Whilst preparing for a meeting on Thursday involving a discussion with a company on sustainability and the law, I decided to revisit some of my previous publications on the issue, whilst also taking a look at what others are saying and the latest developments.
What should the role of lawyers in sustainable business be?
Over the past four years I have spent a lot of time thinking about this question and previously expressed surprise (see the discussion in the article published in the Law Gazette on this ) at the slow uptake by lawyers on what is essentially good business and delivering greater value to their clients. The accountants have grasped this and in my view lawyers have ceded ground to them on the provision of sustainability advice to clients.
However, the increase in regulation on the subject should encourage lawyers to start grappling with these issues and consider how they can add value to their traditional models of advice.
In a report carried out by Bond Dickinson ‘Beyond Responsibility: the emerging role of legal counsel in sustainable business’ (May 2014), the focus is on the role of in-house lawyers. A key finding in their conclusion is that ‘being an effective lawyer requires not just legal expertise, but a real understanding of an organisation’s objectives and the commercial dynamics that surround them’.
Undoubtedly, the role of commercial, corporate and in-house lawyers is changing.
I recently attended an invite only workshop hosted by LexisNexis on Business for the Rule of Law (B4ROL) . It was attended by many senior in-house lawyers of major UK companies. A resounding theme that emerged was the growing realisation that commercial and company lawyers are being required to think more broadly and that understanding the complex challenges facing business today incorporates a better understanding of sustainability issues, including human rights. The Bond Dickinson report also highlights that 72% of in-house counsel believe that over the next five years sustainability will be integrated into organisational strategy primarily as a result of market pressures and commercial decision-making.
Another challenge for lawyers is to understand what we mean by ‘sustainability risk’. There is no single legal definition of ‘sustainability risk’. We have defined it as the potential impact to a business in failing to achieve a certain standard of measurement and management of its environmental, social and governance issues. See our article ‘Risk Management: Sustainability,’ for more a detailed examination of law firms’ due diligence models, and their sufficientcy to deal with emerging sustainability risks.
The definition is perhaps too long and in essence covers ‘legal’ and ‘non legal’ risk. For example ‘sustainability legal risk’ can result in legal fines and penalties for breach of legislation or contracts. There is also the cost of achieving compliance to consider. Sustainability risk which is not of a legal nature is focussed on the risks that could lead to impact of the company’s performance through damage to reputation, losing or failing to attract customers and investors, a supply chain or operational disruption, or a reduction in production levels e.g. due to lack of employee welfare. There is also clear guidance emerging for lawyers on what the UN Guiding Principles on Business and Human rights (See IBA draft consultation).
So what should lawyers be doing?
Lawyers need to think about what Training they might need on these ‘soft law’ issues (that are in fact transitioning into hard law in many cases). They should ensure that they understand how to advise their own clients on legal and non–legal sustainability risk by understanding the bigger picture and what sustainable business means. They should consider their own business practices. Do their CSR strategies only stretch to pro-bono work, or is there an integrated approach to managing their businesses more sustainably? Mostly – they should act. If need be, this could involve getting external experts in to help capacity build and train.