Government Entrepreneurs: Incentivizing Sustainable Businesses as Part of Local Economic Development...

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chapter two

Government EntrepreneursIncentivizing Sustainable Businesses as Part of Local Economic Development Strategies

Jonathan Rosenbloom

Introduction

Local governments are suffocating in growing deficits, shrinking revenues, and sky-

rocketing costs. They are faced with a boundless list of social and economic afflictions,

such as high rates of foreclosures and unemployment. Unlike the federal government,

local governments must annually balance their budgets and are prohibited from carry-

ing a deficit forward.1 Some local governments have struggled under the weight of the

current crisis, missing bond payments and contemplating bankruptcy.2 In the midst

of this tempest, local governments search for economic development strategies to

increase revenues, create jobs, and tap into federal stimulus funding.3

Traditional economic development incentives, such as tax abatements and favor-

able loans, were designed almost 40 years ago. They were a creative attempt to increase

employment opportunities and the local tax base during the 1970s recession and stag-

flation (a stagnant or nondeveloping economy combined with inflation).4 The incen-

tives provided public funds or reduced taxes to encourage the private sector to locate to

a particular area. The incentives sought to attract private sector investment by concen-

trating on enhancing the financial bottom line by reducing the cost of doing business in

The author thanks Drake University Law School Professor Jerry Anderson and Drake University Assistant

Professor of International Business Matthew C. Mitchell for their helpful comments, and Drake University

Law School student Benjamin Kleinjan for his research assistance.

hir84274_02_ch02_019-042.indd 19hir84274_02_ch02_019-042.indd 19 3/26/12 2:41 PM3/26/12 2:41 PM

kerosl

Text Box

From Greening Local Government (Keith H. Hirokawa & Patricia E. Salkin eds., 2012), available for purchase at www.ShopABA.org. Copyright © 2012 by the American Bar Association. Reprinted by permission.

20 Jonathan Rosenbloom

the area. In return, it was hoped that the private sector would create jobs and increase

local government revenues.

While the methods used to attract private sector investment have remained almost

the same for the past 40 years, the private sector itself is changing. A small but rapidly

growing segment has reconceptualized the purpose of a for-profit business. A new por-

tion of the private sector is no longer narrowly focused on the financial bottom line

to the exclusion of other concerns and impacts. An emerging new economic model

generates profit, value, and marketability in fostering sustainable business strategies,

focusing equally on economic profitability, environmental friendliness, and social

responsibility.5

In the face of this evolution, local governments can attempt to force the existing

economic development incentives onto a private sector that looks markedly different

from the one that spawned the incentives 40 years ago. Alternatively, local governments

can rethink the traditional economic development incentives and the manner in which

they are employed to better achieve local objectives. They can diversify local economic

development strategies to include incentives that are more applicable to sustainable

businesses and that more effectively revitalize localities.

The next section of this chapter, Traditional Economic Development Strategies,

briefly reviews the creation of economic development incentives and their traditional

application today. The section titled Emerging Sustainable Businesses investigates the

growing desire and market for sustainable businesses. The following section, titled Eco-

nomic Development Meeting the Needs of Sustainable Businesses, questions whether

local governments can and should redesign economic development strategies to maxi-

mize the opportunities presented by the growth in sustainable businesses. In particu-

lar, it notes that: (1) sustainable businesses, products, and services are often outpacing

their peers; (2) sustainable businesses provide long-term economic, environmental, and

social benefits consistent with local government objectives to provide for the health,

safety, and welfare of citizens; and (3) the move to sustainable businesses is a funda-

mental shift in the private sector in which traditional economic development incen-

tives are insufficient. The section continues with steps local governments may take to

directly incentivize sustainable businesses by increasing the sustainability of the incen-

tives themselves, including a performance-based economic development strategy, and

to indirectly encourage the development of sustainable businesses by helping to facili-

tate a market for their products.

Traditional Economic Development Strategies

The news concerning the economic vitality of local governments has been grim for the

past few years.6 As the economic downturn in the private sector unfolded from 2007

to 2009, the public sector, including local governments, experienced the ripple effect.

Toward the third and fourth quarters of 2008, local government revenues tied to mar-


Chapter 2: Government Entrepreneurs 21

kets hit hard by the declining economy, including the real estate and financial markets,

nosedived.7 Simultaneously, local government costs rose abruptly and precipitously.8

The result was massive local government budget deficits.9

Some of the first local governments to realize the enormity of their budget deficits

were those hit by the declining housing market. Cities in states such as Arizona, Flor-

ida, and Nevada “suffered an epidemic of foreclosures. As prices plunged and buyers

disappeared, revenues from sources as diverse as development fees and sales taxes . . .

dropped.”10 Shortly thereafter, states such as New York, New Jersey, Delaware, and Con-

necticut also suffered massive drops in revenue, this time tied to Wall Street.11

As we emerge from the recession,12 local governments across the country face the

gargantuan and daunting task of reducing budget deficits and costs while increas-

ing revenue and creating jobs. Faced with this financial dilemma, local governments

have implemented a variety of approaches, including increasing revenue through rais-

ing taxes and user and regulatory fees, and reducing expenses by lowering the num-

ber of employees, the types of services, and employee salaries and benefits. While these

approaches have led to varying success, positive economic development is essential for

most local governments. When successful, economic development may provide higher

employment and retention, economic stability, improved public services, and increased

property values. When unsuccessful, it may result in larger deficits, economic instabil-

ity, increased taxes, reduced services, and long-term financial burdens.

The economic development incentives local governments have at their disposal

today are a direct extension of those incentives created almost 40 years ago, when the

postwar economic development boom ended. Prior to the 1970s, few local governments

were providing incentives to attract businesses to their jurisdiction. A confluence of

events, including the 1973 oil crisis, the 1973–74 stock market crash, and the rapid loss

of manufacturing jobs, hit local economies and governments particularly hard.

With unemployment rates continuing to soar through the 1970s,13 state govern-

ments authorized local governments to use economic development incentives to attract

businesses. Some state statutes limited or controlled how local governments could go

about attracting businesses,14 while others gave broad authority to act so long as there

was a showing of “economic development,” which often translated into job creation

and/or revenue generation.15 Texas, for example, gave broad local authority for one

economic development method—favorable loans—so long as it “serve[d] the purpose

of promoting state or local economic development by stimulating business and commer-

cial activity within the city.”16 The objective behind these state statutes was clear—local

governments were authorized to attract the private sector by enhancing the private

sector’s financial prospects in the form of direct financial gains.17 The statutes gave

little concern as to how and whether the private sector actually created jobs and gener-

ated local government revenue.18

Based on these statutes, local governments were authorized to adopt strate-

gies encouraging a narrow definition of economic development. The strategies were



designed to “spend (or forego) some public revenues, directly or indirectly, for the pur-

pose of inducing private firms or entrepreneurs to invest in business undertakings.”19

Local governments developed a series of incentives that involved up-front investments

to private businesses in the hopes of corresponding returns. The incentives can be gen-

erally categorized as:

• Tax incentives (for example, tax abatements, tax exemptions, and tax credits)

• Revenue incentives (for example, favorable borrowing, grants, direct invest-

ments, and real estate transfers, including eminent domain)

• Services incentives (for example, technical assistance such as workforce devel-

opment or marketing)20

The rationale behind boosting the private sector’s financial bottom line was that

if local governments paid some of the private sector’s costs of doing business, those

businesses would relocate to their jurisdiction, raising revenues and creating jobs.

As one survey of local officials discovered, the “‘first priority goal’ for local economic

development [was] ‘increasing jobs located in the city’ (48 percent of city elected offi-

cials), increasing the local tax base (18 percent), and diversifying the local economy (10

percent).”21

In attempting to accomplish these goals, economic development incentives have

been used to attract a variety of market segments where “growth” was projected. Ini-

tially, incentives were directed at industrial markets.22 As markets fluctuated, eco-

nomic development shifted to focus on “growth” markets, such as nanotechnology,

biotechnology, telecommunications, and information technology.23 Although the focus

shifted from one market to the next, the methods for incentivizing economic develop-

ment—tax, revenue, and service incentives—have remained the same.

It is important to acknowledge that the traditional methods of economic develop-

ment have been criticized for providing up-front public investment that failed to turn

into jobs or tax revenues.24 Several authors have detailed economic development proj-

ects that have not produced the projected local revenue and have had little long-lasting

economic success.25 According to those authors, particularly detrimental to the long-

term economic viability of local governments have been projects that involved long-

term commitments to forego local taxes because the governments are receiving little or

no revenue generation from the projects and yet continue to grant the tax abatements.26

As one scholar stated:

Their efficacy . . . has been strongly disputed. Cities appear not to gain back what

they put in, either in the short term or the long term, and there is some evidence

that subsidies do not ultimately alter the location decisions of firms. And even if

location subsidies do enhance local welfare, they do not improve overall welfare—

one city loses what another city gains.27



In addition to concerns about economic efficacy, critics have questioned whether

the social and environmental impacts of some types of economic development out-

weigh the gains. Other authors in this book have clearly stated the dire environmental

and social conditions local governments face.28 The traditional economic development

incentives did not make accommodations to address these conditions.29 Environmen-

tal and social concerns were ignored or took a back seat as they were outweighed by

what was presented as an invaluable opportunity for jobs and revenue. For example,

traditional incentives did not require businesses to maintain a certain level of environ-

mental or social benefit beyond the existing law.30 “[O]verall success [wa]s . . . measured

by the old paradigm of continuous growth and maximized return on investment.”31

Emerging Sustainable Businesses

While many areas of the economy struggle, sustainable businesses continue to emerge

as a bright spot.32 Flourishing in the wake of the recession and bailout, these businesses

gravitate toward a more public service–oriented strategy, focusing equally on profit-

ability, environmental friendliness, and social responsibility. Unlike the traditional

business model, they are not narrowly focused on the financial bottom line to the exclu-

sion of other concerns and impacts. Rather, they find profitability and marketability by

accommodating environmentally friendly and socially responsible initiatives.33

To be sure, sustainable businesses seek to be profitable, but how they achieve that

goal is where they differ from the traditional business model.34 They place significant

value on the environment and social responsibility, thereby maximizing the potential of

an expanding market segment that seeks sustainable products, processes, services, and

manufacturing. 35 According to a recent report that surveyed 593 companies (almost

half of which had revenues greater than $1 billion), 83 percent said they will spend more

or the same amount in becoming more sustainable this year.36 In the same report, “[f]our

out of five people said they were still buying green products and services, even in the

midst of the recession.”37 Even “[g]reen building activity sustained impressive growth

during 2009, amid a brutal construction market.”38 Corporate investment and hiring

in sustainable businesses also continued to grow, even as the stock market collapsed.39

Sustainable business entrepreneurs are not merely making their businesses or

products “green,” but rather they are fundamentally changing the way they operate

their businesses. Every decision is made with the long-term social, environmental, and

financial impacts in mind. “Their initiatives are usually transformational in nature,

bringing a significant but potentially slow rate of return. They are less costly . . . and

often result in higher revenues through sales of green products and services.”40 They

create long-term stakeholder value by embracing opportunities and managing risks

derived from economic, environmental, and social developments. Economic profitabil-

ity is achieved in conjunction with promoting social and environmental initiatives.41

For example:



an energy company’s triple bottom line efforts might focus on renewable energy

sources, an automobile company’s efforts might focus on fuel efficiency and hybrid

and fuel-cell technologies, and a food company’s efforts might focus on healthful

options and reduced packaging. In each of these examples, a company can better

its financial bottom line while also bettering its social and environmental bottom

lines.42

This new business model has assumed and continues to assume a variety of

identities and forms, including triple bottom line, corporate social responsibility,43 B

corporations,44 hybrids,45 and others.46 For each new identity and form, there are cor-

responding criteria to guide the private sector in achieving sustainability. Although

distinct, the criteria cover common ground that includes environmental performance

and monitoring; employee ownership and compensation; community involvement;

production of beneficial products or services and in a legal and beneficial manner;

local charitable work; and transparency and accountability in governance.47 In addi-

tion, they “consider the needs of all stakeholders—employees, community, suppliers,

consumers, and the natural environment, as well as stockholders—when making busi-

ness decisions.”48 The table on the following page is a portion of a questionnaire used

to certify a manufacturing business with 30 or more employees as a B corporation. The

questionnaire produces a score gauging the business’s level of commitment to environ-

mental and social issues.

Each of the subsections of the table has a series of questions pertaining to the

enterprise’s sustainability. For example, in “Accountability: Governance” the question-

naire asks:

• “Has the company dedicated a staff person or employee working group to over-

see the company’s social or environmental performance?”

• “Does your employee training include instruction about your environmental

mission and/or social mission?”

Unlike previous changes in the private sector, no single market segment or indus-

try includes all sustainable businesses. Rather, sustainable businesses are found in all

market segments and industries. Certified B corporations, for example, are a diverse

group ranging from architects to book sellers to energy providers to insurance provid-

ers to lawyers to restaurants. As an indication of their broad application, new indices

and exchanges, such as the Dow Jones Sustainability index and Goldman Sachs SUS-

TAIN, are being formed to accommodate sustainable businesses and their application

to all industries.49 Accommodating this change requires a fundamental shift in eco-

nomic development strategies that goes beyond tinkering with the existing tools.

As a practical matter, one of the main hurdles sustainable businesses face is the

existing legal structures. The current rules, regulations, and policies, including those



applicable to economic development, were designed around the traditional private sec-

tor. As a growing number of environmentally and socially conscious entrepreneurs seek

to enter the marketplace, they are confronted with economic development policies that

did not envision the shift toward more sustainable businesses. The current government

and regulatory strategies put sustainable businesses at a competitive disadvantage

because they provide a more “useful” benefit to nonsustainable businesses by accom-

modating their singular focus on financial profitability. While the traditional economic

development strategies may enhance the primary goal of nonsustainable businesses

by focusing on bottom-line profitability (putting aside the above-mentioned criticism

of whether they are actually doing so), one could argue that they enhance only one-

third of sustainable businesses’ goals. The traditional economic development strate-

gies fail to address environmental and social concerns—two of the three primary goals

B Impact Assessment 2010: Version 2.0

Points

Earned

% Points

Available

Accountability 5.7 57%

Governance 3.2 54%

Transparency 2.5 63%

Employees 29.3 59%

Compensation & Benefits 21.8 73%

Employee Ownership 0.0 0%

Work Environment 7.5 75%

Consumers 5.4 18%

Beneficial Products/Services 5.4 18%

Community Area of Excellence* 24.8 62%

Suppliers 6.5 65%

Local 9.3 93%

Diversity 4.9 49%

Charity/Service 4.1 41%

Environment 18.1 36%

Facilities 4.7 39%

Energy Usage 1.2 16%

Supply Chain 9.1 51%

Manufacturing 3.0 25%

Reprinted with the permission of B Lab.



of sustainable businesses. Despite the current failure of most economic development

strategies to recognize them, sustainable businesses continue to grow in popularity,

showing remarkable momentum and interest in the marketplace.

Economic Development Meeting the Needs of Sustainable Businesses

Local governments will benefit from associating opportunity with the emergence of

sustainable businesses and markets and a desire for sustainable products, services,

and processes. From the standpoint of localities, the question is: Where will sustain-

able businesses be located, employing thousands of individuals and increasing local

revenues? Furthermore, what proactive steps can and should local governments take in

attracting these businesses, which improve the lives of their citizens? Or, at a minimum,

what proactive steps can local government take to avoid being an obstacle to the emer-

gence of the new business model that values sustainable business practices and social

responsibility? From the standpoint of sustainable businesses, the question is: Which

locality provides the best atmosphere for starting, maintaining, and growing a triple-

bottom-line business? And which locality best supports the business’s goals of obtain-

ing economic profitability, environmental friendliness, and social responsibility?

This section suggests that local governments include in their economic develop-

ment strategies incentives to attract sustainable businesses for three reasons: (1) sustain-

able businesses, products, and services are often outpacing their peers; (2) sustainable

businesses provide long-term economic, environmental, and social benefits consistent

with local government objectives to provide for the health, safety, and welfare of citi-

zens; and (3) the move to sustainable businesses is a fundamental shift in the private

sector in which traditional economic development incentives are insufficient.

This section continues with steps local governments may take to directly incen-

tivize sustainable businesses, including a performance-based economic development

strategy, and to indirectly encourage the development of sustainable businesses. The

suggestions are not an attempt to supplant current economic development strategies,

but rather to supplement them to provide flexibility and to foster growth and innova-

tion. The suggestions aim to improve the sustainability of economic development strat-

egies themselves, while attracting sustainable businesses.

Why Incentivize Sustainable Businesses?

The first reason local governments should diversify economic development strategies

to include sustainable businesses is that they are growing. The term “growth” has had

many meanings and in the context of economic development has often been narrowly

defined as economic growth to the exclusion of environmental and social conditions.

While measuring “growth” equally in terms of economic, environmental, and social



concerns would create an atmosphere far more welcoming to sustainable businesses,50

even under a narrow definition, sustainable businesses are one of the few areas experi-

encing “growth” in terms of jobs and revenues, often outpacing their peers:51

Indeed, in 16 of the 18 industries examined, companies recognized as sustainability-

focused outperformed their industry peers over both a three- and six-month period,

and were well protected from value erosion. Over three months, the performance

differential across the 99 companies in this analysis worked out to 10 percent; over

six months, the differential was 15 percent. . . . This performance differential trans-

lates to an average $650 million in market capitalization per company.52

In addition to experiencing economic growth, sustainable businesses typically

offer higher wages than retail positions found in many economic development proj-

ects. Higher-paying wages translate into a variety of social and environmental benefits,

including better health care and education. Further, higher-paying wages mean more

direct and indirect local government revenue through additional consumption and

taxes. Local governments seeking to take advantage of this growth could be ahead of

the curve, establishing and marketing themselves as welcoming communities.53

The second reason local governments should diversify their economic development

strategies to include sustainable businesses is that it is more consistent with local gov-

ernment objectives. States have the authority under their police powers to enact laws

protecting the “health, safety, and welfare” of their citizens.54 As an extension of this,

most local governments find authority to govern in home rule provisions.55 “Home rule”

provisions are state laws authorizing local governments to establish local charters that

function similarly to local constitutions.56 While home rule provisions may assume a

variety of forms, they generally authorize local governments to act in the “health, safety,

and welfare” of their citizens.57

Because sustainable businesses are concerned with promoting environmental

stewardship and social responsibility, as well as economic profitability, they offer a

business model that is more consistent with promoting the “health, safety, and wel-

fare” of citizens.58 Take for example a company that is creating 30 jobs. Is that company

always better than a company that creates 20 jobs? What if the first company decreases

the air and water quality, as well as the health of citizens? What if these conditions lead

to citizens relocating out of the locality? What if the second company offers jobs that

are higher paying and include health coverage? What if the second company evinces

a dedication to the local community, forming connections to the schools and chari-

ties? These are only a few considerations that would clearly fall within the purview of

“health, safety, and welfare,” but are not necessarily accounted for in the current eco-

nomic development analysis.

In contrast, attracting sustainable businesses is consistent with local government

objectives, as sustainable businesses are directly concerned with the health, safety, and



welfare of their employees and the community. As stated above, almost all definitions

and third-party certifications of sustainable businesses require some measure of care

for the local community and environment.59 Sustainable businesses evince a devotion

to their employees and form partnerships that connect and build communities, as they

find economic value in these relationships. For example, of the corporations in one

third-party certification (B corporations):

• 82 percent have programs for volunteering in their local community;

• 74 percent are affiliated with local charities;

• they are 30 times more likely to donate at least 10 percent of their profits to

charity;

• 9 out of 10 are locally owned60

It is difficult to understate the benefits stemming from sustainable businesses that go

beyond job creation and revenues. Sustainable businesses are taking actions that are hand

in hand with local government objectives that provide ancillary benefits to cities that can-

not be accounted for in a financial bottom-line analysis. The more a business is tied to the

community, the less likely it is to relocate when the next best tax abatement is offered.61

The third reason local governments should consider revising economic develop-

ment strategies to incentivize sustainable businesses is that the traditional methods

for economic development are insufficient to meet the needs of sustainable businesses.

As mentioned above, the primary focus of the traditional methods is enhancing the

financial bottom line. At best, when applied to sustainable businesses, the traditional

methods of economic development accomplish only one of three goals. They do not take

into account or help achieve environmental or social concerns that are integral parts of

sustainable businesses. No doubt, sustainable businesses must be economically profit-

able; however, they achieve that goal in a manner that is consistent with environmental

stewardship and social responsibility. Failing to address environmental or social con-

cerns makes the current tools less effective, as they miss the mark.

Traditional methods of economic development are inadequate to accommodate

the broad-based shift in the private sector. Unlike prior areas of growth, sustainable

businesses are not confined to one area of the private sector, such as biotechnology.

Rather, sustainable businesses are emerging in all areas of the economy. Local eco-

nomic development methods must be flexible enough to accommodate a diverse group

of industries. Diversifying to accommodate sustainable businesses would also foster

creativity and innovation, which local governments need to emerge from the financial

crisis. Local governments would be better prepared for tomorrow’s economy, societal

needs, and the environment because the private sector’s goals would be aligned with

the government’s goals. If local governments can harmonize the economic development

methods, including corresponding regulatory regimes, with changes in the private sec-

tor, meaningful and sustainable economic development may result.



Local Proposals to Incentivize Sustainable Businesses

The following proposals attempt to increase local governments’ sustainability and

flexibility in attracting sustainable businesses based on their diversity in the private

sector. At the same time, the proposals have a clear directive to provide lasting jobs

and revenue while enhancing the environment and society. The proposals cover three

areas that focus on strengthening the foundation of sustainable businesses and local

governments: (1) direct local incentives, (2) indirect local initiatives focused on creating

demand, and (3) related state regulations.

Direct Local Incentives

Local governments should begin by evaluating and then effectively leveraging the

assets they control that go beyond financial benefits. Local governments have many

assets that could be made more sustainable while simultaneously being used to incen-

tivize sustainable businesses. These incentives can be applied individually, collectively,

or as part of a larger plan for sustainable development, such as in a performance-based

sustainable economic development strategy discussed below.

While a performance-based sustainable economic development strategy is a holis-

tic approach to local economic development, local governments may take incremen-

tal steps to build sustainability into their economic development strategies. The most

accessible alternatives leverage the assets each municipality controls, whether or not

the assets are associated with financial benefits. The locality’s objective would be to

(1) identify an asset, (2) analyze how the asset itself could be made more sustainable,

and (3) analyze how the enhanced sustainability of the asset can be used to attract sus-

tainable businesses. Some examples are examined next.

Public transportation. Many localities control or heavily influence the local public

transportation systems. Local governments can work with sustainable businesses to

help facilitate their employees’ use of public transportation.62 Drake University stu-

dents, faculty, staff, and retirees, for example, can ride the Des Moines Area Regional

Transit Authority buses for free. “The Unlimited Access Program offers many benefits

for Drake and the environment . . . It reduces the demand for parking, helps . . . recruit

and retain students and employees, reduces the cost of commuting, helps protect the

environment and relieves traffic congestion.”63

Energy. Many localities operate and maintain energy providers. Local governments

can seek to provide lower cost and easier access to renewable energies.64 As discussed

further below, this would also spur a market for sustainable products and services in

clean energy technologies and manufacturing. Columbia, Missouri, for example, has

installed “methane gas recovery wells . . . . Instead of burning off methane . . . gener-

ated by decomposing garbage at the landfill, the city is using it to provide about 1.5



percent of the power consumed in Columbia every day. . . .The electricity . . . is among

the cheapest power in the city utility’s portfolio. It costs 3.8 cents per kilowatt-hour,

compared with 6.3 cents per kilowatt-hour to burn coal in the city power plant.”65 A

local government could direct this energy and these savings to sustainable businesses.

Thus, while the city itself lowers costs and improves the environment, it can also seek

to attract sustainable businesses.

Waste. Local governments generally assume the task of waste removal. This is another

asset that can be used to attract sustainable business. One method is to establish a

benchmark for waste disposal and pass on savings to companies producing waste

under the benchmark and charge those producing waste above the benchmark. Local

governments should consider a sliding scale for the disposal of landfill waste. The

more landfill waste a business produces, the more it should pay. For example, Fort

Collins, Colorado, instituted “a volume-based trash rates system called ‘pay-as-you-

throw’ . . . that provides economic rewards for reducing waste. Residents are charged

for the amount of trash they generate in the same way [they] get billed for the amount of

electricity, gas and other utilities that [they] use. That means ‘the less you throw away,

the less you pay.’”66 This would reduce costs for local governments, which could pass

the savings on to sustainable businesses in the form of reduced rates or grants, loans, or

tax abatements for sustainable infrastructure improvements related to waste.

Water. Local governments often assume the responsibility of treating runoff and pro-

viding drinkable water. Both of these could be adapted to encourage sustainable busi-

nesses. Water runoff costs local governments millions of dollars a year to treat and is

often free regardless of the amount of runoff from a particular site. Local governments

could establish a cost structure that fairly attributes the cost of treating the water to

those businesses responsible for putting the water into the system. Philadelphia, for

example, has instituted a billing structure to benefit those businesses that control their

water runoff, as many sustainable businesses do.67 The more water runoff a business

contributes to the system, the more it pays. In addition to reducing the costs for sustain-

able businesses, a local government could add an additional benefit by passing the local

government savings on to sustainable businesses in the form of reduced rates or grants,

loans, or tax abatements for sustainable infrastructure improvements related to water.68

These incentives could be applied individually to enhance the sustainability of a

local government’s economic development strategy or they could be applied as part

of a performance-based sustainable economic development strategy. This strategy

would be structured around a sliding scale that would provide more public incentives,

such as the individual incentives discussed above, the more sustainable a business is.

Performance-based economic development could be built around a point structure

that allocates a point value for set sustainable actions, much like performance-based

zoning. As illustrated in the chart on the following page, the more points a project accu-

mulates, the more incentives the project would be given.



As many local governments know, performance-based tools and sliding scales

provide them with flexibility. They can stress those aspects of sustainability that their

communities prefer. A standard in one locality may not be applicable to another—that

diversity makes each city wonderful and unique. Examples for establishing criteria

for the point allocations can be found in existing mechanisms in the private sector,

such as the Global Reporting Initiative (GRI), www.globalreporting.org, or B Lab, www

.bcorporation.net. Both of these initiatives have frameworks for identifying sustainabil-

ity, or as GRI states: “how organizations can disclose their sustainability performance.”69

As shown in the partial image of the survey on page 25 certifying B corporations, some

of the criteria include corporate accountability (such as transparency and fair trade),

employee ownership, community benefits (such as charity or direct services), the envi-

ronment, beneficial products, and beneficial methods of production.70

Incorporating a performance-based economic development strategy would attract

sustainable businesses and would encourage them to enhance their sustainability

because it increases incentives with more sustainable measures. Similarly, it may also

encourage existing businesses to incorporate sustainable initiatives. Performance-

based sustainable economic development encourages innovations as local governments

can establish benchmarks, tracking, and reporting requirements to ensure account-

ability and that the triple bottom line is being met. They also offer a wider range of

considerations to enter into the discussion.

Performance-based tools have been criticized for both the cost of administra-

tion and the steep learning curve needed for start-up. Performance-based tools may

involve a higher degree of calculation and consideration. While this criticism should

be examined, it is important to note that in the context of economic development, local

governments are already making complicated economic forecasts when committing

taxpayers to millions of dollars in abatements and loans. This proposal would not nec-

essarily change the level of complexity but rather what is being calculated.

Su

sta

inab

le P

erf

orm

an

ce P

oin

ts

Sustainable Incentive Package

Incentive PackageA

0

20

40

60

80

100

120

Incentive PackageB

Incentive PackageC

Incentive PackageD

Performance-Based EconomicDevelopment



Indirect Local Initiatives Focused on Creating Demand

There are numerous other areas in which cities control assets that they can convert into

direct incentives to attract sustainable businesses. This subsection focuses on indirect

actions cities can take to help create demand for sustainable goods and services and an

atmosphere welcoming to sustainable businesses. As one former executive of a leading

manufacturer of sustainable products stated:

Hands down, the incentives that would matter most to me are on the demand

side. Sure, it’s nice if someone picks up the tab for my cost of business. But what I

really want is for someone to buy my products. That matters for more than the net

income effect. Income is worth more than cost savings, and a great market-leading

example is crucial.71

Local governments have enormous power to provide a market-leading example.

Local governments are often one of the largest market participants in the region. They

can exercise this authority to create a demand for sustainable products and services by

adopting a sustainable procurement code.72 Overnight local governments could change

the demand for local and organic food by requiring it to be served in schools. Local gov-

ernments can also promulgate rules and regulations pertaining to sustainable building

codes, which would also create a demand for these products and services.73 Sustain-

able building codes could apply to the private sector, and, therefore, create demand on

private sector projects, and the public sector (i.e., public buildings), creating demand

on public sector projects.74 Similarly, localities can adopt renewable energy standards,

which would create demand, jobs, and growth in renewable energies.75

Local governments could also provide clear and easy-to-access information to con-

sumers and citizens on sustainable businesses in the jurisdiction and help market those

businesses. Some companies “view sustainability . . . as an opportunity to improve their

reputations. They make small efforts such as upgrading an environmental policy or

rebranding existing initiatives under the guise of sustainability. The efforts are deemed

complete when a sustainability report is published.”76 Local governments need to be

wary of which companies are actually sustainable versus which are simply repackaging

their current structure in creative marketing methods. Providing clear and easy access

to information creates an incentive to sustainable businesses to locate in an area that

supports their needs. It also enhances accountability and provides clear consumer infor-

mation as to who is truly being sustainable—a laudable goal for local governments.77

As more and more state and local entities call for sustainable initiatives, the need

for companies to adapt with more efficient and cost-effective mechanisms to comply

with these initiatives will grow. Moreover, the initiatives create a consumer market-

place for environmentally friendly and socially responsible products. While there may

be a financial benefit to the company itself, there would be a net benefit to the city,



including an increase in the flow of money at all levels. The demand is there and grow-

ing.78 Local governments should take steps to help the private sector to be innovative in

meeting that demand while benefiting local governments, society, and the environment.

State Regulations

As local governments consider altering economic development incentives to accommo-

date sustainable businesses, they need to be concerned with state authorization. Local

governments should assess whether state statutes authorizing economic development

include incentivizing sustainable businesses. Most statutes are broadly written and

should not conflict with a desire to diversify economic development strategies because

economic development strategies focusing on sustainable businesses are more consis-

tent with a local government’s obligations to improve the health, safety, and welfare of

citizens.

If a local government is concerned about its authority to act, it should actively

advocate for state law changes and clarifications. State legislatures should provide

clear authorization to local governments to creatively draft economic development

strategies directed at sustainable businesses. This could include, among other things,

authorization to utilize any creative mechanism, within the existing law, to incentivize

sustainable businesses, including the examples above. This would allow local govern-

ments to go beyond taxing and loaning incentives and allow them to take a deeper look

at the assets they have and how they can benefit sustainable businesses’ triple-bottom-

line approach.

State governments can also be proactive in assisting local governments’ desire to

be sustainable and attract sustainable businesses. Although beyond the purview of this

chapter, state governments can help create an atmosphere welcoming to sustainable

businesses. For example, state governments maintain the authority to officially and

legally recognize sustainable businesses as a new business organization, such as an

LLP, LLC, or corporation. Maryland and Vermont have officially recognized a corporate

form that promotes environmental and social benefits.79 When a state officially recog-

nizes sustainable businesses, it promotes investment and marketing opportunities by

branding a sustainable business as a company that is helping the state, environment,

and society. It also shows the state as a welcoming location for sustainable businesses.

Conclusion

Creative and adventurous entrepreneurs are seeking a closer connection between the

profits they earn and the positive environmental and social impacts they can have

while earning those profits. Confronted with a swelling need to promote economic

activity, local governments have an opportunity to rethink the environment in which

they seek to lure private sector investment. They can make a transition to attract the



leaders of a new economy who view positive environmental and social performance as

an integral part of business.

As this book points out, in almost all jurisdictions there are motivated people pro-

posing and enacting innovative sustainable policies. Another step in this direction is to

join together the energies in the private and public sectors to create an economic devel-

opment policy built on the ideas and fit for the perspective of today.

This chapter does not present sustainable economic development strategies as a

single option or as a blanket panacea. Rather, by implementing economic development

strategies to accommodate and promote sustainable businesses, local governments

enhance their sustainability and diversify their tax base. The strategies also improve

environmental and social conditions, while fostering innovation and new technolo-

gies, as opposed to the older methods of economic development, which often promoted

unnecessary competition and failed to tap into private sector creativity. A welcoming

business framework is crucial in driving interest and investments in sustainability to

the mutual benefit of local governments and the private sector. As local governments

look to support sustainable businesses, they will have a positive impact on communi-

ties, economic development, and the environment in a sustainable and lasting manner.

Notes

1. See, e.g., Ala. Code 1975 § 41-19-7(a) (requiring state and subdivisions to balance budget);

Colo. Const. art. X, § 16 (same); Ill. Const. 1970, art. VIII, § 2 (same); see also Local Zeroes, The

Economist (Nov. 13, 2008), http://www.economist.com/node/12608223?story_id=12608223 (last

visited Dec. 28, 2011).

2. Hibah Yousuf, America’s 7 Junkiest Cities, CNNMoney.com (June 1, 2010), http://money

.cnn.com/2010/06/01/news/economy/junkiest_cities/index.htm (last visited Dec. 28, 2011); Sara

Behunek, Three American Cities on the Brink of Broke, CNNMoney.com (May 28, 2010), http://

money.cnn.com/2010/05/28/news/economy/american_cities_broke.fortune/index.htm (last vis-

ited Dec. 28, 2011). On November 9, 2011, Jefferson County, Alabama, became the largest local

government ever to file for bankruptcy. See Kelly Nolan, Alabama County Files Largest US Munici-

pal Bankruptcy, The Wall Street Journal.com (Nov. 9, 2011), http://online.wsj.com/article/BT-CO-

20111109-721858.html (last visited Dec. 28, 2011); but see Annie Lowrey, Default Position, slate.com

(Dec. 28, 2010), http://www.slate.com/articles/business/moneybox/2010/12/default_position

.html (last visited Dec. 28, 2011) (stating that overall local government defaults are down in 2010

from 2009 and 2008 numbers).

3. For purposes of this chapter, “economic development” is defined as a government action

designed to encourage private investment; see also Matt Kane & Peggy Sand, Economic

Development: What Works at the Local Level 4 (National League of Cities 1988) (defin-

ing local “economic development” as a “local economy’s capacity to create wealth for local resi-

dents”). Also for purposes of this chapter, “government entrepreneurs” is defined as public sector

employees working on behalf of a local government and its commercial activities to encourage

local economic development; see also Christian Iaione, Local Public Entrepreneurship and Judi-

cial Intervention in a Euro-American and Global Perspective, 7 Wash. U. Global Stud. L. Rev. 215,

218 (2008).



4. Ann O.M. Bowman, The Visible Hand: Major Issues in City Economic Policy 10, 19

(National League of Cities 1987).

5. “Sustainable business” has been defined in a variety of ways. For purposes of this chapter,

the definition describes a company that meets the triple bottom line of economics, equity, and

ecology. See also Robin Morris Collin & Robert William Collin, Business and Econom-

ics: Encyclopedia of Sustainability, Vol 2., 40–42 (2010) (discussing the triple bottom line).

The triple-bottom-line concept is generally thought to have been originated by John Elkington

in Towards the Sustainable Corporation: Win-Win-Win Business Strategies for Sustainable Devel-

opment, Cal. Mgmt. Rev. 36, no. 2: 90–100 (1994); see also John Elkington, Cannibals with

Forks: The Triple Bottom Line of 21st Century Business ix, 2 (1998) (stating “The triple

bottom line approach to sustainable business views corporate performance and success in three

separate dimensions: economic prosperity, environmental quality, and social justice.”); see also

Cynthia A. McEwen & John D. Schmidt, Leadership and the Corporate Sustainability

Challenge 10 (2007); Canadian Bus. for Soc. Responsibility, Good Company Guidelines

for Corporate Social Performance 11 (2002) (defining triple bottom line as “a business phi-

losophy that focuses on economic prosperity, environmental quality, and social justice.”).

6. And it appears to be far from good in the future. See The United States Conference of May-

ors/Councils for the New American City, Top 100 U.S. Metro Economies (Jan. 2010), http://www

.usmayors.org/metroeconomies/0110/charts.pdf (last visited Dec. 28, 2011) (stating that unem-

ployment in the top 100 metro areas will decrease but will continue to be very high over the next

several years); Yousuf, supra note 2 (quoting Chris Hoene, director of policy and research at the

National League of Cities: “The fiscal stress is severe in cities around the country, and it’s likely

to stick around for at least a couple of more years”).

7. Local Zeroes, supra note 1.

8. Id.

9. See, e.g., Brent Begin, City’s Budget Looking Bleak, The Examiner (Feb. 11, 2009) (setting

forth San Francisco’s budget woes); Phil Willon, L.A. Budget Gap Could Hit $1 Billion, L.A. Times

(Feb. 28, 2009), http://articles.latimes.com/2009/feb/28/local/me-la-budget28 (last visited Dec.

28, 2011) (same for Los Angeles); Yousuf, supra note 2 (noting that “Seven U.S. cities recently had

their municipal bonds downgraded below investment grade. Their debt is now, junk, considered

more worthless than that of the so-called PIIGS.”).

10. Local Zeroes, supra note 1.

11. Id.

12. Steve Schaefer, Street Rallies Into Fed Meeting, Markets Brief, Forbes.com (Sept. 20,

2010), http://www.forbes.com/2010/09/20/briefing-markets-recession-over-stocks-rally.html?boxes=

Homepagechannels (last visited Dec. 28, 2011) (noting that the National Bureau of Economic

Research found the recession ended in June 2009).

13. Unemployment rates rose from 3.9% in January 1970 to 9.0% in May 1975, peaking at 10.8%

in November and December 1982. U.S. Department of Labor: Bureau of Labor Statistics, Employ-

ment Situation, http://research.stlouisfed.org/fred2/data/UNRATE.txt (last visited Dec. 28, 2011).

14. See, e.g., Wash. Const. art. VIII, §7 (stating “No county, city, town or other municipal cor-

poration shall hereafter give any money, property, or loan its money, or credit to or in aid of any

individual, association, company or corporation, except for the necessary support of the poor

and infirm.”).

15. See e.g., Entergy’s Teamwork Arkansas, Arkansas Financing Options for Economic Develop-

ment, http://www.entergy-arkansas.com/content/economic_development/articles/Economic_

Development_Finance_Brochure.pdf (last visited Dec. 28, 2011) (“Local governments may also



levy a sales and use tax which can only be used for certain economic development purposes.” (cit-

ing Ark. Code Ann. § 14-174-101 et seq.)); id. (“Local governments can also issue bonds secured

by a local sales and use tax to finance capital improvements of a public nature after approval by

an election. Capital improvements of a public nature include streets, water and sewer systems

and numerous other capital facilities. These improvements can be used to assist with economic

development.”) (citing Ark. Const. Amend. 62; Ark. Code Ann. §14-164-301 et seq.)).

16. Jeff Moore, Chapter 380 of the Texas Local Government Code, Texas City Attorneys Asso-

ciation (Feb. 24, 2006) at 2 (citing Tex. Loc. Gov. Code Ann. § 380.001(a)); id. ( “Article III, section

52-a of the Texas Constitution authorizes ‘the making of loans and grants of public money . . . for

the public purposes of development and diversification of the economy of the state, the elimina-

tion of unemployment or underemployment in the state . . . or the development or expansion of

transportation or commerce in the state.” (citing Tex. Const. Art. III, § 52-a)).

17. See generally Erwin N. Griswold, Production, Jobs and Taxes, 57 Harv. L. Rev. 927, 931

(1944) (stating “The salvation of this country’s economy in the postwar period must be found

in increased production and consumption. . . . The answer is clear: America must produce and

consume.”).

18. See, e.g., Minn. Stat. §469.109 (“there exists . . . certain rural areas where development

and redevelopment should be encouraged. The legislature finds that the powers and facilities

of the state government and local communities . . . should assist . . . areas of substantial and

chronic unemployment in planning and financing economic redevelopment by private enter-

prise . . . and to provide new employment opportunities through the development and expansion

of new or existing facilities and resources.”).

19. Peter Eisinger, Financing Economic Development: A Survey of Techniques, Gov’t Fin. Rev.,

June 2002, at 20.

20. See also Timothy J. Bartik, Upjohn Institute Staff Working Paper No. 03-91 (Jan. 2003) at 3

(stating that “the most common economic development programs supported by local govern-

ments are: tax incentives, either citywide or in designated zones (listed by 66 percent of all local

governments); job training programs customized to the needs of individual firms or industries

(63 percent); community development loan funds for businesses (55 percent); community devel-

opment corporations (53 percent); and microenterprise programs (27 percent)”).

21. Id. at 2 (quoting Phyllis Furdell, Poverty and Economic Development: Views

From City Hall 11 (National League of Cities 1994)).

22. See, e.g., Wash. Rev. Code ch. 39.84 (Industrial Redevelopment Bonds).

23. See, e.g., Minn. Stat. 469.330 et. seq. (establishing biotechnology and health sciences

industry zones).

24. See, e.g., Rick E. Rayl, Kelo Aftermath Continues as Pfizer Sets to Close New London Plant (Nov. 9,

2009), http://www.californiaeminentdomainreport.com/2009/11/articles/projects/kelo-aftermath-

continues-as-pfizer-sets-to-close-new-london-plant/ (last visited Dec. 28, 2011); Castle Coalition,

Redevelopment Wrecks (June 2006), http://www.castlecoalition.org/pdf/publications/Redevelop-

ment %20Wrecks.pdf (last visited Dec. 28, 2011); Martha Brannigan, Failed Wynwood Project Sold

at Auction, Miami-Herald, Feb. 12, 2010, http://www.miamiherald.com/2010/02/12/1477731/failed-

wynwood-project-sold-at.html#ixzz17e4e3A4W (last visited Dec. 9, 2010); John Hammond, The Tax

Consequences of Chatham County’s Failed Economic Development, Chatham Journal Weekly,

Apr. 21, 2005, http://www.chathamjournal.com/weekly/opinion/chatlist/the-tax-consequences-of-

c.shtml (last visited Dec. 28, 2011).

25. See, e.g., supra and infra notes 24–27.

26. See Todd Wallack, Jobs Program Lost Its Way—And Tax Money, The Boston Globe, Mar.

14, 2010 (stating “[o]ften, the incentives work and new jobs result. But far too often taxpayers



have not come close to getting their money’s worth . . . [h]undreds of the projects delivered fewer

jobs than promised, and some companies actually slashed employment”).

27. Richard C. Schragger, Rethinking the Theory and Practice of Local Economic Development,

77 U. Chi. L. Rev. 311, 331–32 (2010).

28.

29. There are well-documented instances of economic development projects, for example,

projects in New London, Connecticut, and Poletown, Detroit, Michigan, of established commu-

nities being displaced for the promise of strong economic development, which never came to

fruition. For a description of the facts surrounding Poletown and the case stemming from the

facts, see John E. Mogk, Eminent Domain and the “Public Use”: Michigan Supreme Court Legis-

lates an Unprecedented Overruling of Poletown in County of Wayne v. Hathcock, 51 Wayne L. Rev.

1331 (2005); for a description of the facts surrounding New London, see Patrick McGeehan, Pfizer

to Leave City That Won Land-Use Case (Nov. 12, 2009), http://www.nytimes.com/2009/11/13/

nyregion/13pfizer.html (last visited Dec. 28, 2011) (quoting Scott G. Bullock, senior attorney

at the Institute for Justice, as stating “the folly of these plans that use massive corporate wel-

fare and abuse eminent domain for private development. . . . They oftentimes fail to live up to

expectations.”).

30. Traditional economic development strategies have also been criticized for promoting

negative competition among municipalities in which cities compete against each other to give

the most economic incentives to the detriment of all cities. See also Schragger, supra note 27, at

331–32 (noting that this competition is “the post-industrial version of smokestack chasing: firms

play one city or region against another, generating a subsidy race with dubious welfare effects”).

31. See generally Judy Wicks, Local Living Economies: The New Movement for Responsible Busi-

ness, at 1, http://www.sbnphiladelphia.org/images/uploads/LocalLivingEconomies.pdf (last vis-

ited Dec. 28, 2011).

32. Sustainable businesses have been developing for several years. Considered to be one of

the first socially responsible businesses, Ben & Jerry’s had been incorporated for decades and

had the goals of being profitable and environmentally friendly. The Social Venture Network

and the Business for Social Responsibility, groups that bring sustainable businesses together,

were organized in the early 1990s. As others followed suit, businesses began to include social

concerns, such as employee benefits and community development. See Alissa Mickels, Beyond

Corporate Social Responsibility: Reconciling the Ideals of a For-Benefit Corporation with Director

Fiduciary Duties in the U.S. and Europe, 32 Hastings Int’l & Comp. L. Rev. 271 (2009). In 1994,

John Elkington brought all of these concerns—economic, environmental and social—together in

what he called the triple-bottom-line business model. See Elkington, Cannibals with Forks, supra

note 5, at 55–56.

33. See Joshua D. Margolis et al., Does It Pay to Be Good? A Meta-Analysis and Redirection of

Research on the Relationship Between Corporate Social and Financial Performance 21 (working

paper July 2007), http://stakeholder.bu.edu/2007/Docs/Walsh,%20Jim%20Does%20It%20Pay%20

to%20Be%20Good.pdf (last visited Dec. 28, 2011); Marc Orlitzky et al., Corporate Social and

Financial Performance: A Meta Analysis, 24 Organization Studies 403, 427 (2003) (“[P]ortray-

ing managers’ choices with respect to [sustainability and profitability] as an either/or trade-off

is not justified in light of 30 years of empirical data.”); see also Nell Porter Brown, Turning Green

to Gold, Harv. Mag., Mar.–Apr. 2009, at 56–58 (profiling founder of Global Environment Fund

and its expansion to a $1 billion “top-tier” private-equity fund); Lester R. Brown, Creating New

Jobs, Cutting Carbon Emissions, and Reducing Oil Imports by Investing in Renewable Energy and

Energy Efficiency (Dec. 11, 2008), http://www.earth-policy.org/plan_b_updates/2008/update80

(last visited Dec. 28, 2011).



34. See Judd F. Sneirson, Green Is Good: Sustainability, Profitability, and a New Paradigm for

Corporate Governance, 94 Iowa L. Rev. 987, 992 (2009) (“adherents argue that a triple bottom

line mindset not only helps the environment and society, it can also help firms’ financial bottom

lines. For example, efforts to reduce waste and pollution often result in greater efficiency and

the discovery of innovative techniques and materials, all of which in turn can benefit the firm,

its workforce, and the environment in both the short and the long runs”); Jim Balow, Green Busi-

nesses Can Make Green Too, Charleston Gazette, 5A (June 22, 2010) (“Yes, your business can

be socially and environmentally responsible and still make money.”).

35. See A.T. Kearney, “Green” Winners (2009), http://www.atkearney.com/index.php/

Publications/green-winners.html (last visited Dec. 28, 2011); see also Antonio Vives, Corporate

Social Responsibility: The Role of Law and Markets and the Case of Developing Countries, 83 Chi.-

Kent L. Rev. 199, 207 (2008); Jeff Civins & Mary Mendoza, Corporate Sustainability and Social

Responsibility: A Legal Perspective, 71 Tex. B. J. 368 (May 2008) (stating “Some commentators sug-

gest we are about to reach the sustainability ‘tipping point’—the point at which the idea of sus-

tainability becomes a strategic business imperative”); Jonathan Dee, A Toy Maker’s Conscience,

N.Y. Times, Dec. 23, 2007, at § 6 (Magazine), at 34 (“According to . . . a marketing research firm,

[ninety-one] percent of chief executives believe that a good corporate social-responsibility pro-

gram creates shareholder value.”); see generally David Vogel, The Market for Virtue: The

Potential and Limits of Corporate Social Responsibility (2005); European Commission,

Commission Green Paper on Promoting a European Framework for Corporate Social Responsibility,

at 3, COM (2001) 366 final (July 18, 2001) (urging companies to consider “lifelong learning, work

organization, equal opportunities, social inclusion and sustainable development.”).

36. Joel Makower, State of Green Business 2010, GreenBiz.com (Feb. 2010), at 11.

37. Id. at 6.

38. Id. at 9.

39. Id. at 11.

40. See A.T. Kearney, supra note 35, at 1.

41. See A.T. Kearney, supra note 35, at 1 (stating “A recent A.T. Kearney analysis reveals that

during the current economic slowdown, companies that show a true commitment to sustain-

ability appear to outperform their industry peers in the financial markets.”); see also Com-

mission of the European Communities, Report on the Communication from the Commission

concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development,

at 5, COM (2002) 347 final (Brussels, July 2, 2002), http://trade.ec.europa.eu/doclib/docs/2006/

february/tradoc_127374.pdf (last visited Dec. 28, 2011); Stacy Perman, Making a Profit and a

Difference, Bus. Wk. (Apr. 3, 2009) http://www.businessweek.com/smallbiz/content/mar2009/

sb20090330_541747.htm?chan=smallbiz_smallbiz+index+page_top+small+business+stories

(last visited Dec. 28, 2011); see also Augustin Landier & Vinay B. Nair, Investing for Change:

Profit from Responsible Investment (2008).

42. See Sneirson, supra note 34, at 5–6.

43. Corporate social responsibility (CSR) is “an ongoing commitment by business to behave

ethically and to contribute to economic development while demonstrating respect for people,

communities, society at large, and the environment.” Jeffrey Hollender & Steven Fenichell,

What Matters Most 29 (2004).

44. See http://www.bcorporation.net/about (last visited Dec. 28, 2011) for a description of B

corporations.

45. A hybrid is a legally recognized organizational form structured by combining for-profit

and nonprofit ideals. See, e.g., Minnesota Responsible Business Corporation Act, ch. 304A, § 2(2),



84th Legis. Sess. (Minn. 2006), www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S3786.0.html&

session=ls84 (last visited Dec. 28, 2011); H.R. 3118, §2, 23d Leg. (Haw. 2006), http://www.capitol

.hawaii.gov/site1/archives/2006/ (last visited Dec. 16, 2010) (Search for H.R. 3118); B. 91, 2007 Gen.

Assem., Reg. Sess. (N.C. 2007), http://www.ncleg.net/sessions/2007/Bills/Senate/PDF/S91v5.pdf

(last visited Dec. 28, 2011); H.R. 39, 2007 Gen.Assem., Reg. Sess. (N.C. 2007), http://www.ncleg

.net/sessions/2007/bills/house/PDF/H39v1.pdf (last visited Dec. 28, 2011).

46. Others include microfinance, venture philanthropy, social enterprise, and community

development.

47. See, e.g., ISO/CD 26000, Guidance on Social Responsibility (Dec. 12, 2008), available at

http://isotc.iso.org/livelink/livelink?func=ll&objId=3935837&objAction=browse&sort=name

(last visited on Dec. 28, 2011); B Lab, The B Rating System: Version 1.0 (Manufacturing Survey),

http://www.bcorporation.net/index.cfm/fuseaction/content.page/nodeID/f6780de0-cf1b-44a3-

b8e4-195abbe68fb5/ (last visited on Dec. 28, 2011); Ceres, Ceres 20-20, Our 20-20 Vision, http://

www.ceres.org/Page.aspx?pid=1081 (last visited on Dec. 16, 2010); United Nations Global Com-

pact, Corporate Citizenship in the World Economy, http://www.unglobalcompact.org/ (last vis-

ited on Dec. 28, 2011).

48. See Wicks, supra note 31, at 1.

49. See also Eric J. Lyman, Italian Stock Exchange Considers Side Market, Index for Environ-

mentally Friendly Companies, BNA World Climate Change Report, Nov. 15, 2010, http://info.bna

.com/climate/summary_news.aspx?ID=148499 (last visited Dec. 28, 2011) (stating that the Ital-

ian Stock Exchange may create a new market for environmentally friendly companies).

50. See Wicks, supra note 31 at 2 (“Growth can be measured in ways other than physical size—

expanding creativity, knowledge, and consciousness, deepening relationships, and increasing

happiness and well being.”)

51. See supra notes 32–49 and accompanying text.

52. Kearney, supra note 35, at 1; see, e.g., Roger Bezdek, American Solar Energy Society, Renew-

able Energy and Energy Efficiency: Economic Drivers for the 21st Century, http://www.ases.org/

images/stories/ASES-JobsReport-Final.pdf (last visited Dec. 28, 2011) (stating that by 2030 the

“renewable energy and energy efficiency industries could generate up to $4.5 trillion in revenue

in the U.S., but only with the appropriate public policy . . . [and] 40 million jobs that could be cre-

ated in renewable energy and energy efficiency.”).

53. John D. Sutter, Growing Excitement, Expectations for Green Jobs Corps (Mar. 2, 2009),

http://www.cnn.com/2009/LIVING/03/02/green.jobs.training/index.html (last visited Dec.

28, 2011).

54. See United Haulers Ass’n. Inc. v. Oneida-Herkimer Solid Waste Management, 550 U.S. 330,

342 (2007).

55. See also Michael E. Libonati, Local Government Autonomy: Needs for State Con-

stitutional, Statutory, and Judicial Clarification 1 (1993) (stating 48 states grant home

rule authority to municipalities); David J. Barron, Reclaiming Home Rule, 116 Harv. L. Rev. 2255,

2260 (2003) (same).

56. See Laurie Reynolds, Home Rule, Extraterritorial Impact, and the Region, 86 Denv. U. L.

Rev. 1271, 1276 (2009) (discussing “imperio” and “legislative” home rule provisions).

57. See N.Y. Mun. Home. Rule § 10 (police powers are extended to local governments to act

for the “health, safety and welfare”); see also City and County of Denver v. Qwest Corp., 18 P.3d

748, 755 (Colo. 2001) (stating “If there is a rational basis for legislating to protect the health, safety,

or welfare of the citizens of a municipality, a home rule city may constitutionally do so.” (citing

United States Disposal Sys., Inc. v. City of Northglenn, 193 Colo. 277, 281, 567 P.2d 365, 368 (1977))).



58. See generally Schragger, supra note 27, at 331–32 (2010) (“As a practical matter, any eco-

nomic development strategy that shifts money from taxpayers to private firms has to be mea-

sured against some other use of taxpayer money—say, building better schools, providing more

policing, or producing better health care. And this gets us back to the question of what makes a

city do better or worse economically. Providing good municipal services and creating healthy,

smart people is something that any city should aspire to. But doing so does not ensure economic

success.”).

59. Wicks, supra note 31, at 2 (“[N]ew business models remain human-scaled and locally

owned, fostering direct, authentic and meaningful relationships with employees, customers,

suppliers, neighbors, and local habitat, which add to the quality of life in our communities.”).

60. See Philadelphia First City to Offer Green Biz Tax Incentives, SustainableBusiness.com

News, http://www.sustainablebusiness.com/index.cfm/go/news.display/id/19350 (last visited

Dec. 28, 2011) [hereinafter Green Biz].

61. See e.g., McGeehan, supra note 29 (after only eight years, Pfizer and 1,400 jobs left New

London, which had developed an economic development plan for and around the company and

defending the plan in the lawsuit, Kelo v. City of New London, 545 U.S. 469 (2005)).

62. See Green Biz, supra note 60 (noting that 51% of B corporations have public transporta-

tion or car-pooling incentives).

63. Students, Employees Get Free Ride on DART Buses (Dec. 6, 2007), http://www.drake.edu/

news/db/official/archive.php?article=2485 (last visited Dec. 28, 2011) (“Under the Unlimited

Access program, [Des Moines Area Regional Transit Authority (DART)] and an employer estab-

lish a set annual payment based on current ridership and/or annual bus pass purchases. In

exchange for the set annual payment, all employees of the organization are able to ride all DART

bus service for free by simply showing their employee ID.”).

64. See Green Biz, supra note 60 (noting that 72% of B corporations use renewable energies).

65. Rudi Keller, City Powers Ahead on Renewable Energy, Columbia Daily Tribune (Nov. 28,

2010), http://www.columbiatribune.com/news/2010/nov/28/city-powers-ahead-on-renewable-

energy/ (last visited Dec. 28, 2011) (“The electricity—2.1 megawatts or enough to power about

1,500 homes—is among the cheapest power in the city utility’s portfolio. It costs 3.8 cents per

kilowatt-hour, compared with 6.3 cents per kilowatt-hour to burn coal in the city power plant”).

66. http://www.fcgov.com/recycling/trash-rates.php (last visited Dec. 28, 2011) (“Pay-as-you-

throw programs are good for the environment because they encourage people to reduce, reuse

and recycle. Less waste and more recycling mean that fewer natural resources are used, less

energy is consumed and less pollution—including greenhouse gases that contribute to global

warming—is created from manufacturing. In addition, landfill space is used at a slower rate,

reducing the need to site new facilities.”).

67. Sandy Bauers, A “Green” City Plan to Reduce Storm Water Runoff, Philadelphia Inquirer

(Feb. 5, 2010), http://www.pecpa.org/node/920 (last visited Dec. 28, 2011).

68. Notwithstanding the above, traditional methods of tax incentives and revenue incentives

could be altered to impact sustainable businesses. See, e.g., Green Biz, supra note 60 (stating that

Philadelphia voted to give tax breaks to businesses that pass the B Lab’s corporate rating system

for sustainability).

69. See Global Reporting Initiative, http://www.globalreporting.org/ReportingFramework/

ReportingFrameworkOverview/ (last visited Dec. 17, 2010) (“The Framework is applicable to

organizations of any size, constituency or location, and has been used already by many hundreds

of organizations around the world, as the basis of their sustainability reporting. Information-

seekers can more accurately interpret disclosed information if it is communicated through the

GRI’s credible, comparable framework.”).



70. See B Lab, http://www.bcorporation.net/index.cfm/fuseaction/content.page/nodeID/

f6780de0-cf1b-44a3-b8e4-195abbe68fb5 (last visited Dec. 28, 2011).

71. Email to Jonathan Rosenbloom, Dec. 14, 2010 on file with author. See generally Alyssa

Dizon, Study Shows Clean Energy Would Provide Big Boost for West-Texas Economy, Lubbock

Avalanche-Journal, Aug. 23, 2010, http://lubbockonline.com/local-news/2010-08-24/study-

shows-clean-energy-would-mean-big-boost-west-texas-economy (last visited Dec. 28, 2011)

(stating that state could adopt a variety of initiatives focused on wind energy to increase jobs by

22,000 and revenues by $280 million annually).

72. For more information on sustainable procurement, see Danielle M. Conway’s chapter 3

herein.

73. For more information concerning green building codes, see J. Cullen Howe’s chapter 7

herein.

74. These can be straightforward requirements for building codes, such as mandating LEED

construction, or they can be renovations to enhance sustainability. See, e.g., Joan Gralla, NYC

to Curb Water Runoff with Blue and Green Roofs, Reuters.com (Sept. 28, 2010), http://www.philly

.com/philly/blogs/greenliving/City_breaks_ground_on_first_solar_plant.html, (last visited

Dec. 15, 2010) (noting New York City’s desire to require blue or green roofs on public buildings to

control runoff and save billions of dollars).

75. See, e.g., Sandy Bauers, City Breaks Ground on First Solar Plant, Dec. 14, 2010, http://www

.philly.com/philly/blogs/greenliving/City_breaks_ground_on_first_solar_plant.html, (last vis-

ited Dec. 28, 2011) (noting Philadelphia’s construction of its first solar plant and its goal to pur-

chase or generate 20% renewable energies).

76. Kearney, supra note 35, at 1.

77. Joel Makower, State of Green Business 2010, GreenBiz.com at 4 (Feb. 2010) (“Everyone from

Washington to Walmart is demanding companies provide more information about the environ-

mental [and health and social] impacts of what they do.”).

78. John D. Sutter, Growing Excitement, Expectations for Green Jobs Corps (Mar. 2, 2009),

available at http://www.philly.com/philly/blogs/greenliving/City_breaks_ground_on_first_

solar_plant.html (“Government support has rallied excitement for the prospect of a green jobs

corps, as President Obama’s stimulus package puts about $20 billion into greening the economy,

according to the White House. Video Obama says country will double renewable energy in three

years. In his recent speech to Congress, Obama said the U.S. will double its supply of renewable

energy in three years. To do so, he’s calling on a new class of workers to be trained in environ-

mental fields. Green jobs training programs will get $500 million from the stimulus.”); Email to

Jonathan Rosenbloom, Dec. 14, 2010, on file with author (“Direct purchases for the local gov’ts

own facilities; inclusion in the local gov’t promotional programs [including information cam-

paigns and consumer funding or financing] are two good demand pulls.”).

79. See, e.g., Maryland Senate Bill 690 (2010).


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