As part of the “E” or environmental component
ofEnvironmental, Social, and
Governanceprinciples, companies of all sizes are making
environmental commitments a part of their business vision and
practice, leading to measurable cost savings, growth due to
improved brand image, and satisfied employees and consumers.
Environmental commitments include actions and policies to protect
the quality of the natural environment, adhere to regulatory
requirements, reduce waste and emissions, adopt new technology, and
partner with other organizations to make a more significant
environmental impact. The time is now to assess your environmental
commitments and create intelligent environmental policies. To
begin, here are five areas of policies and practices that your
company can consider to demonstrate its commitment to the
environment.
- Don’t wait until it’s too late conduct
formalized periodic environmental audits to discover and report
violations
Companies can consider making a commitment to comply with
environmental laws and regulations by implementing a formalized
environmental audit program to discover and self-report
environmental violations. Not only do these programs allow
companies to demonstrate a high degree of environmental
responsibility, but they can also allow a company to satisfy the
U.S. Environmental Protection Agency’s (USEPA)Audit Policy. The Audit Policy, formally
called “Incentives for Self- Policing: Discovery, Disclosure,
Correction, and Prevention of Violations,” provides
immunity for self-disclosure of violations.
The Audit Policy provides several major incentives for companies
that discover and disclose their violations most
significantly, large penalty reductions and in some cases total
immunity against penalties. In situations involving extreme
violations, use of the policy has also resulted in no
recommendation for criminal prosecution. However, the Audit Policy
provides these incentives in limited circumstances, where the
violation was voluntarily discovered through either an
“environmental audit” or a “compliance management
system” both of which have specific definitions
in place to prevent, detect, and correct violations. The
company must also promptly disclose the violation to EPA and
correct and remediate the violation within 60 calendar days.
In addition to USEPA’s Audit Policy, many states have their
own audit/self-reporting immunity policies, which protect against
state enforcement and penalties in certain circumstances.
While there is certainly a business cost associated with
designing and implementing an environmental audit program or
compliance management system, given the significant penalties that
USEPA and state environmental agencies can assess, the cost of this
self-policing policy is often very worthwhile.
Environmental counsel can review their clients’
environmental audit reports to determine whether any findings
constitute violations that may be eligible for federal and state
audit policies. Those attorneys can then assist companies in
self-reporting violations and negotiating reduced penalties
afforded by the policy.
- Get serious about utilizing renewable energy as a power
source
Companies can explore various renewable energy options to lower
their carbon footprint, including on-site wind, solar, and battery
installations. For example, companies with unused land, roofs,
parking lots, landfills, or waste treatment operations can consider
installing distributed generation power sources on-site. In
addition, companies can explore off-site procurement options
through power contracts with renewable energy power generators.
Unlike traditional power contracts, no physical power from the
project is sold to the company. Instead, the purchasing company and
renewable energy power generator agree to a long-term fixed
purchase price for the power. Then, the renewable energy power
generation company sells the power to the market, and the
purchasing company pays the difference if the market price is less
than the fixed price or receives any surplus if it is more than the
fixed price.
Other renewable energy power arrangements include
behind-the-meter installations that deploy the offtake and
generator behind the same interconnection point, where energy
transfer occurs before hitting the grid. In these arrangements, the
generator gets an offtaker at a fixed price and can negotiate
beneficial terms, while the offtaker can avoid transmission
charges. Any company can utilize renewable energy as a power
source, and they can use wind or solar for a small portion of their
energy needs or go big and offset all or nearly all of their energy
usage (see ournews alerton our work on Lightsource bp
Renewable Energy Investment Ltd.’s 300 MW Bighorn Solar Project
in Pueblo, Colorado, which offsets approximately 90 percent of the
annual electricity demand from the EVRAZ Rocky Mountain Steel
facility immediately adjacent to the solar project, making the
EVRAZ facility the world’s first solar-powered steel mill).
Once a company takes the renewable energy leap, it can consult
the World Resources Institute (WRI)Greenhouse Gas protocolsand theInternational Performance Measurement &
Verification Protocol(IPMVP) to help calculate their
carbon emissions reductions and publicize their efforts.
- Build and design in a greener way, but with
caution
Buildings contribute 40% of global greenhouse gas (GHG)
emissions and present an actionable source of energy efficiency,
emissions reduction, and cost savings. Companies can announce GHG
or other environmental performance targets that reduce energy use
and water consumption through real-time monitoring technologies
that adjust building conditions to save money and reduce energy
use. However, companies should avoid over-committing themselves to
specific emissions reduction targets unless they can track and meet
those goals.
Companies can install achievable energy use reduction
techniques, including heating, ventilation, air conditioning (HVAC)
retrofits, weatherization, insulation, and lighting upgrades. In
addition, companies can seek building design and energy-system
certifications through the U.S. Green Building Council’s
(USGBC) Leadership in Energy and Environmental Design
(“LEED”) program. Finally, building upgrades are not
limited to the interior, as companies can also explore exterior
design improvements like water-efficient fixtures, irrigation
controls, and drought-resistant landscaping.
Companies should know that a LEED project does not always
receive the full LEED credit expected for the upgrades, as
significant investments to update a building could fall a few
points short of a Platinum, Gold, or Silver LEED certification.
Therefore, companies should aim for an additional cushion of points
above the desired certification level. However, concerns about
meeting full LEED certifications should not prevent a company from
embracing sustainable design.
Additionally, companies should be aware that environmentally
friendly products the companies want to use in their building
design do not always live up to their claims or can be rapidly
replaced with better technology. Therefore, to adequately evaluate
their product sourcing decisions, companies should look for
sustainability certifications from third parties such as Green
Seal, Greenguard, Ecologo, and Energy Star, among many options.
- Encourage employees to walk the walk, too
Companies can partner with their employees to incentivize
smaller-scale decisions like carpooling to in-person work or, where
appropriate, choosing to attend a virtual conference rather than
traveling to the location. Companies can also make recycling
available to employees. Although these are simple choices,
promoting environmentally conscious decisions can attract and
retain employees and customers who want to work at and support
“green” businesses, leading to increased retention,
satisfied clients, and more investment opportunities. The benefits
are not just theoretical and can be measurable in the form of
pounds of material diverted from landfill waste streams or reduced
GHG emissions measured under USEPA’s Waste Reduction Model
(WARM). Companies that advertise those measured reductions can
enhance their brand image, leading to growth and increased
revenue.
With advertising, however, must come caution. The urgent demand
in the market for environmental commitments by companies has led to
increased disclosure requirements that measure a company’s
environmental actions and impacts, resulting in added transparency
that allows the public to compare a company to its peers. Companies
should be careful to report, track, and measure progress before
publishing information on their actions to meet this increased
scrutiny and avoid the legal risks and reputational damage of
“greenwashing” (see our priorblog poston the topic).
- Convert to semi-closed and closed-loop waste systems to
avoid Covid-19 supply chain issues
Semi-closed and closed-loop waste systems are the epitome of
reusing and recycling, as they allow companies to create new items
from production waste. These systems help companies maximize their
process inputs and reuse the same materials repeatedly, ultimately
conserving natural resources, diverting waste from landfills, and
increasing profits. Almost any material can be used in these
systems, including fabrics, dye water, foams, on top of plastics,
metals, technology parts, and glass. Investing in the more advanced
manufacturing equipment and waste collection techniques allow
companies of all sizes to create a waste disposal policy as a last
resort. In addition, companies can maximize these efforts by
incorporating data collection and reporting protocols for
accountability and process improvements.
Semi-closed and closed-loop systems divert waste, save money,
and reduce emissions while also addressing global supply chain
issues caused by the Covid-19 pandemic. Companies not directly
involved in manufacturing can still strongly benefit from
partnering with suppliers, customers, and other organizations that
utilize these waste minimization systems. These partnerships reduce
the business risk of depending on supply sources that require
single-use materials, which are more vulnerable to external supply
chain issues.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.