To get greener, is Philadelphia willing to give up some green?

That was the central question yesterday as City Council's Finance Committee considered a proposal to give annual tax breaks of up to $4,000 to certified sustainable businesses. Those are companies determined to be not only environmentally responsible, but socially generous.

The proposal by Councilman James F. Kenney would grant eligible businesses an annual credit, to be used to offset the city's business privilege tax on gross receipts.

If the tax break is approved - the Finance Committee voted to send it on to the full Council for consideration - Philadelphia would become the first city in the country to adopt a financial incentive for sustainable businesses.

"What we're trying to do is create an environment and a culture that incentivizes not only sustainable building, but sustaining people," Kenney said in an interview before yesterday's hearing.

The message to Philadelphia's business community is, "We want you to turn your attention to some of the social issues that face cities," he said.

A local sustainable business might, for instance, recycle paper, glass, and plastics; eliminate use of incandescent bulbs; and provide employees family-supporting wages and benefits. It might buy its supplies from local companies, hire underprivileged people from the surrounding community, and help fund low-income housing in that neighborhood.

It is a business that seeks to "minimize environmental impacts while improving the local community," Katherine Gajewski, the city's director of sustainability, testified in support of Kenney's legislation.

"Our aim is to grow as a green city, to embrace energy efficiency and social equity not only as core values, but as investment strategies for our community," said Gajewski, whose office would certify which businesses would be eligible for the tax credit.

As currently proposed, the tax break - also supported by the city's revenue commissioner and the Greater Philadelphia Chamber of Commerce - would be a pilot program in effect for tax years 2012 through 2017, after which it would be reviewed for possible extension.

In written testimony, Leanne Krueger-Braneky, executive director of the 500-member Greater Philadelphia Sustainable Business Network, hailed Kenney's proposal as "the city's first step towards providing tangible support for employers who are already doing the right thing for their employees and the environment, and who do not benefit from all the resources spent on business attraction."

Her support was tempered somewhat after learning that the proposal had changed since her testimony was filed. It now says no more than 25 businesses would be eligible for relief in any given tax year, thus capping at $100,000 the amount of business privilege tax the city would forgive sustainable businesses each year.

The estimated business privilege tax revenue for fiscal year 2010 is $369 million, according to Kenney's office.

"I know of more than 25 companies located in the city right now with strong social and environmental practices, and do not think they should have to race against each other to get their applications submitted first in order to be rewarded by the city," Krueger-Braneky said in an e-mail late yesterday afternoon.

Kenney said he would have been in favor of expanded participation if the economy and the city's finances were in better shape.

The legislation defines a "sustainable business" as one that meets the standards of B Lab, a nonprofit in Berwyn that has been certifying sustainable and socially responsible businesses since 2007.

The 240 businesses in 28 states B Lab has certified have demonstrated they have "exceptional environmental and social practices," cofounder Bart Houlahan said in an interview before yesterday's hearing.

Houlahan told the Finance Committee that B Lab's evaluation process includes about 200 questions that explore a company's impact on its employees, its consumers, the environment, and the community.

Onion Flats, a sustainable development, building, and design company based in Kensington, is pursuing certification through B Lab because it "represents a more holistic approach to business," cofounder Tim McDonald told the committee. The prospect of getting a tax break for that effort makes the decision "a little easier."

Council could take up the issue as early as tomorrow. A vote to implement the tax relief could not come before Dec. 3, Kenney said.

Contact staff writer Diane Mastrull at 215-854-2466 or dmastrull@phillynews.com.