By: Wendy E. Wagner*
Corporations have been criticized for their environmental misdeeds for over a century, so it is not surprising that many view corporate approaches to sustainability with skepticism. Reports of green-washing and other forms of misleading advertising by a handful of corporations only serve to reinforce this negative perception.
Based on this evidence of poor corporate behavior, a number of analysts have concluded that sustainability should be regulated in the same way as other industrial polluting activities. Just as laws require corporations to disclose information on their polluting activities because these activities are wrongs to society, so the thinking goes, corporations should be required to engage in an internal accounting of their unsustainable practices. Specifically, corporations should be required to assess the sustainability of their operations in standardized disclosures and take their resulting, publicly-administered medicine, whether it involves being shamed in the marketplace or subjected to greater regulatory control with respect to resource use or disposal practices.
This Article argues that addressing corporate sustainability by putting the onus on corporations to assess the sustainability of their operations may get the solution exactly backwards, at least at this early stage in advancing sustainability. Rather than view the lack of sustainability efforts as another corporate bad that individual corporations should be required to redress, this Article advocates that corporate sustainability should be treated instead as a public good that becomes the government’s responsibility. Information about an industrial sector’s sustainability profile—for example, a life cycle analysis of a typical facility—has clear public good qualities associated with it. This type of assessment allows for cross comparisons between competitors, identifies areas for possible synergies among producing companies, and highlights areas that may ultimately deserve further regulatory oversight. Equally important, if sustainability analyses concerning various production processes and services are produced in the first instance by publicly funded, third-party experts rather than extracted from private actors, the resulting reports are more likely to be reliable, complete, and accessible to a wide-range of stakeholders who can use them in public-benefitting ways.
The argument for treating corporate sustainability as a public good, rather than as a corporate bad, unfolds in four Parts. Part I details the need for much greater information on the sustainability of corporate practices. At present, there appears to be little dispute that rigorous sustainability assessments of major corporate production processes are a valuable tool for directing change, and that life cycle analyses excel in providing this kind of comprehensive assessment. Part II outlines how these life cycle assessments nevertheless face numerous informational and related obstacles that impede their usefulness when they are produced by corporations. Part III then argues that sustainability life cycle analyses, at least at this early stage, are better viewed as public goods that should be conducted by a neutral third party and subsidized by the public, rather than treated as an extension of pollution disclosures that are the sole responsibility of the firm. This public good characterization also manages to dodge the landmine of issues that ordinarily afflict the reliability of information provided by regulated parties with a stake in the outcome. Part VI offers specific suggestions for how corporate sustainability assessments might be prepared by public experts and financed through a collective tax on corporations.
I. Informed Sustainability
There are multiple avenues for advancing corporate sustainability, but a key component to all of these methods is greater information about corporate practices. Individual corporate decisions about production processes, when amalgamated, yield a global market of goods and services which may be badly inefficient from an ecological point of view. Yet, until the relevant information is gathered and synthesized, the overall impact of corporate practices and the areas for the most promising gains with regard to sustainability are obscured. As Professor Gaines notes, “shared information and mechanisms of social response to that information” are some of the primary keys to sustainable development. This Part outlines the critical role that information plays in making progress toward corporate sustainability.
A. The State of Information on Corporate Sustainability
Top commentators on corporate sustainability agree that information is not just an important ingredient, but it is also essential to establishing a meaningful sustainability program. At the most basic level, rigorous information on corporate sustainability informs the market—not simply downstream consumers, but also insurers, investors, corporate partners, and others who ultimately keep the corporation in business. Rigorous information on corporate sustainability informs internal practices as well: Enhanced corporate self-assessment is touted as one of the primary virtues of mandating information disclosures. Corporate sustainability information also identifies corporate practices that are most likely to benefit from greater regulatory oversight or market intervention.
Yet current regulatory programs provide only limited information on corporate sustainability. The Right-to-Know Act in the United States requires annual disclosures of corporate use and disposal of large amounts of hazardous substances. The resulting Toxic Release Inventory (“TRI”) disclosures provide useful information about corporate sustainability with regard to handling and disposal of hazardous substances, but these load estimates offer little insight into meaningful opportunities for a facility to reduce natural resource use, to minimize pollution, or to otherwise decrease a facility’s ecological footprint.
The Global Reporting Initiative (“GRI”), established by the United Nations Environment Programme (“UNEP”) and the Coalition for Environmentally Responsible Economies (“CERES”), provides a more robust measure of a corporation’s ecological footprint because it measures not only outputs, but natural resource use as well. The GRI offers external parties, like investors and customers, an even stronger basis for evaluating a corporation’s commitment to and progress toward sustainability as compared with the TRI disclosures. GRI reporting is voluntary, however. Thus, while a number of Fortune 500 companies have conducted self-audits over the last fifteen years, participation in GRI still remains the exception rather than the rule.
GRI and TRI provide useful barometers to measure corporate sustainability, but because both are exclusively input and output focused, they miss opportunities to focus corporations on the ways that production operations can be altered to provide significant sustainability advances. GRI and TRI also allow firms to be self-referencing in benchmarking their progress, a focus that neglects to reward ecologically-innovative business practices. Indeed, because both measures simply report on input and output over time, they are indifferent to the possibility that some types of processes or firms are unsustainable relative to competitors and need to be phased out. In addition, rather than keeping a firm focused on sustainability goals, a “good score” in the GRI risks becoming an end in itself which can distract firms from searching for design and other process innovations that may make more significant progress in the firm’s sustainability profile.
B. The Unparalleled Virtues of Life Cycle Analysis
Although life cycle analysis is more information-intensive, it offers a substantially improved measure of corporate sustainability relative to the input and output measures embodied in the GRI and TRI reports. Life cycle analysis, which originated in industrial ecology, begins at the “cradle,” where raw materials are produced, and follows that production process through transport and manufacturing to the ultimate disposal, often by the consumer. The goal of this analysis is to identify materials and burdens at each stage of the production process that are not recycled in a closed loop, paralleling natural processes. See Figure 1. Such a holistic view of the process allows for a greater range of options for minimizing a facility’s ecological footprint, including redesigning the process entirely. By focusing on the design of production processes, rather than simply the end-of-the-pipe or output adjustments, much greater environmental gains, as well as cost-savings, are possible.
Figure 1: Example Flow Diagram of a Hypothetical Bar Soap System
Because the virtues of life cycle assessment (“LCA”) enjoy strong consensus among experts, the methods for conducting these assessments are becoming standardized by organizations such as the International Standards Organization (“ISO”). A typical life cycle assessment begins with a qualitative inventory of each stage of the process, which can provide useful information for decision making in and of itself. Most life cycle assessments are quite rigorous, however, and take the form of computational models that measure environmental burdens—often through a single unit—which can then be used to identify the most promising areas for redesign or process adjustments.
To the extent that there is proof in the pudding, life cycle analyses boast of concrete victories. A life cycle approach helped Tropicana learn that it was not the transportation of its juice, but the agricultural inputs that led to its larger-than-necessary carbon footprint. As a result, Tropicana focused its primary efforts on reducing fertilizer use rather than dedicating the same resources to increasing the energy efficiency of its vehicles. In a life cycle analysis of coal-fired power plants, Department of Energy (“DOE”) consultants compared cleaner coal-fired plants with older plants. This analysis not only quantitatively identified the additional environmental burdens associated with the older plants, but pinpointed those costs to specific features within the life cycle. This analysis also identified design changes that might improve the environmental performance of the older coal-fired systems.
From a regulatory standpoint, life cycle analysis can also pinpoint occasions when adverse environmental impacts are simply shifted within a production process—for example, how end-of-the-pipe controls may reduce one source of pollution only to move the problem elsewhere in the production process where it might be more difficult to address. A life cycle assessment of offshore drilling waste disposal, for example, revealed how strict prohibitions on the discharge of cuttings extracted with certain drilling fluids may have precluded opportunities to identify ways to convert the resulting hazardous waste (disposed in hazardous waste landfills) into a useful product. This internal recycling would have ultimately done much more to limit waste, production costs, and environmental risk than flat prohibitions on the generation of the waste.
Given the virtues of life cycle analysis, coupled with what has now become a relatively robust methodology for conducting the assessments, it is no wonder that many commentators are clamoring for greater use and incorporation of life cycle analysis into sustainability calculations. There has even been a movement to use life cycle analysis for a wide range of environmentally intensive practices, and not simply the design, packaging, or manufacture of products. Life cycle analysis is so highly regarded that its methods are also being expanded to encompass more than purely environmental concerns.
II. Impediments to Corporate Self-Assessments of Sustainability
Just as life cycle assessments offer great potential for advancing corporation sustainability, the information-intensive quality of these assessments introduce some formidable challenges. The most significant impediment, by far, is that a great deal of the information needed to conduct facility-specific or even industry-wide life cycle assessments lies in the hands of the companies. And, for a variety of reasons, these firms often lack the incentives to collect, analyze, or even share this basic information in a complete or comprehensive way. While some corporations may receive accolades for their forward-looking sustainability practices revealed in life cycle assessments, many more are likely to view these assessments as yet another opportunity for the public release of unflattering internal information about their environmental problems. Much like environmental audits, and even basic TRI and GRI disclosures, corporations may be wary of conducting these assessments and, if they are required, may resist conducting them in a rigorous or comprehensive way. Indeed, the challenges associated with self-conducted life cycle analyses are more significant than TRI and GRI since the data collection and methods are difficult to prescribe in advance.
This Part identifies several impediments to the production of reliable life cycle analyses when the analyses are conducted by corporations that have a stake in the outcome.
A. Reliability of Data
A life cycle assessment requires a great deal of data about a large range of inputs (including water usage and various chemicals) and outputs (including pollutant streams and discharges) at each stage of the production process, from natural resource extraction to disposal. Yet, since this data is largely in the hands of the corporation, it can be difficult to collect. A number of other environmental programs have relied, out of necessity, on corporations to produce much of the basic information about their compliance with laws and regulations, and in these cases the EPA has often found itself in a cat-and-mouse game with regulated parties in its effort to acquire reliable information.
Over time, additional regulatory innovations have helped increase the reliability of some self-produced information from regulated parties. For example, to gather accurate information about the pollutant emissions emanating from large utility stacks, Congress required that continuous monitors be installed on the stacks, and the EPA promulgated supplemental rules that penalize facilities when their continuous monitors break down. The EPA has also experimented with the use of external auditors who, like financial auditors, inspect companies to assess their violations and help bring them into compliance.
Unfortunately, most of the tools developed to collect more reliable information from regulated parties are only useful in a narrow set of circumstances that do not extend to the data-intensive needs of sustainability life cycle assessments. Expensive continuous monitors at the end of discharge pipes provide only a fraction of the internal data needed to produce a meaningful life cycle assessment. Deploying external auditors to oversee data production is both expensive and incomplete in providing a rigorous accounting of industrial practices over time. Some of the information on processes and inputs can even be trade secret protected and therefore disclosed to only a few agency officials. In fact, even GRI reporting, which is far more standardized because of GRI’s emphasis on input and output quantities and indicators, has encountered challenges in ensuring the reliability of the reported information.
As a result, there are substantial challenges in ensuring the reliability of corporate-conducted life cycle assessments. Compared with GRI, life cycle assessments allow for even more error and bias in extracting basic internal data since there is much greater discretion for the corporation in identifying the types of data to collect, selecting the units of analysis (both in time and scale), and assembling the requisite information from company operations.
B. Disinterested Methods
Beyond problems with ensuring the reliability of the input data, the methods for conducting a life cycle analysis also afford the analyst considerable discretion in how to conduct the assessment. This too presents problems when the company conducting the assessment has a stake in the outcome. For example, there are numerous discretionary points that arise in framing the scope of a life cycle assessment, developing the methods, and interpreting the data. When a company is conducting its own LCA, this remaining methodological discretion raises a risk that it might select the most beneficial assumptions in conducting its assessment and ignore others that might cast the company in a less positive light. The resulting self-assessment could thus be prepared in ways that are afflicted with systemic biases that tilt in favor of the firm, but these biases will remain difficult to detect without careful review.
The development of rigorous methods for other types of open-ended assessments, like risk assessments, have posed similar challenges to environmental regulators. For example, there is evidence of sponsor-bias in manufacturers’ assessments of the chronic hazards of their products and waste streams. In the biomedical literature, this systemic bias has been dubbed “the Funding Effect” since privately sponsored research is more likely to produce results favorable to the sponsor than research that is financed by disinterested parties, like the federal government. Even more standardized sustainability disclosures, like GRI, have suffered from some of these challenges, since they too provide wiggle room for firms that prefer to highlight successes and downplay failures in applying the GRI indicators.
This discretion in methods has also been a continuing problem for life cycle assessments. Relatively blatant evidence of self-serving biases in corporate life cycle self-assessments was discovered in the 1990s which, in turn, sparked greater attention to the development of more rigorous methods for conducting these assessments. UNEP, ISO and SETAC all worked to improve the methods for life cycle analyses in ways that guard against sponsor discretion to the extent possible. Nevertheless, the dynamic features of LCA make it difficult to develop a prescriptive method that guards against all forms of discretion. Methods that are too rigid run the risk of sacrificing innovation and creativity in the drive for reduced analyst discretion.
Precisely for that reason, ISO attempts to increase reliability by encouraging the external peer review of a corporation’s life cycle assessment. Yet this external review is simply voluntary and, at least in 2005, there were indications that this review was not being used comprehensively or uniformly by corporations in their self-assessments. For example, even when peer review is conducted, it may not be rigorous—either because the reviewers are biased themselves (and selected accordingly) or because reviewers face inadequate resources or incentives to engage in robust analyses of a firm’s LCA. Obviously, too, if there are not corresponding audits of the data-inputs, then shoring up the assessments may win the battle on methods but still lose the larger war on reliable assessments.
When a company has considerable discretion to determine the methods for its life cycle self-assessment and when that assessment can affect the company negatively if it reveals unflattering information, then this discretion may translate into systemic, self-serving biases that undermine the reliability of the assessment. Unless regulators have substantial resources to scrutinize the models used for self-assessments, significant discretion in a company’s life cycle assessment will remain.
A critical, third feature of a robust life cycle assessment is its comprehensibility to a wide range of users. Because multiple stakeholders will use the assessments, it is important that the assessments be understandable to those outside the life cycle assessment field.
When left to the discretion of an interested party who produces the report, however, the comprehensibility of life cycle assessments can be controlled or even manipulated. If a corporation conducts a life cycle analysis that reveals embarrassing information, for example, it enjoys considerable discretion to obscure the negative findings by writing the analysis in as technical a way as possible or obfuscating the most incriminating revelations.
GRI reporting would seem immune from this comprehensibility problem given its emphasis on comparable, input and output calculations in generic tables. Yet even GRI reports can be “cluttered with information of little apparent use to readers, while missing out on the big picture risks and opportunities.”
Life cycle assessments magnify these comprehensibility challenges several-fold since the assessments are complex and give considerable discretion to the assessors to determine how the results ought to be communicated. It is thus difficult, if not impossible, to prescribe the comprehensibility of a life cycle assessment in advance. Even when results are communicated clearly, however, the comprehensibility of life cycle analysis may be impaired if the reports cannot be cross-compared among competitor firms. Yet in most cases, this cross-comparison will only occur when facilities use the same models for their assessments, which they may not be inclined to do without external pressure.
III. Corporate Sustainability as a Public Good
Extracting reliable life cycle analyses from corporations is fraught with difficulty, but one simple move can help avoid this impasse: sustainability analysis can be reconceived as a public good rather than a responsibility that should be shouldered by corporations. Reconceptualizing life cycle assessments as public information helps sidestep the impediments to collecting reliable and comprehensible information identified in the prior section. It also manages to produce considerably more relevant, accurate, and hopefully path-breaking types of analyses and recommendations in forms that would not occur if individual firms, who have a clear stake in the findings, were the primary source of this information.
Admittedly, a reconceptualization of sustainability assessments as public goods is at odds with conventional wisdom. In most national and international circles, sustainability reporting is understood to be a natural extension of pollution reporting that discloses negative externalities and other bads that a corporation extracts from society. Yet this conception seems to be based more on analogies to TRI reporting and other corporate disclosures than on a thorough analysis of the unique features of sustainability assessments. Such a close analysis reveals a number of ways that life cycle assessments fall closer to the public good side of environmental information than to regulating corporate bads.
There are at least four features of industrial life cycle analyses that are more closely associated with public goods, at least at this early stage in improving corporate sustainability. First, and perhaps most important, it is not clear what a life cycle analysis will reveal for any given industrial sector, and thus a life cycle analysis may not identify the excessive use of natural resources or polluting activities (i.e., negative externalities) in need of intervention. For some manufacturing sectors it is possible that there are no environmentally smarter options available. As such, life cycle analysis may often be informational and exploratory—identifying areas in need of innovation—rather than exposing corporate dereliction of core environmental responsibilities.
Second, and along these same lines, conducting life cycle analyses and developing innovative solutions for more sustainable approaches in the future constitutes a type of intellectual property or public good for which a firm is unlikely to be able to capture its investment. Because the methods for LCA are constantly evolving, one corporation’s bright idea for how to conduct a life cycle analysis or capture sustainability gains through facility-based innovations may quickly become a good that its competitors can copy. Without patents, copyrights, or other ways to convert these intellectual discoveries into property, sustainability innovations can be co-opted by competitors without compensating the originator of the idea. Firms could even copy and embellish on another facility’s life cycle assessment and enjoy reputational gains without doing the initial work associated with conducting the basic assessment.
Ironically, at the same time that first-mover firms who conduct LCAs and identify ways to improve the sustainability of their operations may be providing competitors with a ready template for copying their green advancements, they may also be providing a playbook for competitors to capitalize on their weaknesses. If the life cycle analysis reveals inefficient or excessive waste in a manufacturing system, for example, then this internal self-evaluation can be used against the company before it has had an opportunity to make improvements. Ironically, some firms may contribute to their own demise by providing this type of admission against interest through voluntarily produced LCAs.
Third, just as the benefits of LCA are broadly dispersed toward public goods, the costs are concentrated on individual firms and can be quite high. Unlike other types of disclosures, like TRI or even Security Exchange Commission (“SEC”) disclosures, life cycle assessments can consume considerable resources. Data collection can be extremely costly and applying the models or methods of LCA requires expertise. From the firm’s perspective, then, conducting this detailed, introspective sustainability analysis is not a simple or inexpensive exercise.
Utilizing the outputs of LCA also requires an organizational structure that can act on the results, a feature that adds still more costs to the LCA process. Some firms, and perhaps many, lack the internal management structures that allow for the internal cross-fertilization that LCA demands. In one case study, for example, Toyota Motor Sales lacked the internal capacity to conduct the assessment and contracted with UCLA to develop a model for its system. Ultimately, Toyota enjoyed considerable environmental and cost savings by eliminating a particular packaging feature of its process; yet without this investment, the areas for improvement would not have been brought to light.
Last but not least, the large-scale costs associated with developing methods, models, and databases and viewing the problem more synoptically, rather than at an individual level, all favor a public good approach to life cycle analysis. Publicly produced assessments can identify areas for cross-fertilization and better allow for the diffusion of information as compared with private assessments, which might not only lack this broader perspective, but might deliberately avoid sharing internal information since it could undermine a firm’s competitive edge.
Expert, neutral assessments of a manufacturing process are critical ingredients to a rigorous life cycle assessment and help pave the way to the development of sustainable innovations in processes, technologies, and even product lines. Yet it seems naïve to expect corporations will conduct these types of expensive analyses voluntarily, particularly when their own innovations can be easily co-opted by competitors. Even if LCA was mandatory for corporations, the unavoidable discretion afforded to the analyst makes it difficult to ensure that the resulting assessments are reliable and comprehensible. This final Part proposes that a public entity should conduct these assessments and describes how this might be done. The Part closes by considering what the public good qualities of LCA suggest about other types of environmental information.
A. Step 1: Public Life Cycle Assessments
Since life cycle assessments come closer to being public goods than the straightforward disclosure of negative externalities, a disinterested public organization is the most appropriate entity to produce life cycle assessments. The resulting LCAs would be based on an average firm within a particular industrial sector, much as is currently done by the EPA in setting technology-based air and water pollution standards under the Clean Water and Clean Air Acts. If this generic assessment reveals reasonable areas for improvements, then consumers, investors, shareholders, and even regulators may begin to demand sustainability progress from firms. Individual facilities themselves will also learn of ways they can operate more sustainably, thanks to these public assessments.
Under this public good view of sustainability assessments, life cycle assessments would be done by respected experts who are completely independent of the companies, but have access to internal corporate information. Ideally, much of the analysis would be done cooperatively with firms since the goal is to identify areas for improvement and possibly cost savings. To the extent that the life cycle analysts face opposition from some firms, information extraction tools—like EPA’s authority to request information under its various statutory mandates—would be needed to secure internal records or to ensure that the voluntarily provided records are complete. Indeed, because it has legal authority to access private records, the EPA is perhaps best situated to conduct these life cycle assessments, or it could subcontract the work to a respected nonprofit body like CERES. The resulting, industrial-sector life cycle assessments would ideally be peer reviewed and subjected to comments from the affected industry, although the expert assessor group would have complete independence in how to respond to comments. Much like technology-based standards, the life cycle analyses would also be updated at regular intervals or could be subject to more informal updating processes (for example, the expert assessor could post a website that invited comments on revisions over time).
In conducting the assessment, the expert assessor should produce two different, bookend life cycle analyses for each industrial sector: (1) a reasonable worst case life cycle assessment, and (2) the very best life cycle assessment for each industrial sector. The reasonable worst-case analysis would present the assessment for a typical facility that falls in the bottom third relative to its competitors with respect to the sustainability of its operations. The very best case analysis would be based on the sustainability profile of an imaginary facility that employs all of the best sustainable innovations and process inventions that are reasonably available. This best case sustainability profile serves not only to set a high bar, but to showcase the types of innovations that are possible.
Publicly-prepared life cycle assessments would operate much like penalty defaults: using the worst case assessment as a baseline, corporations would be able to distinguish their processes or boast of accomplishments that go well beyond the laggard facilities in their sector. The corporations can then use this positive comparison in the market to gain a competitive edge with insurers, investors, and the public at large. Unlike a full-blown life cycle analysis, however, this distinguishing effort would limit the opportunities for worrisome discretion since the firm would be forced to compare specific industrial processes against a centralized, detailed model. Nevertheless, a process for validating a corporation’s claims in making these positive distinctions should also be established to provide added reliability to the firm’s efforts to compare its processes against the publicly produced sustainability assessments.
Ultimately, a more reliable process for benchmarking and validating a corporation’s sustainability claims could go a long way towards improving available, environmental information in the current marketplace. One of the difficulties that front-mover firms currently face is the challenge of distinguishing themselves in the marketplace in ways that can be trusted by outsiders. As one leading sustainability consultant notes, “[i]ronically, green marketing has become one of the greatest threats to the success and scale of corporate sustainability practices. Ubiquitous (and often unsubstantiated) green claims have created a green-washed, eco-cluttered and eco-saturated marketplace.” The public assessments suggested here should help limit the ability of facilities to exaggerate or “green-wash,” since they offer specific baselines against which a firm’s boasting can be more readily compared.
A central entity could also use these public life cycle assessments to identify innovations across multiple industrial sectors more generally, as well as gain a bird’s-eye view of American production processes. “Ecological rucksacks,” material flows, and other ecological accounting tools are also facilitated by life cycle analyses that are conducted by a central organization. These analyses can be used to provide a more systematic view of production and service processes that facilitate the redesign of larger systems as well as firms. The assessments are also likely to identify blind spots that are otherwise missed by regulatory approaches or voluntarily incentives. For example, the assessments may highlight goods or services that are so costly to the environment that they should be significantly curtailed or even eliminated. Finally, centralized LCA can help identify and compare national differences in the sustainability of industrial operations. One study compared United States and Canadian industries and identified differences in energy use, import and transit inputs, and other features that were specific to the company of origin that might otherwise be lost in an individualized LCA.
There are a variety of other, supplemental LCA tools that could be developed by a centralized expert analyst body to reduce the costs to firms of conducting their own facility-based assessments. For example, a web-based model for a facility-specific LCA could be developed with user-friendly interfaces that allow corporations to insert a few parameters and then run the model. Commentators observe that “companies frequently look for simplified assessment tools that offer quick, approximate results,” such as checklists and simplified calculators, and this type of model could fill a needed niche. Guides and other learning materials, including workshops and symposia, might also be provided to help firms use the generic, industry-specific LCA for their facility as a springboard to improving sustainability processes. The EPA has already made progress in preparing these types of guidelines, but further outreach and education is needed since “[m]any companies [in the United States] do not see how life-cycle thinking can be applied to their specific operations—or even the benefits of doing so.”
With strong public leadership, LCA models can also be improved and expanded. Since there have been relatively few validation checks on LCA models to ensure that they are robust, a central body like EPA or CERES could develop ways to match LCA models against the outputs of real systems to enhance the validity of the models. This central organization could also expand the range of features included in life cycle analyses to encompass adverse social and ecological impacts. Finally, the EPA or CERES could develop ways to improve the comprehensibility of the results of LCA and related sustainability assessments.
B. Step 2: Regulatory Incentives to Do Better
In order to produce meaningful incentives for firms to take sustainability seriously, the life cycle assessment could also be used as a baseline for imposing additional regulatory controls that encourage or even require specific sustainability improvements from corporations. Firms might be “commanded” to reach certain sustainability goals in ways that parallel something like the technology-based standards of the Clean Water and Clean Air Acts. For example, all firms would be required to reach some mid- or best-available level of sustainability within their industrial sector, likely required through legislation.
Alternatively, all firms in a given industrial sector could be charged a sustainability tax based on the total resource use and waste production of the reasonable worst-case life cycle for their industrial sector (perhaps further adjusted by the size or production volume of the facility). Facilities that provide validated accounts of how they accomplish sustainability gains above this baseline could then earn tax credits. Companies that go further and actually pioneer innovations in sustainable technologies or operations might not only enjoy even greater tax credits, but also reputational benefits—for example, being officially certified by the EPA, or another nonprofit, as a corporate leader in sustainable innovation.
Identifying meaningful distinctions between individual firms and the default worst-case sustainability life cycle will require a detailed review of a company’s submission and thus will necessitate the dedication of considerable agency resources. One way to finance these important facility-specific evaluations is through the sustainability tax itself. The sustainability tax would operate simultaneously as an incentive for companies to innovate or do better (hence lowering the tax) and as a mechanism to fund the ability of an external party, like the EPA, to certify differences between firms that warrant recognition.
It is ultimately possible that some sustainable innovations will be valued as intellectual property due to the high research costs involved in developing the product. At the same time, however, it is counterproductive to reward innovation in sustainable practices with patents that then allow firms to charge others a licensing fee in order to become more sustainable themselves. Since innovations in sustainability should be shared with the larger community, barriers to the diffusion of sustainable innovation due to patents and other forms of corporate intellectual property need to be monitored closely. Ultimately, more targeted subsidies may need to be developed to encourage still greater private innovation.
C. Information as a Public Good
Traditionally, information disclosures have been used to force firms to disclose their negative externalities; yet this narrow view of information disclosures may be foreclosing opportunities for advances in corporate sustainability. Indeed, a “public good” dimension to environmental information may be a perspective that has been lacking in the design of environmental programs more generally. Professor Biber, for example, has argued that a rigorous ambient monitoring regime should not be established piecemeal, but instead benefits from a single, collective entity that oversees the data collection so that the data is reliable and amenable to cross-comparisons across regions and over time. In drug regulation there in fact appears to be a shift occurring that depends more substantially on the Food and Drug Administration to collect and analyze all publicly available information, including adverse effects reports, and use that information to supplement the research submitted by drug manufacturers. Even historically, the first, often noncontroversial, step toward enacting pollution standards began with an agency like EPA that identifies what the better pollution control technologies could accomplish within various industrial sectors. In these programs, firms were expected to meet publicly established targets but were not required to conduct their own research and development to discover what these targets should be.
Figure 2 provides a re-conceptualization of different types of information-based disclosures according to their public good qualities. Sustainability life cycle analyses for industrial sectors, at least initially, fall closer to the public good axis because they have only a limited assurance of highlighting negative externalities and a much greater probability of introducing information on sustainable innovation that will benefit other firms. Other types of environmental programs might similarly benefit from attention to the fundamental public good qualities of the underlying information. For example, the creation of environmentally superior substitutes, such as green chemistry, is not currently encouraged through regulatory processes even though the development of these innovations primarily benefits the general public. Even some of the green chemistry inventions that receive presidential awards are patented and presumably must be purchased through licenses, thus impeding companies from adopting the inventions. Identifying the public goods qualities of this environmental information helps focus analysts on the need to subsidize certain research and development while at the same time ensuring the rapid and low-cost diffusion of the information into the marketplace.
This analysis of the public good features of sustainability may only be a start in identifying ways in which reframing some intractable information problems as public goods begins to break up the information logjam that has stalled progress in environmental law. Developing a strong base of public information builds on the expert capabilities of the administrative state and approaches particularly intractable information-based challenges in a more collaborative way. Once information is developed on these environmental practices, complementary political, economic, and related market forces can use the information as a springboard to encourage greater sustainability and related gains in the future.
The United States still “does not have a sustainability strategy.” The most promising proposals in the current economically and politically fragile climate are those that can be accomplished without political warfare and that build on progress in incremental ways. The proposal here—to assign to regulators or neutral third-party institutions the task of developing facility-specific life cycle analyses—seems to be a modest first step in this long march towards corporate sustainability. This information-generation approach also develops a partnership with business that is in line with larger goals for enhancing corporate social responsibility in ways that go beyond what specific legal requirements can accomplish standing alone.
While the proposal advanced here will by no means produce perfect information, by trading off detail and specificity in individual firm LCAs on the one hand for comprehensiveness and more general illumination of the sustainability of diverse processes and practices through industry-wide LCAs on the other, progress can be made on the sustainability front more quickly. By producing large amounts of fresh and relevant information about corporate sustainability, consumers, investors, and other actors will be better able to compare and evaluate the sustainability of corporations and, if necessary, demand change.
* Joe A. Worsham Centennial Professor, University of Texas School of Law. Many thanks to Gabriel Markoff for his able research assistance and to the students and faculty at the Wake Forest Law Review Symposium for their helpful comments on an earlier draft. Contact: WWagner@law.utexas.edu.
-sustainability-reporting-pdf-d81243137 (observing that “while some companies have been quick to publicize their high [Global Reporting Initiative] scores . . . , in some cases this may have been less about gaining credibility and more about deflecting attention from poor social and environmental performance per se”); Williams,supra note 2, at 1643 (noting that “[o]f the twenty-seven organizations comprising the charter group [that endorsed the Global Reporting Initiative], only five were companies . . . [and] four of those five companies have pretty clear public relations reasons to want to be associated with a corporate accountability initiative [because of concerns about stricter regulation or a preexisting reputation for being a bad corporate citizen]”); see generally Jacob Vos, Note, Actions Speak Louder than Words: Greenwashing in Corporate America, 23 Notre Dame J.L. Ethics & Pub. Pol’y 673 (2009) (discussing greenwashing more generally).
/Home (last visited Aug. 30, 2011); see also David W. Case, Corporate Environmental Reporting as Informational Regulation: A Law and Economics Perspective, 76 U. Colo. L. Rev. 379, 395–401 (2005); Global Reporting Initiative, Year in Review 2008–2009, available athttp://www.globalreporting.org/NR/rdonlyres/E8B6ED9E‑1A29‑4154‑A6DA‑F14E6F71A2C9/3830/GRI_Year_In_Review_241209.pdf. For sample reports, see Duke Energy, Environmental Indicators, available at
http://www.duke-energy.com/sustainability/environmental-indicators.asp; The Coca-Cola Company, 2008/2009 Sustainability Review, available athttp://www.thecoca‑colacompany.com/citizenship/pdf/2008‑2009_sustainability_review.pdf. See generally Williams, supra note 2, at 1640–61 (describing the development of the GRI as well as other voluntary initiatives by corporations to minimize their environmental impacts).
/2007/05/14/domani-and-garnet-offer-sustainable-insurance-program. There are even accounting requirements in the United States that require businesses to identify assets that may cause long-term damage and to identify how to reduce these risks. See Hecht, supra.
/O16F34323.pdf (describing the importance of identifying a single functional unit that is used throughout the assessment).
.html (last visited Aug. 30, 2011) (utilizing independent auditors to audit compliance problems for pork producers that signed a voluntary agreement to be audited and agreed to conduct needed remedial work in return for reduced penalties); see also Williams, supra note 2, at 1642 (describing the growth of this auditing and nonfinancial rating industry); see infra notes 66–68 and accompanying text.
.htm (last visited Aug. 21, 2011). Such claims may even be used to protect information collected by inspectors in the course of environmental compliance inspections. See EPA Definitions, 40 C.F.R. § 2.201 (2003) (defining a business confidentiality claim).
Results from existing LCA studies could be reviewed to identify common areas of concern, i.e., those processes or life-cycle stages that consistently produce higher impacts . . . . For example, transportation emissions are major contributors to aquatic toxicity, acidification, and CO2 loading. Thus, transportation may be an important consideration in decisions to build small process or disposal sites rather than centralized sites.
D. Elcock, supra note 25, at 76.
/packagedesignmag.com/files/BBMG_sustainability_white_paper.pdf (discussing the need to create “opportunities for multiple stakeholders to help shape, realize and share the benefits of products and services based on a seamlessly integrated business and sustainability strategy”).