Think Global, Legislate Local
Emboldened states and cities are taking action on a range of issues.
In an unlikely alliance between a foreign country and a U.S. state, U.K. Prime Minister Tony Blair aligned with California Governor Arnold Schwarzenegger in late July to develop an international system for purchasing and selling carbon dioxide emissions.
The two politicians shared a stage in Long Beach, CA, for a high-profile announcement of their agreement. “California will not wait for our federal government to take strong action on global warming,” said Schwarzenegger, a Republican. “International partnerships are needed in the fight against global warming.”
Only a few weeks later, Schwarzenegger signed a law to reduce greenhouse gas (GHG) emissions 25 percent by 2020, making California the first state to enforce a limit on greenhouse gas emissions. Frances Beinecke, President of the Washington, DC-based Natural Resources Defense Council (NRDC), said, “The whole world has been watching to see whether California passes this bill, and now the whole world will watch as California takes the lead in developing a clean energy market.”
California’s alliance with the United Kingdom, and its precedent-setting GHG legislation, were the latest in a series of actions by states and local municipalities in areas usually reserved for the federal government. While some of the state and municipal measures have confronted legal challenges, the local initiatives are likely to demand continuing attention from those managing corporate responsibility programs.
“States and municipalities, particularly in the so-called ‘blue states,’ are not satisfied with what they consider to be lack of action at the federal level, and hence they’re moving forward consistent with the regulatory and legislative authority they have," says Bennett Freeman, Senior Vice President for social research and policy at the Calvert Group, a socially responsible investing (SRI) firm.
Indeed, in addition to California’s legislation, the governors of New York, New Jersey, Delaware and four New England states have signed an agreement to cut power-plant emissions 10 percent by 2019. And the trend of addressing climate change is not limited to states. Seattle Mayor Greg Nickels helped launch the US Mayors Climate Protection Agreement, whereby 275 mayors have promised to cut their GHG emissions 7 percent from 1990 levels by 2012.
“I think we’re going to be seeing more of this, not less, for the last two years of this administration, particularly on climate change,” says Freeman, a former Deputy Assistant Secretary of State in the Clinton administration.
But it’s not just the environment that has energized local politicians. In mid-September, Chicago Mayor Richard Daley had to use the first veto of his 17-year tenure to reject a “living wage” ordinance that would have forced big retailers such as Wal-Mart to pay wages of $10 an hour and health benefits equivalent to $3 an hour by 2010. The measure had been overwhelmingly approved by the Chicago City Council in July.
And Maryland state legislators in January overrode a gubernatorial veto to enact legislation targeting Wal-Mart, seeking to force any non-governmental employer with more than 10,000 employees to spend at least 8 percent of its payroll on employee health benefits. But the state measure was struck down in July by a federal judge who said it violated a 32-year-old federal statute intended to protect corporations from having to navigate a patchwork of benefits requirements from state to state. Other states have considered bills similar to Maryland’s law, although no other state has adopted one. Maryland’s attorney general is reportedly contemplating an appeal.
In the socially responsible investment arena, states such as Illinois, New Jersey, and a handful of others are enacting laws directing state pension funds and other public portfolios to divest from companies doing business with the genocidal regime in Sudan. State Department policy prohibits U.S. companies from doing business with the country due to its status as a state sponsor of terrorism, but the ban does not apply to foreign-based companies—so states have taken it upon themselves to enact such legislation.
And, again, there are legal challenges to the states’ actions. “The National Foreign Trade Council, a U.S.-based lobby group, is suing Illinois in federal court, challenging the ban as the equivalent of usurping power from the executive branch, which is responsible for foreign policy,” says Susan Aaronson, Director of Globalization Studies at the Kenan Institute, the Washington, DC arm of the University of North Carolina’s Kenan-Flagler Business School.
“Action at the state level gives White Houses and State Departments heartburn when there are foreign countries involved,” adds Calvert’s Freeman.
Indeed, with many state measures prompted by frustration with inaction at the federal level, attention is focused on the outcome of upcoming national mid-term elections. Says Kenan’s Aaronson: “My gut feeling is that if Democrats get in power in the Senate or House or both at the mid-term election, you will see this state action ‘federalized.’”
Bill Baue (bbaue@socialfunds.com) of Sunderland, MA, writes about social investing for SocialFunds.com and co-hosts the nationally syndicated Corporate Watchdog Radio show. Published in the Fall 2006 issue of CRO Magazine.