Dismantling Roadblocks to a Sustainable Transition

• Date: 01 January 2024
• Author: Jesse Lazarus.

Copyright © 2024 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120. A R T I C L E S DISMANTLING ROADBLOCKS TO A SUSTAINABLE TRANSITION by Jesse Lazarus Jesse Lazarus is an Associate Attorney with the Energy and Climate Solutions practice of Wilson Sonsini. SUMMAR Y Green startups play a crucial role in the transition to a sustainable economy, yet there is a gap in the literature about the legal and policy challenges these startups face. This Article seeks to f‌ill that gap through interviews, surveys, and focus groups with senior law f‌irm partners experienced in advising green startups, senior pro bono counsel and staff, chief executive off‌icers of early-stage green startups, and senior staff at nonprof‌it legal aid groups. The Article identif‌ies two major categories of challenges: substantive, including greenwashing, outdated regulatory frameworks, and insuff‌icient understanding of social enterprise corporate forms; and legal service affordability challenges, including when and what pro bono and discounts to offer green startups. It recommends a comprehensive set of solutions, and argues that adopting them can help accelerate the transition to a sustainable economy to secure our future. Our future depends on a full transition to a sustainable economy. 1 Entrepreneurs of sustainable startup busi- Author’s Note: All views expressed in this Article are solely my own and do not represent those of Wilson Sonsini, any previous employer, or any current or previous client. I have represented, currently am representing, and plan to continue to represent green startups in my professional legal practice, though to be clear, none of the contents of this Article should be taken as legal advice. I owe a debt of gratitude to Buzz Thompson, for originally suggesting this topic and providing me the opportunity to focus on it under his mentorship as a directed research project at Stanford Law School; and Molly Melius, for her mentorship over the course of the project and detailed feedback thereafter. I also benef‌itted tremendously from Luciana Herman’s advice and feedback on the primary research design and Article promotion and content. Thanks also to Phil Malone and Mike Winn for their feedback on the primary research surveys, Kiran Chawla for her detailed feedback on an early draft, and Bernadette Meyer and the spring 2022 class of the Legal Studies Workshop for their feedback on an early draft. Alex Evelson and Fenella McCluskie both stepped in to help answer my most obscure Bluebook citation questions before I f‌irst submitted the Article for publication. I offer my strong appreciation to the ELR—Environmental Law Reporter team for their superb editorial support, and my family and friends for their warm encouragement. Finally, my sincere thanks to all the law f‌irm partners and pro bono counsel and staff, green startup chief executive off‌icers, and senior nonprof‌it legal aid staff who anonymously participated in the primary research and all else who continue to strive, day in and day out, to build the sustainable economy and secure our future; this Article is for you. nesses (green startups 2 ) help lead this transition, 3 daring us to reimagine every aspect of the current economic order. Entrepreneurship, however, is no easy task, with approximately 75% of new U.S. businesses in the past couple of decades failing within 15 years of their founding. 4 Sustainable entrepreneurship is even more daunting—much has already been written, for instance, about the signiicantly greater market challenges and longer pathways to commercial viability for climate technology startups 5 than for more biggest health threat facing humanity,” noting that the “Intergovernmental Panel on Climate Change (IPCC) has concluded that to avert catastrophic health impacts and prevent millions of climate change-related deaths, the world must limit temperature rise to 1.5°C.” Climate Change , World Health Org. (Oct. 12, 2023), https://www.who.int/news-room/fact-sheets/detail/climate-change-and-health. In addition to the climate crisis, other critical, environmental threats to humankind that are important for a sustainable economy to address include air pollution and biodiversity loss. S ee What Is the Triple Planetary Crisis? , United Nations Framework Convention on Climate Change (Apr. 13, 2022), https://unfccc.int/blog/what-is-the-triple-planetary-crisis. 2. For the purposes of this Article, the term “green startups” refers to for-proit startup companies where a key focus of their business is the advancement of the sustainable economy. his term encompasses the terms “climate technology startups” and “clean technology startups.” 3. Cf . Lisa M. LeSage, Sticky hickets: Local Regulatory Challenges for Small and Emerging Sustainable Businesses , 31 W. New Eng. L. Rev. 673, 673 (2009); Caoimhe Ring, Patent Law and Climate Change: Innovation Policy for a Climate in Crisis , 35 Harv. J. L. & Tech. 373, 397 n.159 (2021). 4. See U.S. Bureau of Labor Statistics, Table 7. Survival of Private Sector Establishments by Opening Year , https://www.bls.gov/bdm/us_age_naics_00_table7.txt (last visited Nov. 9, 2023). 5. “Climate technology” can be deined as “technologies that are explicitly focused on reducing greenhouse gas emissions or addressing the impacts of global warming [(i.e., the climate crisis)].” State of Climate Tech 2022: Overcoming Inertia in Climate Tech Investing , PwC (Nov. 3, 2022), https://www. 1. he World Wide Fund for Nature deines a “sustainable economy” as one that “provides a good quality of life for people, stays within the limits of the planet and helps keep global warming [(i.e., the climate crisis)] well below the 2°C threshold.” World Wide Fund for Nature, Sustainable Economies , https://www. wwf.eu/what_we_do/sustainable_economies/ (last visited Nov. 9, 2023). he World Health Organization has also described the climate crisis as “the single 54 ELR 10018 ENVIRONMENTAL LAW REPORTER 1-2024 Copyright © 2024 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120. traditional software startups, 6 including an investor landscape ill-suited to support their growth. 7 Yet relatively little has been written about the legal and policy challenges facing green startups that can underlie the market challenges. his Article aims to ill an important gap in the literature by seeking both to identify some of the most critical legal and policy challenges facing green startups in the United States and to propose potential solutions to these challenges. In particular, it focuses on legal and policy challenges that are either distinct to green startups or more relevant to green startups than to non-green startups. It begins with a discussion of why such a gap needs to be illed in the irst place, including a brief literature survey 8 highlighting the dearth of coverage of the topic and why a targeted focus is warranted. Part II continues by describing the results and signiicance of original primary research 9 on the topic that includes interviews, surveys, and focus groups with chief executive oicers (CEOs) of early-stage green startups, along with senior law irm partners with signiicant experience advising green startups, law irm pro bono counsel, law irm pro bono staf, and senior directors at nonproit legal aid groups. Part III ofers recommendations, based in signiicant part on the results of the focus group sessions, for addressing some of the legal and policy challenges for green startups identiied in the primary research. Part IV concludes. I. Why Focus on Green Startups? Whereas there is at least a small pool of literature covering the legal and policy challenges facing U.S. startups generally, 10 there is a relative dearth of coverage speciic to the challenges facing U.S. green startups. 11 Aside from Lisa LeSage’s analysis of state and local regulatory obstacles facing small and emerging sustainable businesses, much of which primarily focuses on businesses in Oregon, 12 the existing literature covers only tangential topics, such as substantial discussion of law and policy issues related to green technology, 13 including clean energy innovation 14 and energy storage technology 15 in particular, as well as law and policy issues related to clean energy development. 16 What relevant coverage otherwise exists primarily focuses on green startups globally and in other countries, and ofers a more limited examination of legal and policy issues related to the barriers facing green startups. 17 Yet, in interviews and surveys with 20 law irm partners 18 and green startup CEOs with experience advising and working at, respectively, both green and non-green startups, over 70% agreed that there was a distinction between the most critical legal challenges facing green startups versus those faced by non-green startups, warranting a closer look into this topic. 19 he importance of green pwc.com/gx/en/services/sustainability/publications/overcoming-inertia-in-climate-tech-investing.html. 6. See Hara Wang & Cyril Yee, Climate Tech’s Four Valleys of Death and Why We Must Build a Bridge , Third Derivative (June 17, 2020), https://www.third-derivative.org/blog/ climate-techs-four-valleys-of-death-and-why-we-must-build-a-bridge. 7. See Peter Lee, Enhancing the Innovative Capacity of Venture Capital , 24 Yale J. L. & Tech. 611, 611 (2022); Henry Behnen et al., Is Green Technology Stalled at the Starting Line? How Anticompetitive Interests and High Capitalization Costs Are Stunting a Green Tech Boom in the United States , 4 Landslide 16, 17 (2011); cf . Benjamin Gaddy et al., Venture Capital and Clean-tech: he Wrong Model for Clean Energy Innovation 1 (MIT Energy Initiative, Working Paper No. 2016-06, 2016). 8. For a more in-depth survey of the limited relevant coverage ofered by the existing literature, see Appendix 1 below. 9. For primary...