A short while ago, GreenOrder welcomed Professor Michael Gerrard to our New York office as the speaker for our weekly seminar series. Professor Gerrard, Director of the Columbia Center for Climate Change Law, is an accomplished environmental lawyer with over 30 years of experience under his belt. Needless to say, he is a thought leader on all things environmental law and policy-related, with an incredible understanding of the policy landscape, and a keen sense for upcoming policy trends.
Professor Gerrard spoke to the GreenOrder team about 15 significant new or upcoming environmental policies we should watch out for, covering everything from on-bill financing for residential energy efficiency projects, to changes in flood plain mapping practices.
We noted that some of these policies might be particularly important for business leaders to understand and prepare for. These policies fall under three main buckets: more disclosure, regulation of green claims, and requirements for disaster planning. The following policies -- which are at various stages of fruition -- could fundamentally change the way we do business in the coming years.
Disclosure, disclosure, disclosure
More policies requiring environmental monitoring and disclosure/reporting
1. The 2010 Greenhouse Gas Reporting Rule
The EPA currently requires mandatory monitoring and reporting of greenhouse gas (GHG) emissions from a segment of industries that emit more than a certain quantity of GHG. This includes the usual suspects: manufacturing and heavy industry, petroleum refineries, and several other types of stationary fuel combustion sources. While the original plan was to have the first set of reports with 2010 data filed in March 2011, companies have since been granted a 6 month extension to complete this requirement. Many other multinationals have chosen to self-regulate and are already voluntarily disclosing their GHG emissions annually. This information is being captured in large online databases, like the one managed by the Carbon Disclosure Project.
In the near future, the scope of the EPA criteria for mandatory reporting could very well expand, forcing more companies to monitor and publicly report their emissions. Companies already reporting may also soon be required to monitor and disclose emissions further up their supply chains. Professor Gerrard also pointed out that in the next few months, we will see a lot of data filed with the EPA on a facility-specific basis. As we saw happen with the Toxic Release Inventory (which required public reporting of toxic emissions) this law could exert pressure on companies who do not want to show up on the front page of the newspaper as the nation’s biggest polluters.
2. SEC Climate Change–Related Disclosure Requirements
Companies will not just be disclosing their GHG emissions, but are also being encouraged to take a broader approach to addressing climate change risks. In early 2010, the Securities and Exchange Commission (SEC) issued regulations affirming that securities filings needed to talk about climate change-related risk to business, including the impact of legislation and regulation (domestic and international), and the physical impacts of climate change. CERES, a coalition of investors and public interest groups, recently assessed SEC registrants’ climate risk disclosures and found them lacking. Many companies weren’t able calculate and articulate how climate change could affect their business. While there has not been any enforcement action yet, Professor Gerrard predicts that we could soon see the first lawsuits against corporations for inadequate disclosure under the SEC rules. This will not only increase pressure on companies to disclose fully on GHG emissions, but will also serve to increase awareness of overall climate change-related risks and opportunities.
3. Water Accounting and Disclosure
Reporting on water use is also in the policy pipeline. With demand for water set to outstrip supply by 40% by 2030 and more of the world’s population becoming subject to water stress year after year, questions are being raised about how we are using our water. Since the EPA’s GHG reporting rule, which required quantification and disclosure of GHG emissions, there has been talk of whether the same should apply to water demands of projects and operations, and how those disclosures could work their way up the supply chain. This year, the Carbon Disclosure Project is taking an initial step towards this type of regulation by sending out a water questionnaire to a subset of the world’s 500 largest companies to gain an understanding of water usage and exposure to water stress in company operations. Their findings will be launched globally in the last quarter of 2011. Professor Gerrard expects water accounting policy to eventually follow suit.
Standards for Standards
Policies setting standards for internal green product standards and marketing claims
4. The FTC’s “Green Guides” for the Use of Environmental Marketing Claims
The Federal Trade Commission (FTC) has recently revised its “Green Guides,” which were created to help marketers avoid making misleading environmental claims. These changes should make the guides easier for companies to understand and use, and include new guidance on marketers’ use of product certifications and seals of approval, “renewable energy” claims, and “carbon offset” claims. While they have not yet decreed what kind of carbon neutrality claims are legitimate, Professor Gerrard expects to see that happen in the near future. This has come in the wake of a slew of private and state level lawsuits on misleading green claims, including Fiji water’s ‘carbon negative’ claim and more recently, SC Johnson’s self-vetted “Greenlist” seal of approval. Tighter guidelines will help companies avoid sticky situations in which they unintentionally use false or misleading terminology related to their internal standards or product claims.
Policies requiring planning for worst case scenarios
5. NEPA’s Worst Case Scenario Analysis
In the past, when the federal government conducted Environmental Impact Assessments (EIAs) before embarking on a project, an analysis of the ‘worst case scenario’ was required in the report. This was abolished under the Reagan administration, and replaced with a requirement to analyze “reasonably foreseeable” scenarios. Unfortunately though, we have seen one-too-many ‘worst case scenarios’ play out before our eyes in the last few years e.g. (the Deepwater Horizon oil spill, the Fukushima nuclear disaster) and Professor Gerrard predicts that the old standard may be reinstated.
It is worth noting that none of these policies are out-of-the-blue. Indeed, the common thread is that they are all being built upon voluntary actions that some companies are already undertaking. The concretization of these voluntary initiatives into domestic law and policy, however, will add a layer of rigor and urgency to them. Even if only a small proportion of these policies are actually implemented within the next 5 to 10 years, they will affect a company’s operations at their very core: in manufacturing, in transportation, in marketing and branding, in planning and strategy. It would benefit companies to take note of these trends now and stay ahead of the curve while some of these policies are still in inception and infancy phase, rather than having to struggle to catch-up with them once they are fully-fledged and strictly enforced.
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