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The Real-World Application of Corporate Sustainability

Ask ten different experts to define “corporate sustainability” and you are likely to receive ten different answers all based, to a large extent, on their own experiences. Part of the problem in defining such an amorphous term arises from its continuing evolution along with the ever-increasing entry of new stakeholders, an inconsistent set of state and federal reporting standards, and the constant onslaught of newly adopted federal and state laws and regulations. One resource evidencing the divergent views on what constitutes an appropriate definition for corporate sustainability comes from the web-based encyclopedia, Wikipedia:

[1.]. . . a business approach that creates long-term consumer and employee value by not only creating a “green” strategy aimed towards the natural environment, but taking into consideration every dimension of how a business operates in the social, cultural, and economic environment. . .

[2.]. . . an evolution on more traditional phrases describing ethical corporate practice such as corporate social responsibility or corporate citizenship continue to be used but are increasingly superseded by the broader term, corporate sustainability.  Unlike the other phrases that focus on “added-on” policies, corporate sustainability describes business practices built around social and environmental considerations.

[3.]. . . is derived from two keys [sic] sources: [i] The Brundtland Commission’s Report – Our Common Future which described sustainable development as, “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. . . [and]. . . [ii] within more academic management circles Elkington (1999) developed the concept of the “Triple Bottom Line” which proposed that business goals were inseparable from the societies and environments within which they operate. . .

A more manageable and practical definition of corporate sustainability has been presented by KPMG International Cooperative in its 2011 “Corporate Sustainability: A Progress Report:”

“. . . adopting business strategies that meet the needs of the enterprise and its stakeholders today while sustaining the resources, both human and natural, that will be needed in the future.”

Regardless of whether a company agrees with (or even understands) any of the foregoing definitions or creates its own, what is clear is that corporate sustainability as a business strategy is here to stay.

It is with this backdrop that Foster City and Manatt, Phelps & Phillips, LLP recently sponsored the Community Impact Summit (produced by Foster City TV and whaddyathink LLC), in which representatives from local Bay Area companies were brought together for a televised panel discussion on what corporate sustainability means to the community at large. The panel was composed of Seth Baruch from Deloitte Consulting LLP, Redwood City Councilwoman Rosanne Foust, Bruce Klafter from Applied Materials (“Applied”), Walter Ruzzo from Gilead Sciences and John Stockham from Lockheed Martin Space Systems Company (“LMSS”).

One of the core purposes of the event was to view and assess The Video Project’s documentary film So Right, So Smart (showing the economic and environmental successes of businesses that have begun to take positive steps toward a sustainable future); however, it also provided a unique snapshot on how large Bay Area companies have adopted and continue to implement sustainability models in their day-to-day operations.

In post event follow-up conversations, representatives of LMSS and Applied further discussed in more detail the biggest opportunities and the most significant challenges with corporate sustainability in their respective companies.

John Stockham, Director of Facility Operations and Services at LMSS, is fully committed to the development and implementation of a sustainability model, one challenge of which has been to justify the costs of “go green” projects by measuring their tangible benefits. To overcome this challenge, LMSS has implemented a process of selecting its projects carefully. The projects with the best return on investment (ROI) have a better chance of qualifying for approval.

Bruce Klafter, Managing Director of Corporate Responsibility and Sustainability at Applied, has a similar take on the challenges of making the “business case” for sustainability projects.  According to Mr. Klafter, Applied, as a multi billion-dollar company, is heavily committed to sustainability and well positioned to move into new markets that not only have sustainable impacts globally but also positively impact Applied’s bottom line (e.g., the manufacture of solar photovoltaic panels). Often, however, Mr. Klafter acknowledged that large companies looking to adopt a sustainability model “do not know what they do not know.” In other words, there is a constant “chicken and egg” struggle at play where he and his team attempt to secure buy-in from senior management on aspects of Applied’s sustainability model without having the luxury of any backup data establishing the economic viability of a proposal. Applied is dedicated to doing the right thing from a sustainability perspective, but in order to secure the necessary internal support to any new ideas, there needs to be tangible evidence that it will positively impact the fiscal bottom line.

Most experts readily concede that innovation will continue to serve as the key driver for companies looking to lead the corporate sustainability movement.  However, as pointed out above, in order to facilitate a more expedited transition for large business, companies must (i) accept and address the needs of all the necessary constituents (including those of the investors that are often focused on financial returns), and (ii) establish quantifiable measurement tools that can be used to establish business justifications for sustainability models.

Michael C. Polentz is a Real Estate & Land Use Partner at Manatt, Phelps & Phillips, LLP where he specializes in the representation of alternative energy companies. He can be reached at (650) 251-1440 or mpolentz@manatt.com.

This column is the sixth in a series of articles by law firm Manatt, Phelps & Phillips, LLP’s Energy, Environment & Natural Resources practice. Earlier columns discussed Green Chemistry Regulation, Renewable Project Failures in California, Promoting Recycled Water, Environmental Liabilities in Bankruptcy Reorganizations, and California Renewable Policy.

Michael C. Polentz
Michael C. Polentz is a Real Estate & Land Use Partner at Manatt, Phelps & Phillips, LLP where he specializes in the representation of alternative energy companies. He can be reached at (650) 251-1440 or mpolentz@manatt.com.
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