General – Page 2 – Sustainability, Resiliency and Risk Mitigation

April 27, 2023 by Brad A. Molotsky

Plastic Bag Bans – Do They Work?

According to an article in the Philadelphia Inquirer per a report issued by the City of Philadelphia (the “City”), the City’s 2019 plastic bag ban has resulted in a significant reduction in the use of plastic bags – i.e., the equivalent of filling Philadelphia City Hall with plastic bags every 8 months which would be approximately 200 Million less plastic bags. The City’s report – “Evaluating the Ban: Philadelphia’s Plastic Bag Ban and Changes in Bag Usage in the City” (the “Report”) focused on 2021 to 2022, was conducted by the University of Pittsburgh and Swarthmore College and, concluded that the ban significantly reduced plastic bag use in the City.

Click on this link for a copy of the Report. extension://elhekieabhbkpmcefcoobjddigjcaadp/https://www.phila.gov/media/20230426164234/PlasticBagBanReport-1.pdf#:~:text=We%20used%20a%20difference-in-difference%20approach%20to%20estimate%20the,clear%20boundary%20between%20the%20regulated%20and%20unregulated%20areas.

The City’s ban was passed by City Council in 2019 and took effect on July 1, 2021. It prohibits retailer from providing single use plastic bags and paper bags not made of at least 40% recycled material.

Per the Inquirer, 16 other municipalities in Pennsylvania have some sort of plastic bag ban, including Cheltenham, Radnor, Haverford, Media and Pittsburgh. Cheltenham’s ordinance was recently adopted earlier this week and regulates single use plastic bags, including restaurants’ use of such bags.

The Report concluded that in each category improvement was shown in both the City and the suburbs by way of reusable bag use and reduction of plastic bag use (i.e., proportion using any plastic bag (down), proportion using any paper bag (up) , proportion using any recycled bag (up), proportion using no bag (up), number of plastic bags used per customer (down), number of paper bags used per customer (up) and number of reusable bags used per customer (up)).

As hoped for, the ban resulted in a 53% reduction in the likelihood of a consumer using a plastic bag.

Across the bridge in New Jersey, the State enacted the Single Use Waste Reduction Act in May, 2022 which banned plastic bags and foam food containers and built off of an earlier plastic straw ban which went into effect in 2021. Bags in NJ used to wrap uncooked meat, fish or poultry; bags used to package loose items; and bags used to carry live animals are all exempt from the ban. Residents continue to be frustrated, per recent polling, with the inclusion of a ban on paper bags which are not permitted to be handed out or sold at big box stores and grocery stores larger than 2,500 feet in size. The NJ ban also includes carry out and to go styrofoam cups, plates and to go containers .

Take Aways – it appears pretty clear that behavior can be changed via regulation and that the ban on the use of single use plastic bags and similar products is, in fact, reducing the among of these bags in the waste stream and in common usage without a real negative effect other than some convenience by consumers. Like many things these days, not all municipalities or States will pursue this avenue as a means to reduce dependence on plastics which tend to find their way into our water ways and waste streams, but those that do pass such bans are seeing a marked decrease in the use of these products.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information or if you have any questions about this post, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

April 17, 2023 by Brad A. Molotsky

The SEC and its continued focus and enforcement of “Greenwashing” by Alek Smolij

The U.S. Securities and Exchange Commission (SEC) has positioned itself as one of the United States’ leading government regulators on environmental, social, and governance (ESG) issues and in 2023 has continued a pattern of active enforcement actions focusing on their perceived view of ESG misconduct.

The underpinning of these actions has its roots in various places, including those that occurred on March 4, 2021, when the SEC announced the creation of a “Climate and ESG Task Force” in its Division of Enforcement, to focus on ESG-related gaps and misstatements in disclosures by publicly-traded companies, mutual funds, and other investment vehicles.

One of the SEC’s main enforcement focuses is “greenwashing,” a term that describes when a publicly-traded company, mutual fund, or other public investment vehicle makes a misleading claim about its ESG policies or credentials. For instance, some mutual funds may market themselves as an “environmentally-friendly” energy fund but have a relatively small amount of investor funds invested in renewable energy sources. Critics of the current regulation regime have asserted that many investment vehicles mislead investors with terms like “green,” “carbon-neutral,” and “environmentally-friendly.” These broad terms, critics say, are not adequately defined and may convince investors to direct their money to funds that the investors believe align with ESG values when the funds themselves are not actually evaluating whether their investments are in line with such values.

In late March 2022, the SEC’s Division of Examinations used the term “greenwashing” in its 2022 Examination Priorities to describe certain activities that the SEC would be paying particular attention to in the coming months The SEC noted that it would focus on whether public investment vehicles are “overstating or misrepresenting the ESG factors considered or incorporated into portfolio selection (e.g., greenwashing), such as in their performance advertising and marketing.”

The SEC proposed new greenwashing-focused rules in 2022 that would strengthen the Division of Enforcement’s ability to fight against misleading ESG disclosures. In August 2022, after a public comment period, the SEC’s commissioners voted 3-to-1 to move forward with proposed climate disclosure ESG-focused rules. These rules focus on both publicly-traded companies and investment advisors and funds. Under these climate disclosure rules (expected to be made final in April, 2023), publicly-traded companies are required to include certain climate-related disclosures in their public filings. Further, these rules will require investment advisors and funds who associate their investments with ESG to provide specific disclosures about how they pursue ESG strategies in their investments.

While these rules are still pending and have not yet been finalized, the Division of Enforcement has continued its focus on greenwashing enforcement efforts without even having the benefit of these proposed rules.

The SEC has publicly announced various settlements in the banking space and in the manufacturing space involving tens of millions of dollars in agreed-upon penalties in multiple enforcement actions focused on greenwashing. These actions have focused on SEC investigations of internal policies governing mutual funds and investment strategies branded as ESG investments.

The ESG task force has also investigated and charged companies whom the SEC found were not adequately disclosing environmental-related risks. The SEC has, for instance, settled a charge with a mining company related to failure to disclose the financial risks of mercury contamination of a river located near a Brazilian mine.

Through these actions, the SEC has indicated that it will target companies whose policies do not adequately ensure that these investment products align with stated goals of investing in ESG-focused products. Further, the SEC is keeping a close eye on required disclosures by public companies as these disclosures relate to ESG risks and issues that companies may be required to communicate to investors. The SEC undertook these enforcement efforts under existing securities laws and regulations without final passage of the proposed ESG-focused climate disclosure rules mentioned above.

Clearly, the SEC is not waiting for final climate disclosure rules to hone in on greenwashing practices, and the proposed climate disclosure rules will only strengthen the SEC’s ability to engage in similar investigations and enforcement actions.

The Division of Examination’s 2023 Examination Priorities do not explicitly use the term “greenwashing,” but they indicate that the SEC will continue to focus on enforcement actions against companies that engage in this practice. The 2023 Priorities state that the SEC will examine “whether ESG products are appropriately labeled and whether recommendations of such products for retail investors are made in investors’ best interests.” This language indicates that greenwashing-focused enforcement is clearly still a priority for the SEC, especially when paired with the SEC’s proposed new rules requiring ESG climate disclosures.

The SEC’s focus on greenwashing means that organizations associating themselves or their investments with ESG objectives should assess whether their actions line up with their stated ESG efforts and whether their disclosure matches what their records show and whether they are measurable, verifiable and provable statistics and data. Regular auditing of ESG programs, company disclosure, ESG reporting and comprehensive ESG strategy planning could help avoid a costly SEC enforcement action.

Note, we have also published on the Federal Drug Administrations renewed focus on “Greenwashing” in an early post on our blog where we documented the renewed FDA focus in the area of cosmetics and other products and issued additional guidance on greenwashing in the context of utilization of words such as “natural”, “free (of)”, “eco-friendly”, “Cruelty Free”, “renewable” and “sustainable”.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information or if you have any questions about this post, please contact Alek Smolij (the author), Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

April 12, 2023 by Duane Morris

Two Proposed EPA Rules Could Dramatically Increase Electric Vehicle Sales

On April 12, 2023, the EPA announced two proposed vehicle emission rules aimed to accelerate the transition to electric passenger and commercial vehicles.

The proposed standards do not require that manufacturers produce a certain number of electric vehicles, but instead set forth limits on greenhouse gas emissions that manufacturers must comply with for particular vehicle fleets. The EPA predicts such standards will result in a dramatic increase in new electric vehicle sales.

Read the full story on the Duane Morris LLP website.

April 12, 2023 by Brad A. Molotsky

NJ Legislature Passes Flood Warning Requirements for Leases and the Sales of Real Property – Applies to both Commercial and Residential Property

Earlier this week, New Jersey lawmakers passed SB 3110, a bill (the “Bill”) that would require Landlords and Seller of commercial and residential Real Estate to warn prospective tenants and buyers about previous flooding on various types of properties.

SB 3110 has been sent to NJ Governor Murphy for review and execution and will need implementing regulations from the New Jersey Department of Community Affairs (NJDCA) that are anticipated within 90 days of passage of the Bill.

SB 3110 requires that both Sellers and Landlords disclose whether a property is located in a 100-year floodplain or 500-year floodplain, as determined by the Federal Emergency Management Agency (FEMA).

The Bill mandates that NJ Department of Environmental Protection (NJDEP) create a user-friendly website where landlords, owners, tenants and buyers can check whether a property is in a flood zone or at risk of flooding in the future.

NJDCA will also be charged with developing a standard notice for landlords and owners to fill out to disclose whether a flood risks exist.

Note, that, under SB 3110, a tenant who experiences “substantial flood damage” but whom wasn’t properly notified by a landlord of the risk of such a flood, could terminate a lease and sue to recover damages,. “Substantial Flood Damage” is defined as damages of at least 5 months rent worth of damage.

Some of the questions the disclosure form will likely address include:

Is any or all of the property located wholly or partially in the Special Flood Hazard Area (“100-year floodplain”) according to FEMA’s current flood insurance rate maps for your area?
Is any or all of the property located wholly or partially in a Moderate Risk Flood Hazard Area (“500-year floodplain”) according to FEMA’s current flood insurance rate maps for your area?
Is the property subject to any requirement under federal law to obtain and maintain flood insurance on the property?
Have you ever received assistance, or are you aware of any previous owners receiving assistance, from FEMA, the U.S. Small Business Administration, or any other federal disaster flood assistance for flood damage to the property?
Is there flood insurance on the property?
Is there a FEMA elevation certificate available for the property? If so, the elevation certificate must be shared with the buyer.
Have you ever filed a claim for flood damage to the property with any insurance provider, including the National Flood Insurance Program? If the claim was approved, what was the amount received?
Is any or all of the property located in a designated wetland?
Has the property experienced any flood damage, water seepage, or pooled water due to a natural flood event, such as heavy rainfall, costal storm surge, tidal inundation, or river overflow? If so, how many times?

Some of these questions are contained within the Bill and others are likely the subject of DCA’s form creation to address the disclosure obligation if SB 3110 is signed into law.

Parting Thoughts – Given New Jersey’s past history in the last decade with hurricanes and increasing flooding and given that New Jersey has been assigned a grade of an F by the NRDC in connection with its flood disclosure policies, it should come as no real surprise that the legislature is moving to attempt to address this type of tenant and buyer of real property risk and provide for a more informed purchase/leasing process.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG questions, planning and initiatives. We would be happy to discussion your proposed project and how this DOE funding prize might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Alice Shanahan, Jeff Hamera, Nanette Heide, Jolie-Anne Ansley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

April 5, 2023 by Brad A. Molotsky

5th Circuit Court of Appeals – Dismissal and Vacation of Lower Court Ruling – the Social Cost of Greenhouse Gas is Back in Action

In January, 2021, the Biden Administration issued Executive Order 13990 (“EO”) which re-established an interagency working group (the “Working Group”) in order to formulate guidance on the “social cost of greenhouse gases“. The EO directed the Working Group to publish dollar estimates quantifying changes in carbon, methane and nitrous oxide emissions for consideration by all federal agencies when policy making.

Since 2021, the working group has published their Interim Estimates which were based largely on findings of their predecessor Working Group which was established during the Obama Administration.

Various State Attorneys General from Louisiana, Alabama, Florida, Georgia, Kentucky, Mississippi, South Dakota, Texas, West Virginia and Wyoming (the “Plaintiff States“) challenged the EO and the Interim Estimates as procedurally invalid, arbitrary and capricious and obtained a preliminary injunction in the Western District Court of Louisiana.

The 5th Circuit concluded that the Plaintiff States did NOT establish standing to bring such a claim, and, as such, dismissed their action for lack of jurisdiction and vacated the lower courts preliminary injunction. The court indicated that the Plaintiff States failed to meet their burden to prove standing as they did not show an injury in fact. With this ruling, the Working Group and the Interim Estimates may now be used by various federal agencies as part of their analysis and policymaking.

For more than a decade, federal agencies have considered the effect of greenhouse gas emissions (along with a host of other variables) in their cost benefit analysis in determining whether to and the cost of implement various regulations. As the Court pointed out, before proposing any significant action, federal agencies are required to assess the costs and benefits of the regulation and submit to the Office of Management and Budget their assessment for review.

In 2009, the Obama Administration established the original working group to develop a transparent and defensible method, designed for the federal rulemaking process, to quantify the social costs of greenhouse gases. In 2017, after years of work and research, this group derived estimates from peer-reviewed models for translating emissions into dollar costs. Their findings were the subject of public notices and comments and were peer reviewed by the National Academies of Science, Engineering and Medicine.

Later in 2017, the Trump Administration disbanded the prior working group and its work product withdrawn from federal agencies, but these federal agencies were not barred from “monetizing the value of changes in greenhouse gas emissions resulting from proposed regulations.” In ohter words, the agencies were not mandated to include the Interim Estimates BUT they were still permitted to include greenhouse gas emissions and their impact in the agencies’ recommendations. The result of the disbanding of the working group was that instead of utilizing a coordinated approach across all agencies, each agency was left to its own devices in determining how and whether to score green house gas emissions in preparing its cost benefit analysis for a given regulation.

In early 2021, under the Biden Administration, the Working Group was reconvened under EO 13990 and re-tasked with developing Interim Estimates that would be “appropriate and consistent with applicable law.” When the applicable federal agency relies on the Interim Estimates to justify a final action, the court noted that the agency “must respond to any significant comment on those estimates and ensure it analysis” is “not arbitrary or capricious”.

Although some could characterize the Court’s ruling as a bit of legal “in the weeds” arguments over standing and injury, the crux of the court’s ruling hinged on the fact that the “EO 13990 does NOT require any action from federal agencies”. Agencies are required to exercise discretion in conducting their cost benefit analysis and deciding whether or not to use the Interim Estimates. If used, “the Interim Estimates are required by the EO to be appropriate and consistent with applicable law.” The Court further noted that “nothing in EO 13990 requires States to implement the Interim Estimates.”

Parting Thoughts – activism by the Plaintiff States Attorneys’ General is on the rise in the ESG arena and is evident in various articles and actions being taken to oppose various ESG and environmentally focused regulations. It is likely that this activism continues and that further ESG focused programs in investments arena and in disclosure of the impacts of climate change (like the proposed SEC Rules on Climate Change Disclosure which are supposed to be announces as final this month) continue to be called into question by these Plaintiff States. We will continue to monitor and report on these developments as they occur and are here if we can be helpful to you in your analysis on how they might affect your operations, your businesses or you.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how this DOE funding prize might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Alice Shanahan, Jeff Hamera, Nanette Heide, Jolie-Anne Ansley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

April 4, 2023 by Brad A. Molotsky

The Biden Administration and the ESG Investment Rule Congressional Veto

In late March, 2023, President Biden issued the first veto of his Administration. The veto overturned a Republican led measure that was seeking to overturn a Department of Labor retirement plan rule.

Pretty wonky stuff you say?

The Republican measure was designed to overturn a Labor Department rule that would allow (note the word allow, NOT mandate) retirement plan managers to consider climate change in making their investment decisions.

Sounds like some double speak there doesn’t it? The Department of Labor rule was enacted to “permit” investment managers to consider climate change in making decisions. The rules did NOT require this consideration, rather, it permitted it at the discretion of the investment manager.

Congress (in a House vote of 216-204 mostly along party lines and a Senate vote of 50-46 with Democratic Senators Manchin and Tester voting with their Republican colleagues,) voted to overturn the Department of Labor Rule – effectively saying, investment managers should NOT be permitted to consider what some view as relevant information in making an informed decision (e.g., if an area floods daily, should one invest in an asset located there or instead invest where there is not a flooding risk; alternatively, if an area is prone to forest fire risk vs. an area that is not prone to this type of risk, should a manager be able to consider this if they think it relevant?).

The Administration took issue with the overturned Labor Department rule and opted to veto the Congressional restriction on being able to consider climate change in investment manager decisions. Again, as noted above, the Labor Department Rule does NOT require every or any investment manager to consider climate change in their investment decisions, instead it enables these managers to choose how they view climate change, and if they believe climate change to be a relevant factor in making an investment decision, to take it into account when making their decision.

This is likely the first of many such skirmishes to come on the ESG front and its use as a tool or a hammer, depending on your perspective, in making decisions.

Parting Thoughts – if you are an investor looking to deploy your investment dollars, the question is whether you think your investment advisor should be able to (without being required to) take into account climate factors when making investment suggestions to you or not. How and whether resiliency, climate factors, resource allocation and applicable risk mitigation is permitted or mandated into future investment decisions are some of the areas where it is highly likely that additional political party skirmishes will occur.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how this DOE funding prize might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Alice Shanahan, Jeff Hamera, Nanette Heide, Jolie-Anne Ansley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

April 3, 2023April 3, 2023 by Rebecca Green

ESG and the Growing Interplay with Class Action Lawsuits

The plaintiffs’ class action bar is exceedingly innovative and in constant pursuit of “the next big then” insofar as potential liability is concerned for acts and omissions of Corporate America. Environmental, Social, and Governance – known as “ESG” – each of the verticals within ESG are surely are topics on the mind of leading plaintiffs’ class action litigators. As ESG-related issues evolve and become increasingly more important to corporate stakeholders, class action litigation against companies is inevitable and has already begun to take shape. This blog post reviews the current landscape of litigation risks, and underscores how good corporate compliance programs and corporate citizenship are prerequisites to minimizing risk.

The Class Action Context:

In 2022, the plaintiffs’ class action bar filed, litigated, and settled class actions at a breathtaking pace. The aggregate totals of the top ten class action settlements – in areas as diverse as mass torts, consumer fraud, antitrust, civil rights, securities fraud, privacy, and employment-related claims – reached the highest historical totals in the history of American jurisprudence. Class actions and government enforcement litigation spiked to over $63 billion in settlement totals. As analyzed in our Duane Morris Class Action Review https://blogs.duanemorris.com/classactiondefense/2023/01/04/it-is-here-the-duane-morris-class-action-review-2023/, the totals included $50.32 billion for products liability and mass tort, $8.5 billion for consumer fraud, $3.7 billion for antitrust, $3.25 billion for securities fraud, and $1.3 billion for civil rights.

As “success begets success’ in this litigation space, the plaintiffs’ bar is loaded for bear in 2023, and focused on areas of opportunity for litigation targets. ESG-related areas are a prime area of risk.

The ESG Context

Corporate ESG programs is in a state of constant evolution. Early iterations were heavily focused on corporate social responsibility (or “CSR”), with companies sponsoring initiatives that were intended to benefit their communities. They entailed things like employee volunteering, youth training, and charitable contributions as well as internal programs like recycling and employee affinity groups. These efforts were not particularly controversial.

In recent years, ESG programs have become more extensive and more deeply integrated with companies’ core business strategies, including strategies for avoiding risks, such as those presented by employment discrimination claims, the impacts of climate change, supply chain accountability, and cybersecurity and privacy. Companies and studies have increasingly framed ESG programs as contributing to shareholder value.

As ESG programs become larger and more integrated into a company’s business, so do the risks of attracting attention from regulators and private litigants.

And The Lawsuits Begin From All Quarters:

While class action litigation can emanate from many sources, four areas in particular are of importance in the ESG space.

Shareholders: Lawsuits by shareholders regarding ESG matters are accelerating. Examples include claims that their stock holdings have lost value as a result of false disclosures about issues like sexual harassment allegations involving key executives, cybersecurity incidents, or environmental disasters. Even absent a stock drop, some shareholders have brought successful derivative suits focused on ESG issues. Of recent note, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies. In its ruling https://blogs.duanemorris.com/classactiondefense/2023/01/30/delaware-says-corporate-officers-are-now-subject-to-a-duty-of-oversight-in-the-workplace-harassment-context/ in In Re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Delaware Court of Chancery determined that like directors, officers are subject to oversight claims. The ruling expands the scope of the rule established in the case of In Re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), which recognized the duty of oversight for directors. The decision will likely result in a flurry of litigation activity by the plaintiffs’ bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment.

Vendors and Business Partners: As companies face increasing demands to address ESG issues in their operations and throughout their supply chains, ESG requirements in commercial contracts are increasing in prevalence. Requirements imposed on vendors, suppliers, and partners – to ensure their operations do not introduce ESG risks (e.g., by using forced or child labor or employing unsustainable environmental practices) are becoming regular staples in a commercial context. In addition, as more companies report greenhouse gas emissions – and may soon be required by the SEC to report on them – they increasingly require companies in their supply chain to provide information about their own emissions. Furthermore, if the SEC’s proposed cybersecurity disclosure rules are enacted, companies also may require increased reporting regarding cybersecurity from vendors and others. These actions – and disclosures – provide fodder for “greenwashing” claims, where consumers claim that company statements about environmental or social aspects of their products are false and misleading. The theories in these class actions are expanding by encompassing allegations involving product statements as well as a company’s general statements about its commitment to sustainability.

State Consumer Protection and Employment Laws: The patchwork quilt of state laws create myriad causes of action for alleged false advertising and other misleading marketing statements. The plaintiffs’ bar also has invoked statutes like the Trafficking Victims Protection Reauthorization Act to bring claims against companies for alleged failures to stop alleged human rights violations in their supply chains. These claims typically allege that the existence of company policies and programs aimed at helping end human rights violations are themselves a basis for liability. In making human capital management disclosures a part of ESG efforts (including whether to disclose numeric metrics or targets based on race or gender), companies may find themselves in a difficult place with respect to potential liability stemming from stated commitments to diversity and inclusion. On the one hand, companies that fail to achieve numeric targets they articulate (e.g., a certain percent or increase in diversity among management) may subject themselves to claims of having overpromised when discussing their future plans. Conversely, employers that achieve such targets may face “reverse discrimination” claims alleging that they abandoned race-based or gender-neutral employment practices to hit numbers set forth in their public statements.

Government Enforcement Litigation: Federal, state and local government regulators have taken multiple actions against companies based on their alleged contributions to climate change or alleged illegal activities. For instance, in 2019, the U.S. Department of Justice investigated auto companies for possible antitrust violations for agreeing with California to adopt emissions standards more restrictive than those established by federal law. While the investigation did not reveal wrongdoing, it underscores the creativity that proponents and opponents of ESG efforts can employ.

Implications For Corporate America:

The creation, content, and implementation of ESG programs carries increasing litigation risks for corporations but it is unlikely that ESG progams will diminish is size or scale in the coming years given increased focus by Fortune 100s and 500s and increased regulation at the federal and state levels.

Sound planning, comprehensive legal compliance, and systematic auditing of ESG programs should be a key focus and process of all entities beginning or continuing their ESG journey. As more and more companies adopt some level of corporative ESG strategy planning, compliance and auditing are some of the key imperatives in this new world of exposure to diminish and limit one’s exposure.

Duane Morris has an active Class Action Team to help organizations respond to the ever increasing need to be proactive to these types of risks. For more information or if you have any questions about this post, please contact Gerald (Jerry) L. Maatman, Jennifer Riley or the attorney in the firm whom you are regularly in contact with. We also have ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information or if you have any questions about this post, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

February 10, 2023 by David Amerikaner

Innovative New Jersey Low-Carbon Concrete Law Could Jumpstart Infrastructure Decarbonization Nationwide

Recently enacted legislation in New Jersey to encourage the use of low-carbon concrete in state-funded construction projects could not only yield significant reductions in the carbon footprint of Garden State bridges, sidewalks, and foundations, but could be used as a model by other states and the federal government.

The law, known as the Low Embodied Carbon Concrete Leadership Act (LECCLA) (S-287), offers tax incentives for producers who supply state projects with concrete containing reduced quantities of embodied carbon. As a first step, the New Jersey Department of Environmental Protection (NJDEP) will publish rules establishing baseline embodied carbon quantities for concrete. Beginning in 2024, concrete producers who supply at least 50 yards of concrete to state-funded projects and whose product contains less embodied carbon than the baseline will be eligible for corporation business tax (CBT) credits of up to 8 percent of the total cost of the contract.

Several means of reducing embodied carbon in concrete are incentivized by the law. Producers can obtain tax credits of up to 5 percent by reducing embodied carbon in concrete by: (i) improving energy efficiency at the cement plant or concrete plant stages; (ii) substituting low carbon fuels for carbon-intensive fuels at the cement plant or concrete plant stages; (iii) using locally sourced ingredients in concrete mixes, reducing transportation-related emissions; (iv) reducing cement content in concrete mix by substituting materials such as fly ash, slag, or recycled ground-glass pozzolan (collectively known as supplementary cementitious materials, or SCMs), to reduce the quantity of emissions-intensive cement in the mix; (v) capturing and storing point source carbon emissions during the cement plant or concrete plant stages; or (vi) utilizing and storing carbon in concrete. An additional 3 percent tax credit will be available to producers who use carbon capture utilization and storage (CCUS) technology in the concrete manufacturing process. The two tax credits can be combined.

Concrete producers will need to submit verified Environmental Product Declarations (EPDs) for the concrete they supply to state projects in order to become eligible for the tax credits. EPDs are measurements of the life cycle environmental attributes of a particular product, in this case total carbon emissions, using an ISO-published methodology.

Because of the low margins in the highly competitive concrete industry, producers may be able to take advantage of any cost savings generated by these tax credits to pass along lower bids to project proponents, and thereby win additional business. Companies that invest in carbon-reducing practices, such as increasing use of SCMs in their mixes, switching to cement produced using lower carbon fuels or at plants employing CCUS technology, or finding suppliers in closer proximity to their ready-mix plants, will have a significant advantage over companies that are slower to act. Investment in carbon reduction will, potentially, become an essential catalyst to staying competitive in the market.

The tax credit system is also uniquely designed to stay ahead of the curve. NJDEP has the power to shift the concrete carbon baseline lower, thereby forcing producers to bring embodied carbon levels down even further to continue to qualify for the full tax incentives over time. The approach in New Jersey goes further than the federal Buy Clean initiative, which sets embodied emissions benchmarks for various materials that federal project suppliers must meet to be considered for federal contracts. In New Jersey, suppliers must bring embodied emissions below the threshold in order to qualify.

One criticism is that the state has only allocated $10 million in tax credits per year to qualifying companies, and no producer may win more than $1 million in credits in any year. But the law will do its job if it succeeds in nudging the concrete industry toward a lower carbon norm.

Many stakeholders hope, and some even predict, that the New Jersey approach will be quickly adopted by other states. Neighboring New York has been studying a low-carbon concrete program and is set to consider legislation in the coming months. Now that New Jersey has acted first, many hope that New York will also opt for an incentive-based approach that could rework the economics of concrete production in the Empire State. Other states, such as California, could also consider the model in the coming years. Of course, the biggest prize would be the federal government, which is one of the biggest concrete procurement entities in the world and could radically reshape the industry if it adopted an incentive-based model for carbon reduction.

The New Jersey program also arrives just as municipalities across the nation, including New York, Boston, Chicago, Seattle, and others, are implementing programs to reduce carbon emissions from their built environments. Broad availability of low-carbon concrete would improve the emissions profiles of many buildings and their supporting infrastructure if widely adopted, and cities would be wise to consider incentive programs similar to New Jersey’s in order to put this technology into wider use.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information or if you have any questions about this post, please contact David Amerikaner, Sheila Raftery Wiggins, Brad A. Molotsky, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

January 18, 2023 by Brad A. Molotsky

Department of Energy – $22M in Funds available under the Buildings Upgrade Prize

Earlier this week, the Department of Energy (“DOE”) announced $22 Million Dollars in prize money availability under a new program entitled “The Buildings Upgrade Prize” or “Buildings UP“.

According to the DOE, the Buildings UP program is designed to accelerate the transformation of U.S. buildings into energy-efficient and clean energy-ready homes, commercial spaces, and communities

The Buildings Upgrade Prize is offering more than $22 million in cash prizes and technical assistance to teams across America with winning ideas to accelerate widespread, equitable energy efficiency and building electrification upgrades.

According to Alejandro Moreno, Acting Assistant Secretary for Energy Efficiency and Renewable Energy, “We have a once-in-a-generation opportunity to leverage billions of dollars in funding available through the Bipartisan Infrastructure Law, the Inflation Reduction Act, utility rebate programs, and many other sources to upgrade our existing buildings and help address climate change”.

Per DOE’s press release, proposed solutions can be varied and may include adoption of efficient electric equipment and appliances, including heat pumps and heat pump water heaters, as well as enhanced building efficiency through measures such as insulation and air sealing. Together, these efforts should help reduce carbon emissions and energy costs while improving indoor air quality and occupant comfort.

In Phase 1 of Buildings UP, teams are required to submit ideas for innovative concepts to increase building energy upgrades, choosing to enter one of two pathways: “Equity-Centered Innovation” or “Open Innovation.”

Winning “Equity-Centered Innovation” teams, focused on delivering upgrades to low- and moderate-income homes; small, disadvantaged businesses; and other equity-eligible buildings, will receive $400,000 in cash.

Winning “Open Innovation” teams will receive $200,000 in cash. Winners from both pathways will also receive expert technical assistance and coaching to help bring their ideas to life.

Community-based organizations, state and local governments, Indian tribes, building owners, utilities, nonprofit organizations, energy efficiency program implementers, and other organizations are encouraged to team up and apply.

Phase 1 opens for submissions on February 18, 2023.

Separately, up to 50 Application Support Prizes of $5,000 and 10 hours of technical assistance are available to help new and under-resourced teams complete Phase 1 applications.

The Application Support Prize opens for submissions on Jan. 18, 2023, and will be awarded on a rolling basis until funds are expended.

Buildings UP is administered by the National Renewable Energy Laboratory and is part of the American-Made program, which fast-tracks innovation through prizes, training, teaming, and mentoring. Teams competing in Buildings UP will have access to the American-Made Network, connecting the nation’s entrepreneurs and innovators to America’s national labs and the private sector. Mentoring, tools, resources, and support through the American-Made Network help accelerate the transition of ideas into real-world solutions to achieve clean energy goals.

Buildings UP was developed and funded by the U.S. Department of Energy Building Technologies Office as part of its overall mission to reduce the carbon footprint of the U.S. building stock while maintaining or improving affordability, comfort, and performance.

Phase 1 submissions are due by July 18, 2023.

Parting Thoughts – if you are an owner of a building or a community-based organization, state and local government entity, an Indian tribe, a utility a nonprofit organizations or an energy efficiency program implementers, now is the time to dust off your thinking cap and team with others who can be helpful to apply for these grant funds. Real money available to assist along with technical know how – what do you have to lose.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how this DOE funding prize might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Alice Shanahan, Jeff Hamera, Nanette Heide, Jolie-Anne Ansley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

January 12, 2023 by Duane Morris

Investments in Clean Buildings Announced by New York Governor

On the Duane Morris Construction Law Blog, attorney Jose A. Aquino writes that:

New York Governor Kathy Hochul announced new investments in clean and efficient buildings. As part of her 2023 State of the State, Governor Hochul introduced a series of building decarbonization initiatives, including zero-emission for new construction and the phase out of the sale of new fossil fuel heating equipment.

Read the full post.