Sustainability Law

To answer this question, it is important to note that the conversation cannot be about promoting a sustainable business or conducting business as usual; all businesses will have to conserve resources and adapt to a changing climate. There is no doubt that resources will face increasing stress over the coming years and decades, and even the SEC has begun earnestly nudging businesses to disclose their climate change risk. Conversations surrounding more long-term profit maximization over short-term gains are getting easier, and certain states have taken it upon themselves to pass new legislation that allows for corporations to consider public benefits outside of profit, like human health, the environment, and social responsibility.  But these efforts do not necessarily advance the ultimate goal of sustainable business management because they miss one important component: the ability to quantify, and ultimately report, benefits to society as a whole as a component of net profit. That is, in order to truly get businesses to begin to internalize the costs of climate change, or scarce water, and to realize the benefits of working to protect scarce resources, we need to help businesses to begin to value these efforts and include them in their profit margins.

This is certainly not a unique concept; in January 2014, a group of fifty environmental, investment and nonprofit leaders met in San Francisco to discuss the idea of a “new wealth.” Leaders at the World Economic Forum and academics have done the same. One prominent asset manager commented: “[s]adly, because we don’t properly value conservation, most current conservation projects don’t generate cash flows, and when they do, it is usually from either tourism, or the production of traditional commodities (coffee, cocoa, other agricultural products, or forestry).” With a better metric for valuing and reporting benefits to conservation efforts, though, companies could realize profits from investing in social good.

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