Bill would promote ‘sustainability’ among businesses — but does it mean anything?

DOVER — Home to upward of 1 million business entities, including more than 60 percent of Fortune 500 companies, Delaware is an internationally recognized leader in corporate law and incorporation. Some lawmakers believe the time is ripe for the First State to become a pioneer in “sustainability,” potentially attracting more businesses and even making the world a better place to live.

A broad concept, sustainability can be defined in many ways, but at its core, one influential legislator says, it’s about making a positive impact — or at least not a negative one.

“I think it’s important people understand what global sustainability is, and the best way to describe it is that it’s when an organization, a company or an entity or a nonprofit or a government, when they take the long-term impacts of their actions and their policies into account when they’re making decisions. And that’s what’s really important,” Rep. Melanie George Smith, a Bear Democrat, said last week.

Rep. George Smith is the driving force behind House Bill 310, which would create a program allowing companies to receive certificates testifying to their commitment to sustainability. Sustainability can include paying workers a livable wage or being environmentally friendly, for instance.

The proposal, which passed the House overwhelmingly last month, is aimed at encouraging companies to look beyond profit.

“There’s a big divide in the world right now between people that think corporations, that their fiduciary duties are to their shareholders, to the immediate quarter, right? Do whatever you need to get the best stock price that you can,” Rep. George Smith said.

“And so part of the challenge, and one of the ways you might meet that is by the cheapest inputs you can buy are coming from China, where it’s most likely that it’s being used (by) child labor, right? But guess what: Your bottom line is going to be much better because the inputs are going to be less, which means your margins are going to be greater, so hey, we brought in lots of money.

“Well, is that the kind of world we want to live in? So that’s why there’s this big push from investors and consumers and employees, especially the Millennials, that want to go to work for places that are making a positive impact on the world, not a negative one.

Rep. Melanie George Smith

“And so that’s the key to global sustainability and key to our legislation is we’re tapping into a belief that people have now that value from a corporation has to include its long-term impacts, not just its short-term impacts.”

If the bill passes, a company can for a small fee receive a document testifying it has set goals revolving around sustainability as long as it meets certain criteria. Its board of directors, or a comparative governing body, would have to lay out the company’s standards and how it would judge whether it has met them or not. It would also have to provide on its website a link offering more information and be required to file an application with the Department of State.

What those goals are would be defined by the company, and there would be no penalty from the state for failing to meet them. The certificate would not be a sign that Delaware endorses what a corporation is doing: The state would “not make any kind of substantive judgment whatsoever about whether a company is sustainable,” Rep. George Smith told the Senate Thursday.

Because a corporation’s objectives and its success in meeting them (or failing to do so) would be public, the market would be able to easily assess the entity and whether it is worth supporting, she said.

“A company that is willing to be transparent is inherently saying how committed they are to sustainability,” she noted after a budget hearing last month.

But some have questioned whether the measure actually does anything of importance. The Senate tabled the bill Thursday due to opposition, although Rep. George Smith remains hopeful it will pass before the General Assembly concludes business at the end of the month.

Both Republican and Democratic lawmakers have expressed doubt the program would amount to anything more than companies professing a commitment to sustainability but doing nothing to follow up those claims.

“It looks like we’re rubber-stamping what a corporate order is,” Senate Minority Leader Gary Simpson, a Milford Republican, said during debate Thursday.

Rep. John Kowalko, a Newark Democrat who was one of two people to vote against the bill in the House, said Delaware has little to gain and could see its reputation harmed by the program. Some may perceive the state as officially endorsing a company’s goals and could interpret the certification as Delaware indicating a corporation is sustainable, Rep. Kowalko told his colleagues in the House.

The Delaware State Bar Association and the Delaware State Chamber of Commerce are neutral on House Bill 310.

For her part, Rep. George Smith is confident the bill clearly spells out what the program does and does not do, and she maintains it could be a boon to the state.

Sen. Harris McDowell, a Wilmington Democrat, is onboard. Sen. McDowell, the Senate prime sponsor of the measure, noted the public was able to put pressure on companies that did business in South Africa in the 1970s and ‘80s in protest of apartheid, a practice of state-sponsored discrimination.

“With the internet, these kinds of actions will probably take place very rapidly,” he said.

Rep. George Smith, who is retiring from the General Assembly this year to focus more on her work as a lawyer with Richards, Layton & Finger, denied the bill would have a material benefit for her or her employer. She said she developed the idea after reading about sustainability online and spent two years researching possible legislation that could help Delaware.

“If clients, like any other bill in Delaware, and again, when we do employer-employee legislation, when we do real estate legislation, insurance legislation — I mean, the Legislature basically keeps lawyers in business because every time we legislate, businesses need to know and they need to understand what it is,” she said in response to a question about if the proposal would bring in new clients for Richards, Layton & Finger.

“That’s why a lot of times businesses have their own in-house counsel, frankly, that does that. A lot of them hire lobbyists that explain to them, ‘This is what is going on,’ so they don’t necessarily need to hire lawyers, but then there are going to be some businesses that would prefer to go through a lawyer and not hear from a lobbyist. … But that’s the way that every piece of legislation here works.”

Included in the budget bill, which will likely be voted on by the Senate Wednesday, is language allocating $200,000 for a newly created panel on sustainability. That commission would focus on promoting sustainability in state government and researching “opportunities for sustainable policies and practices that improve community services, including those that cross service areas (such as transportations, land use, education, health, labor force development, and environmental quality) and require coordination and collaboration across levels of government and across public, private and nonprofit institutions.”

The group, Rep. George Smith said, would help Delaware lead by example and may be able to even attract businesses.

If Delaware can lay out a path for companies to focus on becoming more sustainable and provide assistance for them to do so, she said, “Then the big company that comes in to Delaware and brings all the jobs, they would have this local supply chain that’s already sustainable and that’ll make their inputs less expensive, which presumably would then make the cost of their goods less expensive. So, there’s an economic development, a huge economic development pull, to the sustainability commission and making Delaware sustainable.”

Staff writer Matt Bittle can be reached at 741-8250 or mbittle@newszap.com. Follow @MatthewCBittle on Twitter.

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