marine resources committee newsletter · 2017-12-07 · marine resources committee, may 2015 1...

1Marine Resources Committee, May 2015

Sustainability, Supply Chains, Corporate Social Responsibility, and

the Environment

A joint newsletter of the Marine Resources Committee,Environmental Disclosure Committee, and

International Environmental and Resources Law Committee.

Marine Resources Committee Newsletter

May 2015Vol. 18, No. 2

Photo Credit: Shannon Dilley, lighthouse in Northern California (2013)


Copyright © 2015. American Bar Association. Allrights reserved. No part of this publication may bereproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic,mechanical, photocopying, recording, or otherwise,without the prior written permission of the publisher.Send requests to Manager, Copyrights and Licensing, at the ABA, by way of www.americanbar.org/reprint.

Any opinions expressed are those of the contributorsand shall not be construed to represent the policiesof the American Bar Association or the Section ofEnvironment, Energy, and Resources.

Marine Resources Committee NewsletterVol. 18, No. 2, May 2015Adena Leibman and Catherine Janasie, Editors

In this issue:

Chair MessageAndrew Schatz, R. Juge Gregg, David Roth, and Niki L. Pace ................3

Sustainability Reporting and Disclosure: Risks, Opportunities, and Best PracticesLauren Hopkins .......................................4

Will 2015 Finally Fulfi ll the Promise for Development of U.S. Offshore Wind?Joan M. Bondareff and Stefanos Roulakis ....................................9

Encouraging Cooperative Resource Games to Promote SustainabilityMisty A. Sims and Jan G. Laitos ..........14

Sustainability in India—Business and Government DriversGeorge Wyeth ......................................17

International and U.S. Agricultural Sustainability Standards—GMO or non-GMO?Thomas P. Redick .................................20

CALENDAR OF SECTION EVENTS

AMERICAN BAR ASSOCIATION

SECTION OF ENVIRONMENT, ENERGY, AND RESOURCES

CALENDAR OF SECTION EVENTS

For full details, please visit www.ambar.org/EnvironCalendar

June 4-5, 2015 33rd Annual Water Law ConferenceDenver

June 11, 2015 Methods for Resolving Water Disputes: Interstate Compacts & Collaborative ProcessesAlternative Dispute Resolution CommitteeCommittee Program Call

June 16, 2015 Smartgrids: Innovative State and Local DevelopmentsGovernment and Private Sector Innovation CommitteeCommittee Program Call

June 17, 2015 Joint Defense Privilege and Joint Defense Group AgreementsCLE Webinar

June 23, 2015 US vs. EU Chemical Regulation: Harmony and Confl ict Between TSCA and REACHCLE Webinar

June 24, 2015 Latest Developments and Updates in the Corporate Environmental/Sustainability Disclosure ArenaEnvironmental Disclosure CommitteeCommittee Program Call

October 28-31, 2015 23rd Fall ConferenceChicago

3 Marine Resources Committee, May 2015

CHAIR MESSAGEAndrew Schatz, R. Juge Gregg, David Roth, and Niki L. Pace

As the chairs of the International Environmental and Resources Law Committee (IERLC), Environmental Disclosure Committee (EDC), and Marine Resources Committee (MRC), we are pleased to offer a joint newsletter focusing on sustainability, supply chains, and corporate social responsibility (CSR).

In response to regulations around the globe, companies around the world are investing in sustainable energy, analyzing their supply chains, and reporting CSR information. These actions often overlap and infl uence one another and, similar to a lighthouse, shed light on potential opportunities related to the environment. As companies begin to disclose publicly information related to the impact of their activities on the environment, they may also be able to analyze potential opportunities related to the environment. For example, companies may be able to determine opportunities to implement sustainable practices, including investment in certain energy activities, such as wind and solar power. Companies may also be able to identify ways to improve the environmental aspects of their supply chains including identifying ways to green their supply chain, determining when it may be possible to use less harmful chemicals, and identifying processes where it may be possible to minimize waste.

This newsletter covers sustainability, supply chains, and CSR reporting issues around the world. Countries covered in this newsletter include the United States, Member States in the European Union, and India. It refl ects our joint committees’ commitment to publishing relevant topics on international environmental and resources law. Lauren Hopkins begins this newsletter by providing an overview of recent trends related to corporate sustainability reporting, the potential legal risks associated with these disclosures and best practices for companies to avoid these risks.

Co-authors Joan M. Bondareff and Stefanos Roulakis review a potential sustainable energy source, offshore wind. Their article reviews the state of U.S. offshore wind development, outlines barriers to the development of offshore wind in the United States, and compares the U.S. experience with the European success story for offshore wind.

The third article, written by Misty A. Sims and Jan G. Laitos, explores how economic “game” theory may promote or defi ne resource sustainability. The fourth article, by George Wyeth, discusses sustainability patterns, trends, and requirements for companies operating in India based on the author’s experience as a Fulbright scholar in the country. Finally, Thomas P. Redick concludes this newsletter identifying several pending or fi nal sustainability standards addressing the controversial questions of “genetic migration” from biotech crops to organic or non-genetically modifi ed organism (GMO) crops.

We encourage members to attend and enjoy interesting CLE content and networking with colleagues. SEER continues to provide timely information and assistance to our members to aid them in becoming better lawyers. Please take note that the next annual conference, the 23rd Fall Conference, will be held in Chicago from October 28 - 31, 2015.

Our committees enjoy active participation by members, with quality programs arising from member involvement. If you want to get more involved in any of our committees’ activities, please let our committee chairs know (IERLC—Andrew Schatz at [email protected] or R. Juge Gregg at [email protected]; EDC—David Roth at [email protected]; or MRC—Niki L. Pace at [email protected]). Additional information is available on the committee websites.

Our newsletter editors are always ready to entertain article ideas and we also welcome periodic guest editors to help put together these newsletters. If you wish to propose an article, please contact


our committee newsletter vice chairs (IERLC—Shannon Martin Dilley at [email protected] or Jonathan Nwagbaraocha at [email protected]; EDC—Kurt Herman at [email protected]; or MRC—Adena Leibman at [email protected] or Catherine Janasie at [email protected]).

R. Juge Gregg and Andrew Schatz are co-chairs of the International Environmental and Resources Law Committee. David Roth is chair of the Environmental Disclosure Committee. Niki L. Pace is chair of the Marine Resources Committee.

SUSTAINABILITY REPORTING AND DISCLOSURE: RISKS, OPPORTUNITIES, AND BEST PRACTICESLauren Hopkins

Expectations for robust corporate sustainability reporting and disclosure are continuing to grow across a range of issues and stakeholders. With over 180 sustainability reporting standards and initiatives in more than 45 countries, it is clear that governments, investors, lenders, insurers, nongovernmental organizations (NGOs), and the public will continue to press companies to disclose more information on a broad range of topics related to their operations, products, and supply chains. See KPMG, Carrots and Sticks: Sustainability Reporting Policies Worldwide—Today’s Best Practice, Tomorrow’s Trends (2013), available at https://www.globalreporting.org/resourcelibrary/carrots-and-sticks.pdf (last viewed Apr. 11, 2015). U.S.-based companies face a unique set of considerations in this emerging area, in part due to the presence of a highly active plaintiffs’ bar as well as a growing number of infl uential stakeholders and accountability centers. This article provides background and a brief survey of the evolving global sustainability landscape before delving into a more detailed discussion from a U.S. perspective of the risks, opportunities, and best practices associated with sustainability reporting and disclosure.

Background and Recent Developments

While the concept of sustainability is not new, shifting expectations with respect to the role companies should play continues to pose new challenges. Not long after the term “sustainable development” was coined by the United Nations-appointed Brundtland Commission, the concept gained traction and began to be expressed in terms of corporate responsibility with the introduction of the triple bottom line—i.e., the notion that in addition to fi nancial reporting, companies should also report on social and environmental performance. The United Nations Guiding Principles on Business and Human Rights,

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which set forth the “protect, respect and remedy” framework, has also been highly infl uential in setting expectations for corporate due diligence and reporting in the area of human rights. Over time, and in response to the Guiding Principles as well as several other infl uential initiatives, including Ceres and the Global Reporting Initiative (GRI), companies have come to report on a broader range of environment, social, and governance (ESG) issues.

Sustainability reporting can also take many forms. The fi rst sustainability reports were published voluntarily. Many of these followed GRI’s Sustainability Reporting Framework. GRI has generally been the most established and widely used sustainability reporting framework, but more recently other initiatives have emerged. For example, in December 2013, the International Integrated Reporting Council (IIRC) published a new reporting framework designed to bring into a single report the different types of value that companies create, including fi nancial and manufactured capital (typically in fi nancial statements), natural and social capital (typically in sustainability reports), and intellectual and human capital. The Sustainability Accounting Standards Board (SASB), founded in 2011, has similarly set out to develop and disseminate sector-specifi c sustainability accounting standards for use by companies in their annual fi nancial fi lings with the Securities and Exchange Commission (SEC). In 2014, the World Federation of Exchanges (WFE), a trade association of 64 publicly regulated stock, futures, and options exchanges globally, established the Sustainability Working Group with a mandate to build consensus on the purpose, practicality and materiality of ESG data. WFE has announced that the working group will issue recommendations for sustainability reporting by listed companies and that the recommendations will likely allow for each local exchange to decide whether the recommendations will operate as a requirement for listing or as best practices or guidelines.

More recently, a growing number of governments have enacted mandatory sustainability reporting

laws. For example, since 2002 South Africa, under King III, has required publicly listed companies to report on a range of nonfi nancial ESG topics. In 2014, the European Union adopted a new directive (2014/95/EU) that will require approximately 6000 large companies (including publicly listed companies and other public-interest entities such as banks and insurance companies) to include information on human rights, diversity, anti-corruption and anti-bribery, and the environment in their public reports. Most recently, in March of 2015 the United Kingdom enacted the Modern Slavery Act, which includes new provisions that will require companies of a certain size doing business in the UK to annually disclose information (in the form of a “human traffi cking statement”) about their efforts to address the risk of slavery and human traffi cking.

While there are currently no laws requiring broad-scale sustainability reporting in the United States, several laws mandate targeted disclosures of supply chain labor or human rights issues. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act—and the SEC confl ict minerals rule implementing the act—requires U.S. publicly listed companies to disclose information on their efforts to conduct due diligence on whether tin, tantalum, tungsten, and gold contained in their products may have contributed to armed confl ict in the Democratic Republic of Congo or an adjoining country. Certain companies doing business in the state of California have been required since 2012 to post on their corporate websites a disclosure of efforts to address the risks of forced labor and human traffi cking in their supply chains. Federal legislation similar to the California law has been introduced several times in Congress and may be revisited.

In addition to sustainability or supply chain reporting pursuant to mandatory or voluntary initiatives, many companies seek to further their sustainability goals or provide material information to the public through other forms of communication such as supplier codes of conduct, as part of fi nancial statements, or in the context of product advertising, certifi cations, and eco-labels.


As discussed in greater detail in the sections that follow, the risk profi le of a particular sustainability disclosure or communication depends in large part on the anticipated audience and context or form in which it is published.

Key Risk Areas

Exchange Act Liability Pursuant to section 18 of the Exchange Act, which primarily regulates transaction of securities that take place after a company initially offered a security, offi cers and directors can be liable for materially false or misleading statements or omissions contained in fi lings made with the SEC. Section 18, often referenced as the “investor suit provision” of the Exchange Act, provides a private right of action for any person who purchases or sells a security in reliance on the false or misleading statement or omission.

Exchange Act section 10(b) and rule 10b-5 also prohibit false or misleading statements (or omissions) in connection with the purchase or sale of any security. In addition to the potential for civil or criminal penalties, section 10(b) and rule 10b-5 have long been construed to provide a private right of action for shareholders against offi cers and directors. Liability under these provisions is not necessarily limited to reports fi led with the SEC and can further extend to a broad range of communications, documents, or statements that are made “in connection with” a securities transaction.

Perhaps the most high-profi le examples of potential Exchange Act liability for sustainability statements have occurred in the context of lawsuits fi led against BP in the wake of the Deepwater Horizon incident, in which plaintiffs highlighted alleged misrepresentations in BP public statements and sustainability reports relating to safety programs and spill response capabilities and seizing, for example, on BP’s stated commitment to “provide energy to customers now and in the future in a safe, sustainable, and environmentally responsible way.” In re BP p.l.c. Securities Litigation, No. 4:10-md-2185 (S.D. Tex. 2012) (granting in

part and denying in part defendants’ motion to dismiss). Other examples in which Exchange Act liability has arisen with respect to sustainability or other nonfi nancial information include alleged misrepresentations regarding the omission of information on regulatory investigations, as well as certain boilerplate disclosures relating to sustainability and environmental compliance. See SASB Legal FAQs (citing No. 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp., 320 F.3d 920 (9th Cir. 2003); and David M. Loritz et al. v. Exide Technologies et al., No. 2:13-cv-2607-SVW-Ex (C.D. Cal. Aug. 7, 2014)).

Liability for Unfair or Deceptive PracticesThe U.S. Federal Trade Commission Act (FTC Act) prohibits “unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45(a)(1). The FTC Act does not provide a private cause of action, but the FTC has broad discretion in its choice of remedies (e.g., cease-and-desist orders, fencing-in provisions, corrective advertising, and potential civil penalties in certain circumstances). Historically, the FTC has focused enforcement of the FTC Act primarily on sustainability statements or claims tied to particular products and services. Former FTC Commissioner Rosch, for example, has expressed the view that the U.S. Constitution’s First Amendment may “shield” from liability certain sustainability or corporate image statements on freedom of speech grounds, but cautioned that “the closer the image claims are associated with specifi c branded products . . . the less likely it is that the First Amendment provides absolute protection.” See J. Thomas Rosch, Self-Regulation and Consumer Protection: A Complement to Federal Law Enforcement, NAD Annual Conference 2008.

A separate U.S. statute, the Lanham Act, prohibits false or misleading representations in the advertising of goods, services, or commercial activities. 15 U.S.C. § 1125(a). The Lanham Act provides a private cause of action for “any person who believes that he or she is likely to be damaged” by such representations, which courts


have generally limited to persons showing potential for commercial or competitive injury. Like the FTC Act, statements challenged under the Lanham Act would need to qualify as commercial speech (i.e., intended to induce a sale). Examples of Lanham Act liability for sustainability-related statements include liability of a plastic resin manufacturer for alleged false and misleading claims that its competitor’s product leached harmful chemicals, Eastman Chemical Co. v. Plastipure, 969 F. Supp. 2d 756 (W.D. Tex. 2013) and liability of an electronics recycling program for claims that its certifi cation was superior to that of another electronics recycling program, Basel Action Network v. International Association of Electronics Recyclers, 793 F. Supp. 2d 1200 (W.D. Wash. 2011).

Many U.S. states also have in place consumer protection statutes that provide a private cause of action for false or misleading claims. In California, for example, a human rights advocate sued Nike under the state’s unfair competition and false advertising laws alleging that public statements the company made regarding improvements in labor conditions at factories in the company’s supply chain were false and misleading. Nike ultimately agreed to a settlement of the allegations, but was embroiled in litigation for over fi ve years as the trial court, appellate court, California Supreme Court, and ultimately the U.S. Supreme Court attempted to resolve the thorny First Amendment freedom of speech issues that were presented. E.g., Kasky v. Nike, Inc., 79 Cal. App. 4th 165 (2000); Kasky v. Nike, Inc., 45 P.3d 243, 247 (Cal. 2002); Nike, Inc. v. Kasky, 539 U.S. 654 (2003).

Alien Tort Statute LiabilityThe Alien Tort Statute (ATS) is a jurisdictional provision of the 1789 Judiciary Act that permits claims in U.S. federal courts for “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350. The ATS has been frequently used by foreign nationals to bring claims against U.S.-based multinational corporations for alleged human rights abuses or for aiding and

abetting such abuses by foreign states or other actors. Despite the U.S. Supreme Court’s recent and signifi cant narrowing of the range of conduct that can give rise to an ATS claim in Kiobel v. Royal Dutch Petroleum, 133 S. Ct. 1659 (2013), the ATS remains a viable basis for alleged human rights abuses that have a suffi cient nexus to the United States.

Most recently, the Ninth Circuit allowed an ATS case to proceed against a group of chocolate companies for allegedly aiding and abetting Cote d’ Ivoirian farmers in child slave labor violations overseas. Doe I v. Nestle USA, Inc., 766 F.3d 1013 (9th Cir. 2014). Even though there were no allegations that the defendants had specifi cally intended for their suppliers to enslave children, the court found it signifi cant that defendants knew about the existence of child slave labor, had a goal to “pursue all options available” to reduce their cost for purchasing cocoa by using the “cheapest form of labor available,” had suffi cient control over the market that they could have leveraged to stop the abuses, and had lobbied to defeat federal legislation that would have required chocolate importers and manufacturers to certify and label their chocolate as “slave free.” Other Challenges Plaintiffs have pursued a handful of other lawsuits based in part on company supply chain initiatives or sustainability-related statements using creative but attenuated legal theories including third-party benefi ciary claims, common law tort claims, and even claims under the Racketeer Infl uenced and Corrupt Organizations Act (RICO). E.g., Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677 (9th Cir. 2009) (alleging, unsuccessfully, that Wal-Mart code of conduct requiring suppliers to adhere to local laws and industry standards on working conditions and providing right of inspection meant that suppliers’ employees were third-party benefi ciaries of the agreement, that Wal-Mart was plaintiffs’ joint-employer and including several variations of negligence claims based on alleged exercise of control over suppliers). See also Does I v. Gap, Inc., No. CV-01-0031, 2002 U.S. Dist. LEXIS


28730 (D. N. Mar. I. May 10, 2002) (alleging that contractual relationships between 27 retailers and 30 suppliers were part of an enterprise for purposes of racketeering and had allegedly used their collective oversight and economic pressure to drive unlawful labor practices at garment manufacturing facilities). While such claims have generally been held to be nonactionable or were settled prior to full adjudication on the merits, they highlight the potential for litigation costs and unwanted publicity that may arise notwithstanding a company’s leadership in establishing supply chain standards and facilitating industry coordination on shared sustainability challenges.

Opportunities and Best Practices

Managing legal and reputational risks while also preparing to meet compounding expectations in multiple markets relating to sustainability, supply chain management, and overall corporate transparency are a challenging but not insurmountable undertaking. Consider the following practices as guideposts along the way:

When developing sustainability statements or communications (e.g., for the public, the supply chain, or for investors or other accountability centers), consider the unique risk profi le that may be presented as a result of the form of communication or the intended audience.

Consider assembling a cross-functional team that includes members from traditionally distinct corporate functions (e.g., environmental compliance, fi nancial reporting, procurement, and corporate media) to better identify issue and address the risks associated with a given statement or communication.

Segregate forward-looking, corporate operational, supply chain, and other general aspirational commitments that may be entitled to First Amendment protection or other safe harbor provisions from commercial or product-focused advertising, which should be targeted and readily substantiated.

Develop tools or reference documents to help business and compliance teams navigate potential legal or reputational pitfalls.

If information from the supply chain is needed in order to establish a corporate sustainability goal or publicly report on progress, consider undertaking supplier capacity building in advance of any in-depth inquiry or due diligence to help ensure suppliers have appropriate risk management tools and policies in place.

Finally, track development of the emerging mandatory and voluntary frameworks for sustainability reporting that appear likely to impact your sector or region to avoid surprises from NGOs and other stakeholders regarding the scope of issues, quality of reporting, or sustainability metrics that will be expected.

Conclusion

Expectations for improved sustainability performance and more meaningful transparency will continue to grow. Disclosures and other sustainability communications that are carefully drafted, fully substantiated, and take into account the spectrum of potential risks can help position companies for emerging opportunities including brand confi dence, market differentiation, and eligibility for sustainable investment initiatives.

Lauren Hopkins is an associate at Beveridge & Diamond, PC. Her practice focuses primarily on global product stewardship, supply chain due diligence, and environmental advertising and marketing. She advises on issues including interpretation and implementation of the U.S. Securities and Exchange Commission’s confl ict minerals rule, supply chain due diligence, and the preparation of confl ict minerals disclosures. Her practice also extends to product-related environmental requirements such as material restrictions in the United States and Europe, worldwide product safety regulations, and product take-back and recycling.


WILL 2015 FINALLY FULFILL THE PROMISE FOR DEVELOPMENT OF U.S. OFFSHORE WIND?Joan M. Bondareff and Stefanos Roulakis

The development of offshore wind projects in the United States has been a story of high hopes and many setbacks. Thus far, 2015 has perpetuated the same story line with major setbacks plaguing one of the major U.S. offshore wind projects—Cape Wind—but with Deepwater Wind set to put steel in the water near Block Island this year. This article reviews the state of U.S. offshore wind development, the hurdles this development has had to overcome, and the barriers to further development. The article closes by offering a comparison with the European success story for offshore wind. Background

U.S. commitment to developing the wind resources of the Outer Continental Shelf (OCS) in the Atlantic Coast began in 2010, with the launch by former Secretary of the Interior, Ken Salazar, of the “Smart from the Start” program. The secretary noted that the “initiative for Atlantic wind will allow us to identify priority Wind Energy Areas (WEAs) for potential development, improve our coordination with local, state, and federal partners and accelerate the leasing process.” Press Release, Salazar Launches “Smart from the Start” Initiative to Speed Offshore Wind Energy Development off the Atlantic Coast, U.S. Dept. of Interior, Nov. 23, 2010, available at http://www.doi.gov/news/pressreleases/Salazar-Launches-Smart-from-the-Start-Initiative. While the program may not have fulfi lled all of the secretary’s expectations, the initiative did promote leasing of wind farms off the Atlantic seaboard and has led to the prospect for the fi rst offshore wind (OSW) farms in the United States.

The statutory basis for this program is contained in section 388 of the Energy Policy Act of 2005 (EPAct), which authorizes the Secretary of the Interior to develop renewable energy resources

(including wind, tidal, and kinetic energy) on the OCS. While the act granted Interior similar leasing authority to what it possessed for oil and gas in the OCS, the law did not grant sole permitting authority to the Secretary of the Interior. Adam Vann, Wind Energy: Offshore Permitting, CRS Rept. 7-5700, 5, Oct. 17, 2012, available at https://www.fas.org/sgp/crs/misc/R40175.pdf. Instead, EPAct continued to allow federal resource agencies, including the Fish and Wildlife Service and the National Oceanic and Atmospheric Administration, to regulate whether the development would be compatible with other uses of the ocean, including endangered species and critical habitats, marine mammals, birds, and fi sheries. Id.

In 2010, the Bureau of Ocean Energy Management (BOEM), the lead agency in the Department of the Interior, identifi ed four WEAs off the Atlantic seaboard and began both the environmental review and stakeholder involvement process. BOEM also had to comply with the National Environmental Policy Act (NEPA) before beginning the leasing process. In 2012, BOEM issued a fi nal programmatic environmental impact statement covering the four WEAs and began to qualify interested developers and to set the rules of the road—or the sea—for wind farms. BOEM decides whether there is competitive interest in the lease areas and, after qualifying interested companies and bidders, auctions the areas to the highest bidder. This has resulted in 403,405 acres leased to fi ve companies.

Divided U.S. Federal-State Jurisdiction over Offshore Wind Projects Complicates the Process

A patchwork of uneven state laws and policies has left developers largely on their own to negotiate agreements with adjacent coastal states, utilities, and state utility regulators. A unique aspect of OSW development in the United States compared to Europe is the divided jurisdiction between the federal government and the states on the Atlantic seaboard. While Interior can lease the WEAs on


the OCS because they are beyond state waters, it cannot force states or utilities to bring the wind-generated power onshore and to sell the wind power to consumers.

The fact that states and local jurisdictions have the power to decide has complicated the develop-ment process greatly as each adjacent state has had to negotiate its own terms with developers and stakeholders. There is no single model for bring-ing OSW to the shore and ultimately to consumers. While BOEM can offer the states incentives, they cannot preempt local land use or utility rate regula-tions. Timothy H. Powell, Revisiting Federalism Concerns in the Offshore Wind Energy Industry in Light of Continued Local Opposition to the Cape Wind Project, 92 B.U. L. Rev. 2023, 2039 (2012).

Each affected state has taken its own approach to offshore wind. Some have been aggressive and passed supportive legislation and others have just taken a wait-and-see approach.

MarylandFor example, in Maryland, the legislature passed and Governor O’Malley signed into law the Maryland Offshore Wind Energy Act of 2012. The act creates a mechanism to incentivize the development of up to 500 megawatts (MW) of offshore wind capacity, at least ten nautical miles off Maryland’s coast. A target project size of 310 MW would require the installation of between 50 and 100 wind turbines. Maryland Energy Admin., Maryland Offshore Wind Act 2012—Facts and Figures (2012), available at http://energy.maryland.gov/documents/MDOSWEnergyActof2012.pdf. Maryland’s new law also creates a system of offshore wind renewable energy credits (ORECs), which would subsidize the cost of the renewable energy for Maryland ratepayers. The ORECs are capped at $2 per month for residential ratepayers and 2.5 percent on annual bills for commercial ratepayers.

In August 2014, BOEM auctioned the WEA off the Maryland coast. US Wind, Inc., a subsidiary of the Italian renewable energy company Renexia,

won the auction with a bid of $8.7 million. Keith Goldberg, Renexia’s $8.7M Bid Tops Md. Offshore Wind Auction, LAW360, Aug. 20, 2014, http://www.law360.com/articles/569186/renexia-s-8-7m-bid-tops-md-offshore-wind-auction (last visited Apr. 10, 2015).

New YorkIn New York, the New York Power Authority (NYPA), the Long Island Power Authority (LIPA) and Consolidated Edison initially worked together to propose an offshore wind project south of Long Island. BOEM determined that NYPA was qualifi ed to hold a lease and Deepwater Wind submitted an application to LIPA to sell 280 MW from its Deepwater ONE project. In 2014, LIPA turned down the application in favor of buying solar power, which LIPA believes may be less costly. The total energy LIPA is planning to purchase amounts to only 122 MW, far less than the 280 MW of renewable energy the utilities had initially planned. North American Windpower, Long Island Power Authority Turns Down Deepwater Wind’s PPA Bid, Dec. 18, 2014, http://www.nawindpower.com/e107_plugins/content/content.php?content.13772 (last visited Apr. 10, 2015).

New JerseyIn 2010, the New Jersey legislature passed and Governor Christie signed the Offshore Wind Economic Development Act into law. The act requires the state Board of Public Utilities (BPU) to establish an OREC program and requires that a percentage of electricity sold in the state be from offshore wind energy. Press Release, State of N.J., Governor Christie Signs Offshore Wind Economic Development Act to Spur Economic Growth, Encourage Energy as Industry, Aug. 19, 2010, http://www.state.nj.us/governor/news/news/552010/approved/20100819a.html (last visited Apr. 10, 2015). The BPU has yet to issue fi nal regulations to implement the act, which has frustrated developers. For example, Fishermen’s Energy recently announced that it would be building the onshore portion of its proposed wind farm in state waters despite having been rejected earlier in 2014 by the BPU on the grounds that the


project did not demonstrate a net economic benefi t to the state and the project would be too costly to ratepayers. Martin Bricketto, NJ Wind Farm Exec Hopeful Court Will Revive Project, LAW360, Dec. 18, 2014, http://www.law360.com/articles/606199/nj-wind-farm-exec-hopeful-court-will-revive-project (last visited Apr. 10, 2015). Fishermen’shas fi led suit asserting that BPU’s denial was both unreasonable and in violation of New Jersey law. Id. The BPU’s failure to issue regulations and work with Fishermen’s has left critics questioning the state’s commitment to the Offshore Wind Economic Development Act. Id.

Rhode IslandIn Rhode Island, the state adopted an ocean management plan for state waters and determined where compatible ocean uses, including offshore wind siting, could exist. Rhode Island Coastal Resources Management Council, Rhode Island Ocean Special Area Management Plan, at 9. Deepwater Wind is scheduled to build its wind farm three miles southeast of Block Island, Rhode Island, in state waters, and has received all of its federal permits according to the company’s website. Deepwater Wind Company’s website is available at http://dwwind.com/news/block-island-wind-farm-now-fully-permitted. Because Deepwater has all permits and fi nancing it expects to have “steel in water” for this project by the summer of 2015. The project will include 15 wind turbines purchased from Alstom in Denmark and produce power for over 17,000 homes. The Deepwater Wind Company project overview is available at http://dwwind.com/block-island/block-island-project-overview.

MassachusettsIn Massachusetts, Cape Wind, one of the fi rst U.S. offshore wind projects, was dealt a major setback at the end of 2014 when two utilities rescinded purchase agreements, citing missed fi nancial deadlines by the company. Cape Wind immediately and publicly pointed to force majeure clauses in its contracts, citing more than a decade of litigation and fi ghting public opposition as justifi cation for not meeting initial benchmarks. Peter Howe, Cape Wind Project Dealt Major Setback: Two

Major Utilities Have Decided to Terminate Their Contracts to Buy Power from the Proposed $2.5 Billion Wind Farm, NECN, Jan. 7, 2015, http://www.necn.com/news/business/Cape-Wind-Project-Dealt-Setback-287792051.html (last visited Apr. 10, 2015).

In July 2013, BOEM auctioned off a combined Massachusetts-Rhode Island WEA and Deepwater Wind New England LLC was declared the winner of both lease areas for an auction bid of $3.8 million. Bureau of Ocean Energy Management, Commercial Wind Lease for the Wind Energy Area Offshore Rhode Island and Massachusetts, July 31, 2013, http://www.boem.gov/Commercial-Wind-Lease-Rhode-Island-and-Massachusetts/ (last visited Apr. 10, 2015). In an early test of the staying power of offshore wind, a lease sale for four new WEAs off the coast of Massachusetts, totaling 742,000 acres, will be held on January 29, 2015. While BOEM has qualifi ed 12 companies to participate, it is unclear what effect low oil prices combined with the troubles of other OSW companies will have on the sale.

VirginiaIn Virginia, the state created a Virginia Offshore Wind Development Authority to encourage offshore wind development, but has not enacted a law mandating a renewable energy standard or establishing a system of ORECs as Maryland and New Jersey have done. The major utility in Virginia, Dominion Virginia Power, was the successful bidder for the Virginia WEA in 2013 at a bid of $1.6 million. Dominion plans to install its fi rst turbine in the WEA in ten years, after completing its research and demonstration project, called Virginia Offshore Wind Technology Advancement Project (VOWTAP). Dominion Virginia Power, Virginia Offshore Wind Technology Advancement Project, https://www.dom.com/corporate/what-we-do/electricity/generation/wind/virginia-offshore-wind-technology-advancement-project (last visited Apr. 1, 2015).

Lack of Consistent Incentives

The wind industry has historically depended on federal tax incentives to support the requisite up-


front investment needed to construct the offshore projects. It is likely that once construction is completed, costs will level out and become more competitive with other energy sources. At the end of the 113th Congress, which ended in December 2014, Congress passed a one-year-only extension of the production tax credit (PTC), which seeks to provide fi scal incentives for private companies to return electricity to the grid through renewable sources of energy. U.S. Department of Energy, The Renewable Electricity Production Tax Credit, http://energy.gov/savings/renewable-electricity-production-tax-credit-ptc (last visited Apr. 11, 2015). Unfortunately, this extension did little good because the year was almost at an end when the extension was enacted. The wind industry has asked for a level playing fi eld to be able to compete with traditional energy sources. The American Wind Energy Association (AWEA) has noted that extending the PTC will improve energy security as well as provide economic benefi ts.

In 2014, the International Energy Agency (IEA) issued a comprehensive report on U.S. energy policy, which praised the United States for its growth in renewable energy. That praise notwithstanding, the IEA’s report decried the lack of an “explicit national policy mechanism” to ensure the United States meets its renewable energy goals. At a conference in Washington, D.C., in December 2014, the executive director of the IEA complained that “[y]et another short-term extension of the PTC undermines investor confi dence and contributes to the volatile pattern of annual wind growth.” Jeff McMahon, IEA Scolds U.S. for Waffl ing on Wind Tax Credit, FORBES, Dec. 18, 2014, http://www.forbes.com/sites/jeffmcmahon/2014/12/18/iea-scolds-u-s-for-waffl ing-on-wind-tax-credit/ (last visited Apr. 10, 2015).

The Success Stories and the Future of OSW in the United States

Despite the long list of impediments, described above, BOEM has leased 403,405 acres in WEAs and has more lease sales planned for 2015 off the coast of Massachusetts and possibly North Carolina and New York.

Deepwater Wind, the successful bidder for the 2013 Massachusetts and Rhode Island lease sales, has also begun to develop the OSW project off Block Island, R.I. Since Block Island has no independent source of energy, it is an ideal test bed for OSW. Construction on the Rhode Island project is expected to commence this year as well. As noted above, the Block Island wind farm is now “fully permitted.” Ibid.

In Virginia, BOEM completed an environmental assessment for VOWTAP. Dominion Virginia Power, Environmental Assessment for the Virginia Offshore Wind Technology, https://www.dom.com/corporate/what-we-do/electricity/generation/wind/virginia-offshore-wind-technology-advancement-project (last visited Apr. 11, 2015). The VOWTAP project will consist of two turbines in an area adjacent to the Virginia WEA and allow testing of turbines to take place over the next two years in an effort to bring costs down and test whether turbines can withstand hurricane force winds. The state has also received federal approval for a research lease, which will go a long way to providing answers to key questions about maximizing production while limiting visibility of turbines from shore. Id. Finally, the Department of Energy (DoE) awarded VOWTAP a $47 million, four-year grant to help fund the construction of this OSW demonstration project.

DoE awarded grants to two other wind projects in 2014, including Fishermen’s Energy off Atlantic City, N.J., and PrinciplePower off the coast of Coos Bay, Or. Offi ce of Energy Effi ciency & Renewable Energy, Offshore Wind Advanced Technology Demonstration Projects, http://energy.gov/eere/wind/offshore-wind-advanced-technology-demonstration-projects (last visited Apr. 10, 2015).

Why Has the United States Lagged Behind Europe?

It’s no secret that U.S. offshore wind development lags behind Europe. In European countries like Germany, voters have accepted that initial public spending will exceed immediate return on


investment for green projects for decades. Jan Hromadko, Wind Power Hopes for Sea Change, WALL ST. J., Aug. 7, 2014. Despite some recent “not in my backyard” (NIMBY) related setbacks in Europe, renewables, including offshore wind, clearly are entrenched in European energy schemes and receive broad support. Melissa Eddy, Germans Balk at Plan for Wind Power Lines, N.Y. TIMES, Dec. 25, 2014. Europeans’ support has translated into a wide variety of publicly supported debt fi nancing, such as public bond measures and loans from state run banks, totaling approximately $100 billion. The results are unmistakable: Ireland and Denmark now predict that they will obtain over 30 percent of their energy from wind. In contrast, recent examples in the United States show that the American public, even in progressive states like Maine, Massachusetts, and New York, does not have the stomach for the high start-up costs and subsidies required for clean energy projects.

Two other factors have also impacted the growth of OSW in Europe. European Union (EU) Member States have feed-in tariffs to level the playing fi eld. Europe also lacks supplies of natural gas, which has been a focus of U.S. clean-energy policies because of the increase in supply through enhanced production techniques.

European “federalism” has also worked in favor of clean energy. Under Article 4 of the Treaty on the Functioning of the European Union, Member States “share competence” with the EU on environmental and energy issues. That is to say, both individual states and the EU have authority to legislate and implement energy and environmental policies. But, in practice, Member States largely are permitted to determine their own appropriate renewable energy policies. This has led to an equilibrium whereby EU environmental policies are paramount and, although the EU cannot directly shape energy in its Member States per se, environmental concerns have infl uenced energy policies that otherwise would be contrary to EU principles, such as the free movement of goods amongst states.

EU courts have consistently held that renewable energy is a more pressing concern than its founding principle, namely, the free movement of goods. In a landmark decision, the European Court of Justice (ECJ) decided in 2000 that Germany could pass a law mandating energy supply companies to purchase energy from domestic renewable sources at infl ated prices. PreussenElektra AG v. Schhleswag AG, 2001 E.C.R. I-02099. On its face, it seemed that the law violated laws on the free movement of goods, as well as competition laws. Id. However, the ECJ found that reducing greenhouse gases was a pressing interest that outweighed the disruption to commerce because the mandatory sales at infl ated prices were the “least restrictive way” for Germany to accomplish its goals. Id.

Similarly, in a recent case, the ECJ ruled that a Swedish energy agency did not have to subsidize a Finnish power company that was providing the Swedish power grid clean energy, even though the agency provided subsidies to Swedish companies. Ålands Vindkraft AB v. Energimyndigheten, 2014 ECLI:EU:C:2014:2037. However, as in the PreussenElektra case above, the ECJ ruled for the public interest objective of promoting the use of renewable energy sources in order to protect the environment and combat climate change. It is hard to imagine U.S. voters and courts allowing anti-competitive behavior that violates the Commerce Clause, especially given the litigation that has hampered offshore resources.

Conclusions

Despite the lack of a complete commitment to offshore wind in the United States, divided jurisdiction, and uncertain tax policies, new OSW development off the Atlantic Coast is on the horizon. The fi rst projects begin actual construction in 2015. In 2017, we anticipate this clean energy resource will be provided to consumers through new and existing power grids.

Joan M. Bondareff is Of Counsel at Blank Rome LLP and focuses her practice on marine transportation, environmental, and legislative issues. Ms. Bondareff


represents clients in many industries and state and local governments in matters related to maritime regulations and public policy; environmental law; government relations; international law; federal grants; and port security. She is an appointed member of the Virginia Offshore Wind Development Authority and of the Pool of Experts of the Regular Process for Global Reporting and Assessment of the State of the Marine Environment. Ms. Bondareff can be reached at (202) 772-5911 or [email protected].

Stefanos N. Roulakis is an associate at Blank Rome LLP and concentrates his practice on international and maritime law. He counsels clients on a wide range of regulatory matters, including international and domestic environmental standards, cabotage requirements, and international trade; he also advises clients on cross-border transactions. Mr. Roulakis can be reached at (202) 772-5958 or [email protected].

ENCOURAGING COOPERATIVE RESOURCE GAMES TO PROMOTE SUSTAINABILITY Misty A. Sims and Jan G. Laitos

The premise of sustainability is a component that we need for survival and well-being. Sustainability is either directly or indirectly dependent on the natural environment. It is therefore critical to ensure essential natural resources are present to protect the environment and human health. See U.S. Environmental Protect Agency, Sustainability, http://www.epa.gov/sustainability/basicinfo.htm (last visited Mar. 16, 2015). To that end, economic game theory is a means to critically evaluate and achieve sustainability.

Historically, there have been two interests that play a role with respect to natural resources. First, “users” of the resource wish to use the resource in some way. They may wish to extract it, develop it, alter it, dump emissions, effl uent, and waste into it, or play in it. Second, “nonusers” of the resource wish to leave the resource alone. These interests value a resource for its valuable nonuse qualities. For example, as a nonuse quality, most humans enjoy indirect use value from public environmental goods (like the air, water, and underground resources) when those goods are not used as a dumping ground for wastes, and when, instead, those goods provide the necessities of healthy life. Nonusers also benefi t from the existence value that humans experience when natural objects, such as wild lands and wildlife, are not used and instead are preserved and protected from the consequences of human use.

Several confl icts may arise between and within these two interests. Among users, disagreements may occur between those who wish to use the resource for one purpose and those who wish to use it for a confl icting purpose. For example, a fi eld may be valuable for either crops or forage, but not both simultaneously. Farmers may thereby fi nd themselves in confl ict with ranchers. Similarly, land may be valuable for either mining or recreation, but not at the same time. Miners may fi nd themselves in confl ict with motorized recreationists.

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Sometimes a user owns the resource and a potential user does not. The potential user may wish to challenge the owner’s property right, in the hopes that the owner will lose that interest so that the potential user can acquire an ownership interest, allowing the new owner to use the resource. We term all confl icts between users, and all confl icts between users and potential users, “Class 1 confl icts.”

There may also be confl icts between users and nonusers. One type of such confl ict involves users and nonusers that wish to prevent a particular use because it interferes with a resource’s indirect use value. For example, use of the atmosphere as a depository for sulfur dioxide emissions from coal-burning power plants can create acid rain. Acid rain adversely affects the indirect use value enjoyed by humans when the air is clean. Uncontaminated air is a nonuse value inherent in air because when air is not contaminated it can be inhaled by living organisms, and the rain that falls from it is nourishing to the Earth’s living systems, not dangerously acidic. Another class of user/nonuser confl ict is between resource users and nonusers who benefi t from the existence value of objects preserved in a natural state. Resource use may destroy wild landscapes or wildlife species, thereby degrading the existence value enjoyed by humans, who desire that these objects remain undisturbed by human use. We term both types of confl icts between users and nonusers “Class 2 confl icts.”

Both Class 1 and Class 2 confl icts raise interests for essentially anthropocentric ends. Users wish to use resources to maximize human welfare. Nonusers wish for resources to be unused either because of indirect use value or existence value, both of which are enjoyed and measured by humans. Arguably, nonusers rarely wish to proscribe use of resources for purely selfl ess, non-anthropocentric reasons.

Class 1 confl icts are usually resolved by contract and property law, or by statutes setting forth the conditions of acceptable resource ownership and use. Class 2 confl icts occur when legally protected use rights confront statutes or common law doctrines limiting use for anti-pollution or preservationist reasons. Anti-pollution laws seek

to bring about benefi ts to human health from the absence of pollution—an indirect use value when the nonuse quality of public environmental goods is maintained. Preservationist laws support existence value, which humans enjoy and are willing to pay for, when natural objects are preserved so that they cannot be degraded or destroyed by human resource use.

This essay focuses exclusively on Class 2 confl icts between users and nonusers of resources. Both users and nonusers assert interests that are protected and legitimized by statute and legal norms. Users rely on statute and property law to use and exploit resources. Nonusers are equally protected by statute and certain common law doctrine. Nonusers wish to resist the user’s desire to use the resource; nonusers want to enjoy the nonuse benefi ts that fl ow when the resource is not used, but instead is left in a natural state. This essay also refers to a non-cooperative Prisoner’s Dilemma game, which is a type of game theory trying to demonstrate why two purely “rational” individuals might not cooperate, even if it appears that it is in their best interests to cooperate.

In game theoretic terminology, Class 2 confl icts possess the elements of non-cooperative games. In such games, the self-interested players, users and nonusers alike, could theoretically cooperate, but are in practice unable to do so. This failure is because in non-cooperative games, such as confl icts between resource users and nonusers, each player will play the game with a self-interested strategy, creating a result a player would not otherwise choose if that player could have made a cooperative agreement with the other player. The outcome of a Class 2 confl ict is similar to that of a non-cooperative Prisoner’s Dilemma game. See Avinash Dixit & Barry Nalebuff, The Concise Encyclopedia of Economics, Prisoner’s Dilemma, http://www.econlib.org/library/Enc/PrisonersDilemma.html (last visited Mar. 16, 2015). Because of a lack of coordination in such games, the result is sub-optimal, both for the players and for the society (and the natural environment) in which the players live.

We propose three responses to correct this undesirable result of non-cooperative use


when there are nonuse games involving natural resources. First, some intermediate step between non-cooperation and cooperation must occur. That step is “coordination.” With respect to Class 2 confl icts, we propose the introduction of another party—the natural resource itself—that will serve as a focal point permitting (and even encouraging) resource users and nonusers to coordinate their strategies.

Second, once coordination has occurred, it is more likely that a cooperative game will exist that in turn will yield a socially optimal solution—a cooperative game solution based on bargaining. See ROGER B. MYERSON, NASH EQUILIBRIUM AND THE HISTORY OF ECONOMIC THEORY (Mar. 1999), available at http://home.uchicago.edu/rmyerson/research/jelnash.pdf. John Nash proposed that each bargaining party balance the risk of failing to come to any agreement against the benefi t of demanding a higher share of the payoff. Id. We suggest an alternative to the Nash solution—the use of Shapley values to bind and facilitate natural resource negotiations. See Faruk Gul, Bargaining Foundations of Shapley Value, 57 ECONOMETRICA 1, 81–95, Jan. 1989, available at http://www.princeton.edu/~fgul/G89.pdf. A Shapley value assigns payoffs to the members of a grand coalition of relevant players in an attempt to fairly allocate the gains obtained among these players. Id.

As a third response to an otherwise non-cooperative game, we suggest legitimizing a critical third player, a player that is in addition to the user and nonuser players—the natural resource itself. These three players may then create a coalition and a Shapley value can be calculated. Based on the calculation of a Shapley value premised on the newly formed coalition, a Class 2 confl ict game may thereby become a cooperative game, permitting mutually benefi cial and socially responsible Pareto optimality to be reached. See GAMETHEORY.NET, Pareto Optimal, http://www.gametheory.net/dictionary/ParetoOptimal.html (last visited Mar. 16, 2015).

As a general matter, we should prefer a system that empowers individual and corporate resource users, and individual and group nonusers, to

make decisions in their economic best interest as compared to a system that, by legislative or executive fi at, simply mandates non-action or authorizes use. By vesting decisional authority in private parties, who must consider the interest of the resource they wish to use, or safeguard, government encourages long-term responsibility that exists independently of top-down mandates.

To encourage a cooperative game, an agreement consistent with the motives of all the relevant players in a resources game should be imposed. A cooperative solution must consist of a common strategy that is effi cient from the perspective of all key players invested in resource use and nonuse—users, nonusers, and the resource itself. It is necessary that social norms premised on reciprocity among the three players result in the choice of an agreed-upon strategy. The existence of such an agreement, outlining guidelines for the sharing of benefi ts amidst the presence of self-interest and reciprocity motives, should be imposed by a neutral outside party. A rational choice of commitment to cooperation will better bring about an equitable distribution among the three key players in confl icts over natural resources and further the interests of sustainability.

Misty A. Sims received an LL.M. degree in environmental and natural resources law from the University of Denver Sturm College of Law. She is a partner at Sims & Sims Law, PLLC, a comprehensive environmental science and technology fi rm, and owner of a legal blogging optimization company, Marketing Justice, marketingjusticellc.com. In addition, Misty serves as a Membership Vice Chair for the ABA Marine Resources Committee; Year in Review Vice Chair for the ABA Climate Change, Sustainable Development, and Ecosystems Committee; ABA Environmental Disclosure Programs Vice Chair; Social Media Vice Chair for the ABA Waste and Resource Recovery Committee; and Electronic Communications Editor for the ABA Water Resources Committee.

Jan G. Laitos is John A. Carver Jr. Professor of Law at University of Denver Sturm College of Law. He is a reporter for the Planning and Environmental Law Review, a regional board member of the Rocky Mountain Land Use Institute, and trustee of the Rocky Mountain Mineral Law foundation. He is also vice chair of the Colorado Water Quality Control Commission.


SUSTAINABILITY IN INDIA—BUSINESS AND GOVERNMENT DRIVERSGeorge Wyeth

Many large businesses based in the United States, Europe, and Japan have sophisticated programs to identify and address issues of “sustainability” such as energy and climate, water use, waste generation, and biodiversity. But what is going on in developing economies, whose economic growth threatens to swamp any gains made elsewhere? One might well assume that companies there would have little interest in sustainability, being focused primarily on seizing a larger share of global production.

In fact, after recently spending four months in India as a Fulbright scholar, I found that is not the case. Sustainability even crept into Prime Minister Narendra Modi’s 2014 Independence Day address, when he called for India to expand its global standing as a manufacturing center. Prime Minister Narendra, Address 68th Independence Day (Aug. 15, 2014), available at http://pib.nic.in/newsite/pmreleases.aspx?mincode=3 (English translation of speech in Hindi). He said that to do so, business should both improve quality and reduce environmental harm: “zero defect, zero effect,” as he put it. This suggests a deeper level of understanding than would be expected from most politicians in the United States.

It is not just a matter of political rhetoric. The results from discussions with businesses, trade associations, consultants, and academics showed that:

A sizable number of Indian-owned corporations (perhaps 50 to 100) have advanced sustainability programs; many others have efforts focused on energy effi ciency. Given that these include some of the country’s largest business groups, with multiple subsidiaries, they account for a meaningful share of manufacturing GDP.

India has sophisticated capabilities: the programs were homegrown and designed to address the specifi c needs of the companies

involved, using in-house expertise. They weren’t just outsourced to a consulting fi rm.

Multinationals operating in India seem to be acting consistently with global sustainability initiatives and did not appear to be lowering standards.

There was less evidence than expected of pressure on suppliers to be green, however.

Finally, government policy plays a larger role in India than in the United States; the largest businesses are subject to national requirements on sustainability reporting and are required to devote 2 percent of their profi ts to corporate social responsibility projects.

Whether this is a story of success or failure depends on one’s expectations. However, it seems at a minimum to be a glass half-full.

Government Policy Drivers

Perhaps the most notable difference between India and the United States is that government plays a larger role there in driving corporate sustainability initiatives. Although India has a reputation for uneven enforcement of environmental laws, it also has a socialist history that makes it less skittish about public intervention in business matters. For example, the Ministry of Corporate Affairs (roughly equivalent to the U.S. Commerce Department) has issued “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business.” See Ministry of Corporate Affairs, National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business, July 8, 2011, http://pib.nic.in/newsite/erelease.aspx?relid=73107 (last visited Mar. 21, 2015). The guidelines include nine principles on topics such as ethics, treatment of employees, and product sustainability. The sustainability-reporting component of these guidelines has been made mandatory for the 100 largest companies on the Bombay Stock Exchange. The United States has no equivalent of these government-issued guidelines—the closest analogy would be the voluntary reporting guidelines of the Global Reporting Initiative (GRI).


In August 2013, India enacted a law requiring businesses (including subsidiaries of foreign companies) to set aside 2 percent of their profi ts for spending on corporate social responsibility (CSR). The Companies Act, 2013, No. 18, available at http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf. The law defi nes CSR as activities that promote poverty reduction, education, health, environmental sustainability, gender equality, and vocational skills development. The law requires that priority be given to communities in which the company operates. Id. at 294. It is estimated that about 8000 companies will be affected.

While the law would certainly increase the amount spent on socially benefi cial purposes, concerns have also been expressed that it seems more likely to result simply in increased corporate philanthropy rather than “strategic” CSR that is tied to broader corporate goals. The result is likely to be more a matter of checking the box than developing successful business strategies that also have a socially benefi cial component. See Chhavi Ghuliani, India Companies Act 2013: Five Key Points About India’s “CSR Mandate” BSR, Nov. 22, 2013, http://www.bsr.org/en/our-insights/blog-view/india-companies-act-2013-fi ve-key-points-about-indias-csr-mandate (last visited Apr. 10, 2015).

Business Drivers for Sustainability

Therefore, the stronger and more meaningful drivers of sustainability in India, as in the West, are business goals. Just as in American companies, well-run Indian businesses are managing sustainability as a core business activity and as an integral part of long-term corporate strategy. Moreover, the expertise to design and carry out these initiatives has been developed in-house, both in individual companies and in trade groups such as the Confederation of Indian Industries. It has not just been purchased from global consulting fi rms.

For example, the Tata Group is a global fi rm with interests in everything from IT consulting to cars (it

owns Jaguar as well as its own India-based motors subsidiary), chemicals, steel, and many other lines of business. Tata Group website, available at http://www.tata.com/ (last visited Mar. 21, 2015). Its largest component companies issue sustainability reports and run sustainability programs. Tata Sustainability Group, available at http://www.tata.com/sustainability/sub_index/Tata-Sustainability-Group (last visited Mar. 21, 2015). It also embeds sustainability in the criteria by which the central group assesses management performance across the many Tata companies.

Another diverse group is the Godrej Group, which makes a wide array of home-oriented products such as appliances, furniture, locks, and interior decoration. Godrej Group, http://www.godrej.com/godrej/godrej/aboutgodrejgroup.aspx?id=1&menuid=1163 (last visited Mar. 21, 2015). Godrej has established sustainability goals in nine categories, ranging from typical concerns such as reducing energy and water consumption and reducing waste to more advanced steps such as designing products for recyclability and reducing depletion of natural capital. See Godrej, Sustainability Goals for Godrej, http://www.godrej.com/godrej/GodrejIndustries/gilsustainability.aspx?id=12&menuid=1093 (last visited Mar. 21, 2015).

Godrej sets annual targets for each goal, and progress is tracked at each operating facility. At one particular appliance factory, performance on these targets is displayed in the main conference room. The factory replaced its old diesel generator (necessary because of frequent power outages) with one using biomass. It recycled wastewater to the maximum extent possible and had a system for separating waste streams into those that could be reused on-site, those that could be sold to recyclers, and those that had to be consigned to a landfi ll.

A third sustainability leader is ITC, a large conglomerate that sells, among other things, food products. ITC Company website is available at http://www.itcportal.com/ (last visited Mar. 21, 2015). ITC has taken a variety of steps to


strengthen local villages on which it depends for agricultural products—for example, helping build dams to retain rainwater throughout the year and providing computer terminals to provide farmers with access to market information. ITC, Sustainability: Investing in Social Development, http://www.itcportal.com/sustainability/investing-in-social-development.aspx (last visited Mar. 21, 2015).

As in the West, an entry point for sustainability in Indian businesses has been the increasing adoption of advanced management practices, such as lean manufacturing, that put a premium on resource effi ciency. Even small businesses using these approaches have found ways to avoid wasting energy and to reuse water or chemicals. Multinational Indian operations appeared to be operating consistently with their global sustainability strategies. For example, a Kimberly-Clark facility was given a target for energy use by the corporate headquarters in the United States, with local managers responsible for fi nding ways of meeting the target.

There is less evidence of pressure from multinational enterprises on their local suppliers to become more sustainable. The smaller fi rms reported that their customers scrutinized them intensely on quality—to the point of conducting on-site inspections—but none indicated that they were either required to green their operations or given technical assistance in doing so. Where they were taking such efforts, it was on their own for reasons of resource effi ciency.

Challenges to Sustainability Efforts in India

The picture should not be overstated: Indian businesses certainly face serious challenges in developing sustainability programs. In general, India’s manufacturing sector has struggled; while software development and other services have taken off, manufacturing represents a slightly smaller share of GDP than it did two decades ago. World Bank data indicate that manufacturing represented 17 percent of GDP in 1995 and

13 percent in 2013. See World Bank Data, Manufacturing, Value Added (% of GDP), http://data.worldbank.org/indicator/NV.IND.MANF.ZS (last visited Mar. 21, 2015).

Of course, India’s GDP has grown at much faster rates than that of the United States, so a constant share of GDP represents signifi cant growth in absolute terms. Companies only tend to invest in sustainability if they are thinking about the long term and in diffi cult economic circumstances the number of companies that can afford to do that is limited. The percentage of large businesses that have a comprehensive sustainability strategy (that is, beyond narrow efforts focused on targets such as energy effi ciency) was less than 20 percent as of 2011. See FE-EVI Green Business Survey 2010–11, as reported at https://www.2degreesnetwork.com/groups/2degrees-community/resources/fe-evi-green-business-survey-2010-11-india-inc-sustainability-matters/.

Nevertheless, it is worth taking notice that even in a developing economy such as India’s, sustainability has taken hold as a business goal. It tells us that sustainability is not a luxury but a necessity for the 21st-century business, regardless of where it may be located.

George Wyeth is an attorney with the U.S. Environmental Protection Agency. However, the research described in this article was carried out in his private capacity as a Fulbright scholar, based in Pune, India, in 2013 and not as part of his offi cial duties.

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INTERNATIONAL AND U.S. AGRICULTURAL SUSTAINABILITY STANDARDS—GMO OR NON-GMO?Thomas P. Redick

As the U.S. Department of Agriculture considers standards for ensuring peaceful coexistence of biotech crops (also known as “genetically modifi ed organisms” or “GMOs”) and non-GMO or organic crops, it may be affected by domestic and international sustainability standards. This article will review the status of biotech crops and their coexistence with organic or non-GMO versions of the same crops in various agricultural sustainability standards at home in the United States and internationally. This article will fi rst provide a brief review of the biotech-organic coexistence issues in three national agricultural sustainability standards in draft form at the American National Standards Institute. Second, two international sustainability standards will be discussed.

ANSI Standards on Sustainable Agriculture

The American National Standards Institute (ANSI) announced at a meeting a few years ago that it saw great potential for setting industry standards in the “sustainability space” and three standard-setting organizations have undertaken efforts to defi ne the sustainability of agriculture. See ANSI, ANSI Launches Pilot Program: Accreditation to International Sustainability and Carbon Certifi cation (ISCC) Certifi cation System for Sustainability and Greenhouse Gas Emissions, ANSI NEWS & PUBLICATIONS, Feb. 5, 2015, http://www.ansi.org/news_publications/news_story.aspx?menuid=7&articleid=a9e1377e-3c57-40a9-834a-09839c943330 (last visited Apr. 10, 2015). The fi rst to be proposed, the LEO 4000 standard on sustainable agriculture, stirred controversy as it tilted toward organic and non-GMO production and appeared to be making work for the certifi er that funded its creation. The second, X-62, is an early stage standard from the American Society of Agricultural and Biological Engineers, a scientifi c society that will not exclude industrial agriculture.

The third, the Validus Environmental Review program, focuses on family farms.

LEO 4000 StandardIn 2007, Scientifi c Certifi cation Systems Inc. (SCS) published the Draft Standard for Sustainable Agriculture (SCS-001, now called LEO 4000) with the American National Standards Institute. See Leonardo Academy, LEO 4000 Sustainable Agriculture Standard, Mar. 2, 2015, http://sustainableagstandard.org/ (last visited Apr. 10, 2015). SCS retained Leonardo Academy in Madison, Wisconsin (Leonardo), an ANSI-accredited standards development organization specializing in sustainability to act as secretariat for the standard, facilitating dialogue on the future of sustainable agriculture in the United States.

In April 2012, the Leonardo Academy’s LEO 4000 standards committee fi nalized the text of a proposed national standard on sustainable agriculture under the American National Standards Institute. This standard would award “points” for particular agricultural practices, allowing growers to be certifi ed, like a LEED building, at levels (e.g., basic, silver, gold, platinum). The current draft standard will elevate some forms of certifi ed organic agriculture over other more productive forms of agriculture, which use agricultural chemicals and do not place diversity in crops above productivity for the sake of diversity.

The standards committee agreed in 2009 to proceed on a “science-based” basis with a common set of metrics to measure progress toward outcomes. Douglas Constance, Sustainable Agriculture in the United States: A Critical Examination of a Contested Process, SUSTAINABILITY 2010, 2, 48–72 (Dec. 28, 2009), available at www.mdpi.com/2071-1050/2/1/48/pdf. The fi rst sign of a breakdown in the committee came in mid-2010 with the departure of two leading environmental organizations that complained of the cumbersome and contentious process, which other leading agricultural environmental groups echoed.

By 2010, the Leonardo Academy increased the organic slant in membership to give it an


apparent voting majority at the third meeting of the standards committee in 2010. In late 2010, 12 members representing mainstream agriculture resigned from the standards committee citing the organic bias in the committee, and key fl oral industry representatives also left the standards committee soon thereafter. Chris Clayton, What Is Sustainability? Sustainability Standards Push Has Its Critics, DTN PROGRESSIVE FARMER, Apr. 24, 2012, http://www.dtnprogressivefarmer.com/dtnag/home (follow “DTN Progressive Farmer” hyperlink; then enter “Chris Clayton Sustainability Push” in search tool) (last visited Apr. 10, 2015).

In 2014, the standards committee published the standard to take public comment. As currently framed, however, the organically stacked standards committee has set “tiers” (like a LEED building—platinum, gold, silver, and entry level), to provide more “points” for practices that are used in organic production, making the national standard for sustainable agriculture serviceable only in niche markets—an “organic-plus” standard. Lacking participation from suffi cient voices in mainstream agriculture, however, such a niche standard may be fated to be marketable to a small percentage, yet to be defi ned, of the small percentage of crop growers that already use organic practices.

Organic advocates admit that they yield almost 20 percent less than conventional agriculture, according to a recent study at the University of California, Berkeley, that favored organic agriculture and found nearly even comparisons in some specialty leguminous crops. See Sarah Yang, Can Organic Crops Compete with Industrial Agriculture? UC BERKELEY NEWS CENTER, Dec. 9, 2014, http://newscenter.berkeley.edu/2014/12/09/organic-conventional-farming-yield-gap/ (last visited Apr. 10, 2015). The debate over yield vs. environmental benefi ts will continue because some feel that organic agriculture is more sustainable than conventional agriculture, while others suggest that organic cannot feed the world.

ASABE X629 Sustainable Agriculture StandardThe Leo 4000 standard excludes the use of certain chemicals and penalizes biotech growers

with a duty to “prevent migration” to neighbors who sign premium-paying production contracts. However, the American Society of Agricultural and Biological Engineers (ASABE) drafted a standard that respects the need to use some industrial inputs—e.g., fertilizers and biocides in order to reap the highest possible yield. American Society of Agricultural and Biological Engineers, Draft X629 Framework for Sustainable Agriculture (Dec. 3, 2013) (on fi le with author). The purpose of this sustainability framework is to improve key performance indicators across agricultural production systems. The elements of this framework are critical for uniform, effective, and legitimate implementation of sustainability initiatives across the complex, diverse, and multifaceted landscape of agriculture in North America. The framework provides explicit guidance on the goal and scope of each element, the process for implementing each element, and the necessary components for each element.

The standard was based in large part on work performed for the U.S. Soybean Export Council (USSEC) by Dr. Marty Matlock of the University of Arkansas, who is a member of the ASABE sustainability committee. USSEC created the “U.S. Soybean Sustainability Assurance Protocol” (SSAP) through a multi-stakeholder process to address customer requests for a supply of documented and certifi ed sustainable soy. Certifi cation is shipment specifi c and non-transferable. The SSAP is based on a national system of sustainability and conservation laws and regulations and farmer participation in the U.S. Farm Program. See U.S. Soybean Export Council, U.S. Soybean Sustainability Assurance Protocol: A Sustainability System That Delivers, May 2014, available at http://28vp741ffl b42av02837961yayh.wpengine.netdna-cdn.com/wp-content/uploads/2014/04/USSEC_Protocol_04.23.14_F.pdf (last visited Apr. 11, 2015). In contrast to Leo 4000, which will be dead on arrival in conventional agriculture, the ASABE-X629 standard should fi nd support for application in conventional agriculture; it lacks


some of the impractical burdens and organic slant that Leo 4000 features.

Sustainability for Livestock and Family Farms

The Validus Environmental Review program is based on the Good Environmental Livestock Production Practices (GELPPs), standard GELPP 0002-2002 under the American National Standards Institute. See American National Standards Institute, Good Environmental Livestock Production Practices (GELPP): Concentrated Livestock Operations—Production Areas (2014), http://webstore.ansi.org/RecordDetail.aspx?sku=ANSI+GELPP+0002-2002 (last visited Apr. 10, 2015). ANSI certifi ed that the Validus process had “the appropriate mix of industry, academia and public” that was consulted in developing the livestock standard. See Validus Environmental Review (2006), http://www.validuscertifi ed.com/environmental_certifi cation.asp (last visited Apr. 10, 2015).

Under the Validus Environmental Review program, farmers get a detailed assessment and audit of their environmental management practices. Farms that are compliant with the following environmental criteria are certifi ed to the GELPP 0002-2002 standard:

General site management and conditions; Livestock living and production areas; Outdoor manure and storm water storage; Manure use and land application; Animal mortality management; and Wastewater plans, treatments, and controls.

International Sustainability Standards

There are many international agricultural sustainability standards. This section discusses two of the many international agricultural sustainability standards, mainly due to their willingness (in contrast to the Leo 4000) to recognize the role of biotech crops in sustainable agriculture, without requiring biotech growers to keep their crops

contained. These standards were open to input from growers in North America who had extensive experience in growing biotech crops in proximity to organic and non-GMO crops.

Roundtable on Responsible Soybeans (RTRS)The World Wildlife Fund-U.S. (WWF) convened a broad group of stakeholders in South America in 2007 to create the Round Table on Responsible Soy (RTRS), seeking to improve on the environmental footprint of South American soy production. In June 2010, the RTRS issued its fi nal version of global voluntary standards for environmentally and socially responsible soy production (RTRS 2010). The RTRS is technology neutral and will certify “GM” soy, to the dismay of some anti-biotech activists.

The RTRS process should be commended, however, for taking input from producers of biotech crops. While it was anti-GMO to start, the following provisions on GMO production (paragraph 5.10) created after public comment will help to ensure that most biotech crop producers participating in the standard would not have to create a buffer zone to protect a non-GMO neighbor’s premium.

When a change in soybean production practices is introduced which could impact neighboring production systems, it is the responsibility of the producer making the change to implement a buffer strip of 30 m. (e.g. in areas where production is generally GM, it is the responsibility of an organic or non-GM farmer to maintain the buffer around his own production. In areas where production is mainly non-GM or organic, a farmer planting GM or using chemicals should maintain a buffer). RTRS 2010.

This language addressed biotech crop producers’ objections to language that would have required a biotech producer who is planting biotech corn to create a buffer against cross-pollination to a neighbor who is planting organic or non-GMO


corn to reap a premium in the marketplace. As will be discussed below, similar legal expert input was provided to the Roundtable on Sustainable Biofuels but similar language has yet to be adopted.

Roundtable on Sustainable BiomaterialsThe Roundtable on Sustainable Biomaterials (RSB) is a multi-stakeholder initiative initiated by EPFL in Lausanne, Switzerland (Ecole polytechnique fédérale de Lausanne or Swiss Federal Institute of Technology Lausanne). This biomaterials standard (formerly biofuels) seeks to develop a system for measuring sustainable performance throughout the chain of biofuel production.

In 2009, RSB version 1.0 contained language requiring biotech crop producers to “prevent migration” to other crops. Grower groups from the United States objected strongly to this imposition of a duty that would be impossible to fulfi ll, if the non-GMO neighbor failed to communicate his growing plans—and unfair to impose, if the non-GMO grower was collecting a premium and also expecting his neighbor, without pay, to refrain from productive use of strip of land. Fortunately, the RSB recognized the need for legal input on this coexistence issue, drafting “Terms of Reference” in late 2010 for an expert committee on coexistence and liability issues. Unfortunately, as of 2015, the RSB still has not voted on a recommendation by the RSB steering committee to adopt the input from a group of liability experts.

The difference in language is subtle enough to merit a comparison below. While the RSB would have a biotech producer “take measures to prevent migration” under RSB version 2.0, the proposal from the liability expert group (of which this author was a member) would move “cooperate” to be the active verb, eliminating the positive duty to “take measures” to prevent migration. Unless this change is made, the text of the RSB will remain as anti-GMO as some of the laws in the EU imposing such a duty to avoid migration (Parliament 2011).

Current RSB Principle 11.b reads as follows: “Participating Operators using GMOs shall take

measures to prevent migration of genetically modifi ed material and shall cooperate with neighbors, regulatory and conservation authorities, and local stakeholders to implement monitoring and preventative measures. Crop-specifi c and technology-specifi c mitigation strategies shall be utilized.” (underline added)

Editorial Suggestion of Expert Group (May 2011), Criterion 11.b, Third Bullet: “Participating Operators using GMOs shall cooperate with neighbours, regulatory and conservation authorities, and local stakeholders to implement monitoring and preventative measures to prevent migration of genetically modifi ed material. Crop-specifi c and technology-specifi c mitigation strategies shall be utilized.” (underline added)

In contrast to the RTRS above, which clearly requires a non-GMO producer to maintain his own buffer (unless he is in a non-GMO zone), the current RSB language would always impose this obligation on the biotech producer. This is similar to the EU’s Global Good Agricultural Practice (GlobalG.A.P.) standard, which is a voluntary standard for the certifi cation of good agricultural practices for agricultural products around the globe, formerly known as EUREPGAP (European good agricultural practice). The GlobalG.A.P. states the following criterion as a “Major Must” (CB 2 . 3 . 4 ) for certifi cation: “Is there a plan for handling GM material (crops and trials) setting out strategies to minimize contamination risks, such as accidental mixing of adjacent non-GM crops and maintaining product integrity? There must be a written plan that explains how GM material (crops and trials) are handled and stored to minimize risk of contamination with conventional material.” GlobalG.A. P., INTEGRATED FARM ASSURANCE: CONTROL POINTS AND COMPLIANCE CRITERIA, VERSION 4.0 (2013), http://www.globalgap.org/export/sites/default/.content/.galleries/documents/130315_gg_ifa_cpcc_af_cb_fv_v4_0-2_en.pdf.

Standards are entitled to “go beyond regulation” to address adverse impacts to the environment and


people. It is more troubling, perhaps, to venture into managing relative economic interests between growers of biotech or non-GMO crops. Indeed, no particular economic interest is more worthy of protection unless it links to some public benefi t (e.g., standards dictating size or quality criteria for crops are common in the industry). RSB version 2.0’s provisions on coexistence of biotech and organic/non-GMO crops would require a biotech producer who has grown biotech corn for 15 years, selling a commodity crop with no premium paid, to incur costs of his own to protect a neighbor next door who just decided to produce non-GM corn in the hope of getting a premium of up to 100 percent. If the RSB accepts the recommendations of its expert attorneys, however, it will not force biotech growers to implement buffers to protect such neighbors without payment.

The EU plans to make the RSB part of the reference materials for compliance with its Directive on Renewable Energy and U.S. producers

will need to comply with that directive to be able to ship.

Conclusion

While there will always be debates over what is “sustainable,” there are clearly benefi ts to be reaped from better management of environmental and social impacts of agriculture. A balanced approach would simply recognize the resource limits on expanding organic production and also encourage continuous improvement in managing the environmental-social impacts of mainstream agriculture. This process appears to be well under way in various sectors of the agricultural economy, with sustainability standards providing a vehicle, if they are drafted with suffi cient input from relevant sectors—particularly the producers who would be asked to change particular practices.

Thomas P. Redick is in solo practice at Global Environmental Ethics Counsel LLC in Clayton Missouri, and a member of ABA SEER’s Council.

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