest level of nonfinancial transparency of the 23 countries examined in the study; only companies based in Japan, where corporate sustainability reporting requirements have been in place for years, had a higher disclosure rate. The United Kingdom, Taiwan, and France round out the top five countries with the highest levels of corporate sustainability disclosure for companies headquartered there. At the opposite end of the spectrum, nonfinancial disclosure is largely absent from companies based in Malaysia, Indonesia, Pakistan, and Poland. In these countries, companies on average report on fewer than five of the 91 practices we tracked.

Sustainability disclosure for U.S.-based companies is driven not only by shareholder pressure but also by a recognition that transparency can help strengthen relationships with employees, customers, suppliers, and local communities. Voluntary sustainability reporting frameworks such as the GRI Standards play an important role in helping firms navigate nonfinancial disclosure by making the process easier. These instruments are also evolving to encourage companies to focus their reporting on material issues. Materiality is a term of art in accounting for publicly held companies, meaning issues that such firms and their share owners as well as other stakeholders, including communities where facilities are located, deem most important or relevant to the business’s operations. It thus is key to the standards put forward by the Sustainability Accounting Standards Board, as well as the framework developed by the industry-led Task Force on Climate-related Financial Disclosures, known as TCFD, which encourages firms to align climate-related risk disclosures with investors’ needs.

GRI chief executive Tim Mohin says, “That investors are pushing for more transparency about organizations’ impact shows how important sustainability is for business.” There is a new acronym in town in addition to TCFD and GRI, which used to be called the Global Reporting Initiative. That neophyte neologism is ESG, which stands for environmental, social, and governance aspects of a firm engaged in commerce. “Through the GRI Standards, we provide the most comprehensive framework for ESG disclosure and a common language that investors and other stakeholders use to improve both business and sustainability outcomes,” Mohin notes. “With the GRI materiality assessment that involves all relevant stakeholders, organizations can be sure they are acting on the issues that are most relevant to them, and to the communities where they operate.”

While most U.S. nonfinancial reporting remains voluntary, some long-term investors are looking to change this. For example, in October 2018, a group of investors representing more than $5 trillion in assets under management, including the California Public Employees’ Retirement System and the New York State Comptroller, petitioned the Securities and Exchange Commission to develop a comprehensive framework requiring public companies to disclose ESG aspects of their operations.

We also find that across regions and countries, sustainability disclosure rates generally increase with company size. The largest companies by revenue consistently have higher disclosure rates than companies in lower revenue groups, and in some cases the differences are significant. Companies in the largest revenue group (with annual income of $5 billion or more) on average reported on 26 of the 91 environmental and social practices examined, double the number reported by companies in the next-highest revenue group (over $1 billion). This owes to the fact that large companies are generally more prone to stakeholder scrutiny. In addition, many of the nonfinancial reporting requirements introduced in recent years, including those by stock exchanges (such as the Singapore Exchange), often apply primarily to larger companies.

What follows are three case analyses of an environmental, a social, and a governance aspect of corporate performance in the ESG/sustainability reporting space. We’ll look at business’s reporting on climate change impacts, gender diversity, and the use of external assurance to validate ESG data.

As more companies recognize that climate change can pose significant risks to their business, they are preparing strategies in response. Almost half of the 250 largest
publicly traded American companies have such strategies. And 36 percent of the U.S. sample of companies include discussion of climate-related risks in their annual filings.

Such disclosure is gaining traction among U.S. companies largely due to a growing recognition that climate change has the potential to pose material risks for businesses, and that companies should disclose these risks as well as steps to prevent and/or mitigate them. While a 2010 SEC rule requires companies to disclose material climate-related risks, enforcement has been notoriously lax. Nonbinding efforts to standardize and improve disclosure, such as the framework introduced by TCFD, are likely having a greater impact than the SEC rule. Individual states are also starting to recognize the financial risks associated with climate change: In 2018, for example, California enacted a bill requiring the two largest pension funds in the country, CalPERS and the California State Teachers’ Retirement System, to disclose all funds’ exposure to climate-related financial risks.

Shareholders also continue to be active regarding climate risks. In 2018, for example, investor proposals requesting that companies conduct climate-risk analyses passed at Anadarko Petroleum and at Kinder Morgan. Similar proposals received at least 40 percent of votes cast at Noble Energy and Old Republic. Relatedly, shareholder proposals passed at Genesee & Wyoming and at Middleby Corporation requesting that the companies report on greenhouse gas management strategies.

Investors are increasingly attuned to climate-related risks and looking for reassurance that companies are taking steps to mitigate them. To help companies meet investor expectations for climate-risk reporting, TCFD released its recommendations for disclosure of climate-related financial risks in 2017. These recommendations encourage businesses to discuss their strategies for dealing with climate change impacts in financial filings and annual reports. Other nonfinancial reporting frameworks, guidelines, and standards, such as those from GRI and the Sustainability Accounting Standard Board, also offer guidance on how to disclose climate-related information. For an example, Alcoa’s most recent annual report details the potential impacts climate change could have on its operation, ranging from regulatory costs to operational impacts resulting from changes in rainfall patterns and water shortages. The report makes clear that if these impacts materialize they could damage the company’s production and financial performance.

These effects are not trivial: The latest report by the Intergovernmental Panel on Climate Change estimates that, if greenhouse gas emissions continue at the current rate, damages from climate change could reach $54 trillion by as early as 2040. And the severity of these damages is now estimated to be greater — and likely to occur earlier — than previously thought. The business community has a significant role to play here. When it comes to climate change, aligning investor needs with social needs will achieve the fabled win-win scenario.

Another key topic emerging from our analysis is gender diversity in business leadership. We found that women fill fewer than one in five board seats globally. The differences
by country are significant: Companies in France, for example, have the highest median share of women directors (40 percent), followed by Italy (33 percent), and Belgium (30 percent). Female directors at American companies account for a median 21 percent of board members. At the opposite end of the spectrum, the median percentage of women on company boards was reported to be nil among Russian, Mexican, Indonesian, Pakistani, and South Korean companies.

These low levels of boardroom gender diversity have triggered responses in several countries. Norway, for example, in 2003 became the first country to pass a quota mandate for women’s representation on corporate boards of firms based there. Several European countries have since followed suit, including Spain, Belgium, France, Italy, the Netherlands, and Germany. In the United States, some states are commencing legal action to counter low levels of gender diversity on boards of firms headquartered in their jurisdictions. For example, in 2018 California passed a law requiring companies “whose principal executive offices” are in the Golden State to have at least one woman on their boards by the end of 2019. That mandate increases to two women directors (for companies with five directors) or to three women directors (for companies with six or more directors) by the close of 2021. This new requirement will be of particular interest to technology companies, many of them headquartered there, as our data show that, globally, this sector has the lowest representation of women on company boards of any sector: On average, roughly 1 in 10 tech company directors is female.

Large asset managers, including BlackRock, State Street, and Vanguard, are also announcing stewardship programs and actively supporting shareholder proposals aimed at increasing board diversity. In 2018, for example, five board-diversity shareholder resolutions came to a vote among Russell 3000 Index companies, although none passed. Discovery Inc. faced a resolution to adopt a policy for improving board diversity that was supported by one-third of the votes cast. At Oracle Corporation, a gender pay gap resolution received almost two-fifths of the votes cast.

Gender pay gap transparency is a related issue in which companies are increasingly interested, one that overlaps with the governance space. Currently, few U.S. companies provide such details. Our analysis found that, of the 250 largest publicly traded U.S. companies, only 3 percent, including Apple, Microsoft, and Johnson Controls, publish a breakout of their gender pay gaps. While by no means widely practiced, gender pay difference transparency is more common among European companies. For example, 10 percent of sample companies in Italy disclose such details; in the U.K., only four percent of companies report this information, but disclosure is likely to surge because of a 2017 regulation requiring organizations with over 250 employees to publish gender and bonus pay, as well as the proportion of male and female employees in different pay bands. Virgin Money, a U.K.-based bank and financial services company, began reporting this information in 2016. The company’s most recent gender pay gap report reveals a mean pay disparity of 29.7 percent (based on hourly rates of pay). For bonuses paid, the mean gap is 48.7 percent. Notably, the company also discloses the gender distribution across four equally sized pay quartiles, revealing women represent 70 percent of the lowest pay quartile and only 37 percent of the highest. In its report, Virgin Money admits it has “more work to do in increasing the number of women in senior management roles.”

In recent years, U.S. shareholders have put increasing pressure on companies to report information related to gender pay disparities. And while there is no federal requirement for companies to disclose information on gender pay gaps, there has been a recent flurry of related state and local regulatory activity. For example, some states (California, Delaware, Massachusetts, and Oregon) and cities (San Francisco, New York, and Philadelphia) have banned the use of salary history in setting pay. At the federal level, the Ninth Circuit Court of Appeals recently ruled that wage differences between male and female employees based on “prior salary alone or in combination with other factors” violate the federal Equal Pay Act.

Reporting is necessary, but not sufficient to remedy gender pay gaps. The real gains will be made by understanding the reasons for gaps and introducing measures to achieve equality and support women’s rise to senior management roles or to overcome bias in pay negotiation.

Indeed, while nonfinancial impact transparency is important, what ultimately matters is that disclosure leads to improvements in sustainability. And one way companies are driving such progress, particularly in the United States, is by linking incentive compensation to sustainability performance. The analysis finds that almost one-quarter of sample U.S. companies — including Verizon, American Electric Power, Suncor Energy, and Microsoft — link incentive compensation to sustainability performance. Verizon, for example, includes diversity and sustainability metrics as part of executives’ short-term incentive compensation plan. They account for five percent of the award opportunity, and include the following targets: ensuring that at least 58.9 percent of the U.S.-based workforce is comprised of minority and female employees; directing at least $4.6 billion of overall supplier spending to minority- and female-owned firms; and reducing the company’s carbon intensity by at least six percent compared to the prior year. This linking practice is also gaining traction among British companies, as 19 percent of the U.K. sample report having it in place.

U.S. shareholders have also paid special attention to this topic during the most recent proxy seasons. In 2018, for example, four shareholder resolutions came to a vote requesting that company boards include sustainability as one of the performance measures for senior executives (none passed, and on average they received 11.8 percent of votes). Five similar proposals were also voted on in 2017. Even when such resolutions don’t pass, they can be shareholder bellwethers.

The quality and reliability of nonfinancial information are becoming increasingly important. As more investors turn to ESG data to make portfolio decisions, there is growing pressure to ensure it is on par with traditional financial reporting. This is one reason the use of external assurance for sustainability information has grown in recent years — almost doubling in the S&P Global 1200 in five years, to 44 percent last year.

Globally, the use of external assurance is most prevalent among companies in Japan and Taiwan, where 42 percent obtain some assurance of their nonfinancial data. By comparison, 28 percent of sampled U.S. companies utilize such external assurance. Despite its becoming more prevalent, the actual scope of what is assured remains limited. Most companies currently include assurance only for a small number of environmental indicators (most commonly, those related to greenhouse gas emissions, and occasionally energy use and water consumption), and in some cases the scope of assurance is limited to the data-collection process and methodology and does not include verification of the data itself.

There are a few companies, however, that extend assurance to a wider range of indicators, including social ones. For example, Walgreens Boots Alliance includes information related to corporate giving and employee diversity in addition to more common indicators such as CO₂ emissions, energy use, and waste. Similarly, Lockheed Martin extends assurance to 21 GRI indicators, including those related to employee diversity and injury rates.

Overall, external sustainability assurance is most common among higher-revenue companies. This is likely due in part to the extra cost and other corporate resources. Recent academic research, however, suggests the benefits of assurance can outweigh the associated costs. A study by Ryan Casey and Jonathan Grenier in the Journal of Accountancy last year found that sustainability assurance can lead to reduced cost of capital for companies, and that this benefit surpassed assurance costs for more than half of examined companies.

The last two decades have seen corporate sustainability reporting established as a mainstream practice. The frameworks, guidelines, and standards designed to help companies and their stakeholders navigate sustainability reporting have also evolved, focusing less on breadth of disclosure — what some may view as disclosure for its own sake — and more on its quality and materiality. Another development in this respect is integrated reporting, a model that encourages more holistic disclosure focusing on value created.

For many large companies, remaining on the sidelines is no longer an option, as many countries are introducing nonfinancial reporting requirements. Even in the absence of mandates, stakeholder pressure to disclose nonfinancial impacts such as climate-related risks, board diversity, and gender pay inequity is greater than ever.

While the growth of sustainability reporting should be lauded, nonfinancial disclosure alone does not necessarily translate into better performance. As Professor Sarah Dadush notes, “The reality is that more reporting does not necessarily mean better reporting or indeed better sustainability performance. For reporting requirements (whether mandatory or voluntary) to be effective in terms of generating positive change in sustainability performance, the quality of the reporting requirements must itself be improved.” In Japan, for example, virtually all companies in the sample report the percentage of women on their boards, yet only three percent of directors among Japanese companies are female. As nonfinancial reporting requirements continue to emerge and develop, frameworks should be designed to achieve not only greater disclosure but also performance improvements. The key is recognizing that disclosure alone is insufficient — and performance must follow transparency. TEF

Since moving to Washington almost 40 years ago, I’ve had two main editorial gigs. In addition to my current post, I was editor of the American diplomats’ magazine, the Foreign Service Journal, during the Reagan years. Most of the Journal’s audience are Foreign Service officers, who sign after their names, “Esq.” Most of The Environmental Forum’s audience are lawyers, who also sign, “Esq.”

That was just an amusing coincidence between two professional magazines, but now both of the agencies they mainly cover, the State Department and the Environmental Protection Agency, have been threatened with having their budgets and staffs savaged. To date, Congress hasn’t gone along, but the danger is causing poor morale at these agencies and hundreds to already quit voluntarily. As these workers’ longtime chronicler, critic, and champion, I feel compelled to respond.

It seems the esquires and other professionals at State and EPA are now deemed to be a “deep state” conspiring to its own ends and disloyal to the new administration and its policy priorities. Suspicion of career officials is not new, but over time all previous presidents have come to respect the civil service; they recognize that, bureaucratic inertia aside, its ranks are loyal to their country and eager to carry out mandates designed to better the lot of Americans.

A cost-benefit analysis of American diplomacy would note that since the end of World War II, an unprecedented era of worldwide peace and prosperity has grown and endured. Experienced diplomats established the financial and trade institutions that underpinned a huge expansion in wealth driven by improvements implemented by workers, business, and agriculture. Since 1960, global per capita GDP has increased 22 times in constant dollars. Human life spans have leaped from 48 years in 1950 to 71 years in 2015 — and a decade more in developed countries.

Professional diplomats were also at the epicenter during the Cold War and kept the pressure on the Soviet Union via containment until it collapsed. And the Foreign Service helped create the military alliances whose might created the environment for that implosion.

The Foreign Service can only take partial credit, for helping to create the framework and oiling the gears, but the United States has benefited hugely from its tiny investment in fielding a professional diplomatic corps whose numbers couldn’t even fill a hockey arena.

Now the international system they have helped to build is subject to attack. “Other presidents have understood,” the Washington Post said, “that the United States has gained, disproportionately, from a system in which it helps keep the peace without keeping crabbed accounts on its national ledger.” The same can be said about Trump’s attacks on the world trading system, where he sees other countries as robbing the American “piggy bank.” He blames the situation he beholds on his Oval Office predecessors and especially the weak professionals at State.

According to Foreign Policy, a Trump acolyte in the department is combing through social media to compile a list of officials who have supposedly been disloyal. Trump has experienced diplomats processing FOIA requests and has refused to name ambassadors to key countries or to fill other crucial posts. Trump also nearly tweeted away diplomatic immunity, exposing our government workers to real danger.

The fact that 99 percent of foreign affairs — of maintaining “our first line of defense” — is at the level of daily transactions among professionals serving in hundreds of countries has not occurred to him. Or as Defense Secretary James Mattis has said, if State’s budget is reduced, “Then I need to buy more ammunition.” But when asked about Trump’s proposal for a 30 percent cut, Secretary Mike Pompeo said cryptically, “I’ll make sure we have every single dollar we need and not one dollar more.”

Likewise, EPA is a useful and good agency Trump wants to ravage to upend its successes. The benefits of environmental protection have vastly outweighed the cost to American businesses and taxpayers, by between $113-741 billion a year, according to 2014 OMB data. Yet Trump and his first agency administrator came into office seeing the skilled professionals who helped accomplish this as an enemy — it was time to “deconstruct the administrative state.”

Scott Pruitt began the process by measuring his success using a different yardstick than his predecessors: beating down the professionals who dutifully implement and enforce the statutes passed by Congress and signed by the president, as detailed and directed under law and under careful court scrutiny. “When you look at what’s going on at the EPA, that agency has been a bastion of liberalism for years and years and years,” Pruitt told a radio host. He said the agency “was weaponized historically” against business. Representative Betty McCollum (D-MN) countered, “‘Staff has been under attack during your tenure’ and ‘there’s documented retaliation, as far as I’m concerned,’” according to the Washington Post. In fact, “the U.S. Office of Special Counsel is investigating whether . . . Pruitt retaliated against staffers who questioned his spending and management decisions.”

Pruitt is gone. According to E&E News, acting Administrator Andrew Wheeler “has signaled an increase in press access and engagement with career staff,” both principles that were anathema to his predecessor. And at State, Pompeo, who succeeded the dour institutional decimator Rex Tillerson, is said to be more popular among the Foreign Service employees and other civil servants who staff the department headquarters and overseas posts.

If they care to listen to professionals who want nothing more than to uphold their oaths of office, Wheeler and Pompeo will be well served in implementing the president’s policies.

Notice & Comment is written by the editor and represents his views.

Critics Call Bailout of Coal, Nuclear Plants “Trump Socialism”

The Trump administration’s plan to bail out the beleaguered nuclear and coal industries continues to draw sharp reaction from critics, with activists now claiming it will cost Americans as much as $34 billion more a year for electricity.

Meanwhile, Howard Learner, executive director of the Chicago-based Environmental Law & Policy Center, claims the directive that was announced June 1 is largely a result of lobbying on behalf of FirstEnergy Corp. by President Trump’s former campaign manager, Corey Lewandowski. . . .

Murray Energy is a major mining company that supplies coal to many affected power plants.

“Clearly, FirstEnergy and Bob Murray of Murray Energy have been aggressively lobbying the Trump administration for a bailout,” according to Mr. Learner, who said the directive would interfere with the marketplace to ensure cash flow for executives from noncompetitive corporations.

“President Trump is asking the public to subsidize the losers,” Mr. Learner said.

Former U.S. Nuclear Regulatory Commission board member Peter Bradford [said], “This is about favors and political paybacks. . . . It’s not Bernie Sanders socialism. It’s Trump socialism, because the benefits aren’t going to the public at large.”

— The Toledo Blade

“Scott Pruitt’s . . . claim that benefits have been inflated in EPA regulatory decisionmaking is simply not borne out by the facts, and in today’s far-reaching announcement, he is doing nothing short of cooking the books so that polluters always win, and people always lose.”

— Sara Chieffo, vice president of government affairs, League of Conservation Voters

The Tragedy of the Commons Writ Large

Maybe planet-wrecking behavior is generic to technology, or so says astrophysicist Adam Frank, as reported in Popular Science. The venerable publication cites an article in a more obscure journal, Astrobiology, and notes, “A generic feature of any planet evolving a species that intensively harvests resources for the development of a technological civilization” is what biologists, geologists, and anthropologists call the Anthropocene, the era in which Earth’s environment has been shaped by humans.

“Frank borrowed from population ecology to devise models that represent the relationship between a civilization and its planet, using mathematical equations similar to those used by anthropologists to represent the rise and fall of ancient civilizations, like the one on Easter Island.” The result? “When you get advanced enough, and start consuming resources and energy at a fast enough clip you necessarily start to change your home planet on a global scale.”

Frank says that because of feedback loops that allow civilizations to respond to environmental stressors, dystopia isn’t the necessary result. Disturbingly, however, it’s the immutable outcome in three out of four scenarios. He labels the three bad results on graphs showing the declines as either a gradual die off, a brutal collapse without resource change, and a still severe collapse with resource change. In other words, if humanity does nothing, we all die, either in a cataclysm or slowly. But even if we do alter course, chances are the collapse still occurs.

The fourth outcome is sustainability. Strangely, the popular magazine doesn’t define what that means or how to get there, which makes sense because The Environmental Forum has also puzzled over sustainability. It would appear that humanity needs to recognize its resource constraints, but faster and more aggressively than in the outcome in which constraints are recognized but there is still a collapse.

But let’s not fault Popular Science here for not describing sustainability. Gro Brundtland laid down the challenge to humanity in 1987’s Our Common Future. Her definition suffers from tautology, however: sustainability is living such that you do not deprive succeeding generations of the resources they will need. Maybe surviving means we sustain the means of survival.

Right now we are using resources at a rate equivalent to two planet Earths, so we are outside Brundtland’s boundary. That is a challenge to environmental professionals, who are in the best position to inform policymakers and the public about defining sustainability and how to get there.

Christie Manning is an assistant professor of environmental studies and psychology at Macalester College whose field encompasses “how people respond to information about climate change.” She says, “If you want to encourage action, fear is often counterproductive.” Further, it “narrows our thinking and makes us less willing to work with those who are different.”

At ELI, we have adhered to a centrist approach on the question of regulatory reform, seeing our current system of environmental protection as neither fatally flawed nor beyond improvement. But the question remains where to aim the reform effort.

A suggestion: waste recycling activity. Why? Because the RCRA program has become increasingly difficult to reconcile with sustainability ideals.

There are a number of different takes on what is meant by environmental sustainability, but I like the one that derives from Section 102 of the National Environmental Policy Act: a key goal of today’s society is to avoid the irreversible commitment of resources. That way, tomorrow’s needs can also be met. At first blush, RCRA would appear to be complementary in thrust, since, it is, after all, called the Resource Conservation and Recovery Act. But the regulatory system that emerged and has prevailed under the statute has always been preoccupied with guaranteeing proper disposal, and this preoccupation has at times pushed deployable secondary material toward end of life rather than recycling and reuse.

This orientation is understandable, given where we started. The initial National Priorities List under Superfund was populated with sites around the country that were the product of chemical reclamation activities gone awry. Many of the cases that I litigated back in the 1980s involved such circumstances. Take U.S. v. Monsanto, which involved the Bluff Road site in South Carolina. That site was envisioned by its operators as a collection and staging area for reclamation of organic chemicals. Nearly 10,000 drums would make their way to the site, but, as often seemed to be the case in those days, the operators could not keep up with the volume of material that they received and were unsuccessful in finding markets for repurposing the waste. As a result, the drums never left, the containers corroded, and a chemical stew contaminated land and groundwater, resulting in millions of dollars of liability and cleanup.

RCRA, with its cradle-to-grave system and stringent requirements for hazardous waste management and disposal, was in part intended as a “never again” response to scenarios like these. It presumed mismanagement and then applied a belt and suspenders approach to overcome it.

Fast forward to the present. RCRA has largely been successful in reining in industrial chemical waste mismanagement. Though Superfund continues to chug along in cleaning up legacy sites, very few new NPL sites have emerged based on behaviors post-dating the promulgation of RCRA’s regulations. Indeed, the chemical manufacturing and waste management sectors, having labored under RCRA controls for decades now, have largely internalized these controls in their compliance management systems.

The question now is whether RCRA should be turned more decisively in the direction of resource conservation and recovery — particularly in view of the emergence of sustainability and smart materials management as core objectives in much of the business community. At their root, these objectives are grounded in conservation thinking, focused on designing products with end-of-life in mind and strong reuse and recycling programs, allowing for an increasingly circular economy.

The difficulty is that the RCRA program in its current form has proven a straight jacket when it comes to recycling. The flip switches that operate around the questions of whether a material is a waste and whether a waste is hazardous, coupled with the absence of clear statutory authority to develop customized programs for recyclables, drive resource loss rather than reuse.

Take, for example, what is happening in the retail sector with discarded aerosol cans. By virtue of their propellant, these hit the trip wire for RCRA ignitability and are treated as hazardous waste. This waste stream accounts for nearly half of the RCRA-regulated material in the retail sector and drives the status of retail stores as RCRA large-quantity generators. Awkwardly, these same cans, when disposed of by consumers, are treated as household solid waste rather than hazardous. 

Treated as hazardous waste, the fate of the material is certain — the vast majority is incinerated. Apart from the enormous cost of this approach, there is a sustainability tragedy — both the cans and the propellant are recoverable and either recyclable or reusable, the cans for their metal and the propellant as fuel. It seems virtually assured that reharvesting these materials can be undertaken in an environmentally protective manner.

Can we work together to find a better path for waste streams like this? To me, that sounds like smart reform, anchored by the sustainability ideal.

Napa! What does that name conjure up? Delicious wines? A bucolic “paradise valley” with thousands of green acres stretching from the Napa River to the Mayacamas Mountains to the west and Howell Mountain to the east? Farmland undergoing rapid development? It is all of these, but the reality is more complicated. It is a microcosm of the struggle going on across America between profit-driven development and resource conservation.

Napa at Last Light: America’s Eden in an Age of Calamity is the recently published third volume of a trilogy on this subject by James Conaway. The first in the series, Napa: the Story of an American Eden (1990), a New York Times best seller, describes this place where climate, soil, and weather conditions are extraordinarily well-suited to the growing of grapes from which excellent wines can be produced. In the late 19th century a few adventurers, including immi-
grants from Europe who brought with them knowledge on how to grow grapes, matching grapes to climate, and the making of wine, came to the Napa Valley. They produced wine profitably, built large mansions on the hillsides, and then the combination of a grape disease and Prohibition shut them down. In the 1960s, people eager to leave city life for a living in a beautiful setting “rediscovered” Napa and revived the wine industry.

By 1976 the wineries that sprung up in Napa Valley were producing wine of such excellence that two Napa vintages, a cabernet sauvignon and a chardonnay, won a blind taste testing in Paris against some of the very best French wines. As the number of wineries expanded rapidly, other businesses began to arrive, bringing construction equipment and traffic. In 1968 the county wisely declared agriculture to be the “highest and best use” of the land and created in the Napa Valley the first “agricultural preserve” in the country. “Agriculture” included “the raising of crops, trees, and livestock, [and] the production and processing of agricultural products.” A house or farm building required at least 40 acres.

Conaway’s second book in the trilogy, The Far Side of Eden: New Money, Old Land and the Battle for Napa Valley (2003), describes the extraordinary wealth generated by Napa’s wines, and the arrival of absentee corporate owners and real estate developers whose main interest was making money. This led to planting vineyards on steep slopes, and the associated cutting of enormous numbers of trees, which in turn led to erosion and pollution of the Napa River, which runs from north to south through the valley. The river was home to salmon and steelhead before the deteriorating water quality drove them out. This development also began to take its toll on the appearance of the valley and the hillsides, including new structures, heavy traffic, dust, bulldozers, and other earth-moving equipment.

Napa at Last Light begins with a recap of this history, and then brings the saga up to 2017. (Disclosure: I read and provided comments on an early draft of the book). Conaway has spent over 30 years traveling up and down the approximately 25 mile Napa Valley and the surrounding communities, getting to know the people, their desires, values, and personalities. As a result, reading his books is not just a story of the evolution of a community. It is also getting to know the grape growers, the winemakers, and their families, many of the original owners, the preservationists, the concerned citizens, the newcomers looking to make big money fast, and the local officials. You encounter the organizations that spring up on all sides, and their interactions. After reading about the fist fight between Robert and Peter Mondavi to decide the ownership of the family business, you may never look at a bottle of Mondavi quite the same.

There are now over 400 wineries in Napa Valley, and efforts continue to increase production and profits. Some winery owners tried to increase their production by bringing in grapes from outside the valley. This increased short-term profits, but eventually debased the value of the winery name when the public found out that their bottle of “Napa Valley” wine was made from mostly non-Napa grapes, and didn’t taste quite as good. To curtail this practice the county passed an ordinance in 1990 defining “Napa Valley” wine as being produced from at least 75 percent Napa Valley grapes.

Also in 1990, with strong backing of citizens groups and environmentalists, Napa adopted an amendment to its general plan, known as Measure J, which stated that any change in land use provisions, whether by ordinance or permit, must first be subject to a popular referendum. This was challenged by winery owners and developers, but was upheld by the California Supreme Court in 1994. It has been invoked to challenge exceptions to land use laws with mixed success.

Many vineyard owners and winemakers have long felt they should be able to do whatever they want with their property. They began to chafe against the strictures of the “agricultural preserve” and the definition of “agriculture.” Using their wealth and influence they have been able to persuade local officials to overlook violations and to allow planting on more acres than authorized, illegal tree-cutting and construction in the wrong places. The threat which climate change poses to future grape-growing has been ignored. Some owners expanded what once was known as a “tasting” to include food service tantamount to running a restaurant. Promoted as the “full wine experience,” the events are high priced. Receptions and the like are being held, and the sale of T-shirts, bar equipment, and paraphernalia unrelated to wine has sprung up.

By 2008 the owners were promoting an expansion of the definition of “agriculture” quoted above to include: “and related marketing, sales and other accessory uses.” This would legalize the excesses described above, and more. They argued that the greater business and profits that could be generated from these activities would benefit everyone. There was widespread opposition among the other residents. Many feared further destruction of the natural beauty of the valley, increased traffic and noise, and further pollution of the Napa River, which was already listed by EPA as impaired under the Clean Water Act. However, this change had support among the planning department and the board of supervisors, and was approved as a “minor” clarification with minimal public notice.

While the owners reaped extraordinary profits, the farm workers and many other residents were barely getting by — some living in trailer parks not visible to most tourists. They resented the arrogance of the owners and developers, who seemed oblivious to the fact that their drive to expand operations and convert wineries into tourist attractions was destroying the qualities of the valley which brought people — including many of the owners — there in the first place.

To put the land use conflict into human terms, Conaway discusses several examples of profit-motivated outsiders who came to the Napa Valley with the aim of creating opulent wineries with no regard for the impact which development would have on the environment. One grew up in San Matteo, made a fortune during the tech boom, and bought 40 acres on a mountain adjacent to a 3,000-acre wildlife preserve and a state park, where he wanted to plant a vineyard. This would involve clear-cutting many large trees, removing boulders, and recontouring the land in an area that was ill-suited to development. Outraged citizens organized a strong effort to block it, and that battle continues.

Another example was a Texas real estate developer and part owner of the Dallas Cowboys who wanted to clear cut 500 acres, including an estimated 30,000 mature oak trees, ostensibly for a vineyard. His massive infrastructure plans strongly suggested an intention to build a large number of “ranchettes.” He had done a similar development in neighboring Sonoma County. Surveys indicated that the land disturbance would cause significant erosion, damaging Napa’s drinking water supply, adversely affecting fish populations, and destabilizing downhill soil. The public, fed up with deforestation and environmental destruction, rallied to oppose this. But the developer began a campaign of misinformation and bullying, and the county supervisors allowed the project to proceed. Lawsuits were immediately filed.

Conservation-minded citizens then drafted a proposed water and woodland protection initiative, and quickly gathered more than twice the number of signatures needed to get on the ballot for the 2016 election. The board of supervisors initially approved it to go on the ballot. Then they rejected it on the technicality, rarely invoked, that it failed to attach copies of regulations that might be affected. The citizens were left to start the process over again for the 2018 ballot, amid protests of “voter suppression.”

Near the end of the book Conaway observes: “‘Eden’ is a figurative stretch for what the valley once represented, but all vestiges of that early innocence are lost. The remnant fig leaf kept in place by the wine and hospitality industries grows more tattered every year, revealing more schemes to transform a way of life into a marketable experience as or more valuable than the thing itself.”

Napa at Last Light is a very engaging read and carries some important messages. The struggle going on in the Napa Valley is similar to struggles between developers and conservationists all across the country. At a time when our national leaders are calling for less regulation and making it more difficult to protect our environment, this book could not be more timely.