The most well-known definition of the term came out of the Brundtland Commission, led by former Norwegian Prime Minister Gro Harlem Brundtland. In 1987, the Commission defined sustainable development as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs.” Sustainability is a discussion of how to make human economic systems last longer and have less impact on ecological systems, particularly relating to major global problems such as climate change and oil depletion.

Since publication of the Brundtland Report, the concept of sustainability has taken the world by storm. In 2005, Amory B. Lovins, co-founder of the Rocky Mountain Institute, along with Karlson Hargroves and Michael H. Smith, co-founders of the non-profit Natural Edge Project, released a book entitled The Natural Advantage of Nations: Business Opportunities, Innovation and Governance in the 21st Century. The authors enumerate the following principles to guide modern sustainability:

1. Dealing transparently and systemically with risk, uncertainty and irreversibility.
2. Ensuring appropriate valuation, appreciation and restoration of nature.
3. Integration of environmental, social, human and economic goals in policies and activities.
4. Equal opportunity and community participation/sustainable community.
5. Conservation of biodiversity and ecological integrity.
6. Ensuring inter-generational equity.
7. Recognizing the global integration of localities.
8. A commitment to best practices.
9. No net loss of human capital or natural capital.
10. The principle of continuous improvement.
11. The need for good governance.

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Some Basics

Carbon Footprinting

Issues of climate change have come to the forefront internationally and domestically due to changing weather patterns and pending regulation. As a result, more companies and individuals are taking account of the impact their emissions have on the environment. A carbon footprint is the “measure of the impact human activities have on the environment in terms of the amount of greenhouse gases produced, measured in units of carbon dioxide.” (carbonfootprint.com). A total footprint is made up of two parts — an individual or a company’s direct/primary footprint and the indirect/secondary footprint. The primary footprint measures the direct emissions of CO₂ from a person or entity (e.g., from the burning of fossil fuels through domestic energy consumption and transportation). The secondary footprint measures the indirect CO₂ emissions from the whole life cycle of products used.

Life Cycle Assessment

Life cycle assessment, or LCA, is a way to quantify the environmental impact of activities related to processes or products. It is a way of looking at a product or process and evaluating its function, considering both upstream and downstream activities. Often referred to as “cradle to grave,” LCA means evaluating a product or process throughout its life cycle — from the extraction of raw materials, to the manufacture of the product, through the use of the product, to its recycling or ultimate disposal. Sustainability auditing is one way to look at the full impact of your company’s products and services on the environment.

Markets for Carbon Exchanges and Crediting

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Although there is currently no national regulation of carbon emissions in the United States, these emissions are regulated in Europe by the European Union. Voluntary actions and regional regulations in the United States have begun. The Chicago Climate Exchange (CCX) is a voluntary organization whose members pledge to reduce their emissions of greenhouse gases. Launched in 2003, CCX is the world’s first and North America’s only active voluntary, legally binding integrated trading system to reduce emissions of all six major greenhouse gases (GHGs), with offset projects worldwide. Once each member’s emissions are converted into credits that can be bought, sold and traded, CCX will work like any financial market. If participants reduce their greenhouse gas emissions below their target, these institutions can sell their extra carbon credits on the CCX exchange for a profit. If they cannot reach their goals, these institutions can purchase additional credits from others through the exchange. Mandatory controls are being developed in several regions in the U.S. — including California, the Western Climate Initiative, and the Midwestern Greenhouse Gas Reduction Accord — but the most advanced is in the Northeast, where the Regional Greenhouse Gas Initiative (RGGI) has set September 10, 2008 as the date for its first auction of carbon allowances, with compliance beginning January 1, 2009. RGGI has set an initial total carbon budget for the 10 participating states of 188 million tons per year; the initial reserve price for allowances will be $1.86/ton of CO₂.

In the past quarter, forward contracts on CCX have traded between $4/ton and $7.35/ton, and trade at an even higher price in Europe. For more information, visit chicagoclimatex.com or ask a member of SGR’s Sustainability Practice Group how carbon crediting and climate change can work for your company.

The concept of sustainability has numerous implications on how human and business activity should be conducted. This issue of Trust The Leaders explores several areas of human and business activity that are affected by the overriding imperative that those activities be conducted sustainably. SGR’s Sustainability Practice Group is organized around the proposition that businesses and institutions will benefit from legal services and advice focused on the unique issues presented by the business and institutional push toward sustainability.

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Graphics

1. Available at carbonfootprint.com/carbonfootprint.html.
2. Al Gore, An Inconvenient Truth 104-06 (2006).
3. Al Gore, An Inconvenient Truth 253 (2006).