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Is AI driving ESG?

As environmental, social and governance (ESG) considerations continue to grow, amid new renewable energy and climate developments, it should be considered whether new and emerging technologies for legal practices, big and small, go hand in hand with meeting ESG targets.

user iconLauren Croft 31 May 2023 Big Law
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ESG has been identified as one of the key trends for the legal profession this year, with nine in 10 business leaders concerned about all aspects of environmental, social and governance and law firms needing to meet client ESG goals as well as their own.

So how can firms meet growing client expectations, both in terms of ESG concerns and innovation and efficiency moving forward? The answer may lie in artificial intelligence (AI) and other emerging technology.

ChatGPT and similar AI tech have made global headlines in the first half of 2023 and prompted waves of change within a number of industries, including the legal profession. You can read Lawyers Weekly’s full coverage of ChatGPT and other AI platforms and what lawyers need to know here.


AI has since been revealed to be able to offset gender bias in recruitment and create images based on witness statements, with KPMG partnering with Microsoft to develop “Kymchat”, a proprietary version of ChatGPT, and both Allen & Overy and PwC partnering with artificial intelligence platform “Harvey”.

And in February this year — in a first for Australian law firms — Clayton Utz built a product to help its lawyers use and benefit from ChatGPT in a “reliable and effective” way. The product initially works with another commercial AI tool to pull key information from a case. Once complete, ChatGPT converts that output into a case summary. This summary is then reviewed by a lawyer for any required edits.

Implemented firstly within the firm’s ESG practice, this product meant that a backlog of cases that would usually take months to summarise could be finalised in a couple of weeks, freeing up lawyer’s time — something particularly valuable after the growth of the ESG sector in recent years.

In addition to AI technologies, ESG has been revealed to be one of the top key trends for the legal profession in 2023 — with tech and ESG also tipped to drive M&A throughout the year.

ESG goals made easier with AI

A good case has already been made that leading with an ESG strategy is good for business, as well as why legal teams should go beyond compliance issues and offer their clients a variety of lessons on the ESG front. And according to MinterEllison senior associate Phoebe Roberts, “AI and new technologies are critical to addressing ESG goals”.

“In particular, ‘big data’ and large language models will be critical in collecting, collating and interpreting data and information to arm organisations, investors and market participants on their ESG journey with decision-useful information,” she said.

“However, as ESG is an emerging field, large language models such as ChatGPT, which rely on large and general historical data sets, will require a human overlay to apply the sufficient forward-looking insights and nuance required for ESG to really harness their transformative power.”

Despite there being a number of risks associated with AI technologies, particularly when used within workplaces, many law firms have found that leveraging this type of technology has made achieving ESG objectives easier.

Allens corporate partner Jessica Mottau corroborated this — and said that she’s currently seeing emerging technologies that are targeted at helping corporates address ESG concerns.

“On the decarbonisation front, in particular, there has been an uptick in the use of digital technologies — for instance, smart metering and other IoT devices, combined with data analytics and AI tools — to enable organisations to capture accurate operational data in real time, and derive insights into potential operational efficiencies. As ESG reporting obligations increase and standardise in nature, we expect the demand for data capture and reporting tools to also grow,” she added.

“Aside from leveraging technology to achieve ESG objectives, it’s increasingly important for organisations to consider the ESG impact of any technologies they are procuring (for any purpose) — particularly against the backdrop of an evolving regulatory landscape and shifting community expectations.”

Emerging governance and compliance technologies being developed include tools that support sustainability reporting, GHG emissions data management tools and carbon tracking software, as well as devices to improve traceability in supply chains.

Gilbert + Tobin partner Ilona Millar explained that these types of tools “help ensure companies can track and be accountable for their environmental and social impacts” — a number of which G+T clients have already started using.

“Many of our clients are deeply embedded in the energy transition. We are working with a number of highly innovative companies that are developing new technology solutions to support decarbonisation across the industrial, energy, transport, agriculture and waste sectors (to name a few). Having a curious mindset and genuine interest in the science and technology that underpins these solutions enables us to better connect with our clients and tailor legal solutions that are practical and responsive to their needs,” she explained.

“A number of our clients are also starting to use software tools that enable the capture of ESG data to inform corporate disclosures. For example, in the modern slavery context, platforms such as Sourcemap are being used to map business supply chains and assist in the identification of modern slavery and human rights risks for clients. This then provides a data point which can inform reporting and compliance obligations, such as the preparation of modern slavery statements.

“In terms of using new technologies ourselves, as a firm, we are investigating the use of enhanced ESG reporting tools. In the ESG practice, we are also testing the application of AI tools such as ChatGPT and exploring how they could support the delivery of efficient advice on risks and opportunities across the different areas of ESG. By way of example, you can run a search for comparative examples of disclosure statements relating to climate risk in a particular industry and have that information to hand in under 30 seconds.”

Driving efficiencies in such a growing practice area is important — in fact, a report from Herbert Smith Freehills late last year revealed that ESG was a concern for 90 per cent of business leaders.

Speaking to Lawyers Weekly, HSF confirmed that emerging technology and data are both at the top of their clients’ strategic agendas, playing into ESG on all fronts.

According to the firm, they have “invested significantly in meeting client needs by establishing a global, cross-practice team called the Emerging Technology Group”.

“Our Emerging Technology Group which brings together a global network of over 300 tech-savvy lawyers to help businesses of all shapes and sizes capitalise on the opportunities offered by emerging technologies, while complying with fast-changing law and regulation, particularly in the context of ESG compliance to minimise ESG risk,” the firm said.

“Examples include of the group’s work include matters that focus on blockchain and digital assets where we support many leading incumbent and emerging businesses, together with investors and wider ecosystem participants, on cutting-edge transactions, regulatory compliance, and disputes that frequently touch on elements across the full spectrum of ESG issues and artificial intelligence where we help clients navigate the complexities of legal or regulatory landscapes surrounding artificial intelligence and machine learning technologies.”

With renewable energy and ESG now being issues that sit firmly in boardrooms and C-suites — and climate-conscious lawyering growing in popularity, ESG trends will continue to shape the legal landscape moving forward — both in terms of legal departments continually integrating ESG into their day-to-day and larger corporates scaling their ESG strategies, outlined MinterEllison Consulting risk and regulatory director Cécile Walton.

“In a field as dynamic as ESG and in light of fast-evolving societal expectations, AI presents some tantalising prospects for corporates looking to operationalise their strategies at pace and at scale. AI has tremendous potential to improve the effectiveness of decision making given the sheer complexity of the challenges we collectively face, for example, with regard to climate change,” she added.

“As technologies improve and we become more adept at harnessing the benefits of AI, it will be important to remain vigilant to avoid unintended consequences such as the introduction of bias or discrimination in the way decisions are made. Human judgment and experience will remain critical in decision making, and we anticipate the regulatory and legislative landscape surrounding AI will evolve rapidly in recognition of these challenges.”

MinterEllison has a team of lawyers, developers, and data analysts who work with their ESG teams to support clients as they navigate their sustainability agendas — and have implemented various technologies to drive efficiency.

“Technologies we see as critical to this include AI, RPA and ML, brought together through hyperautomation, to streamline operations and increase accuracy in baselining, data ingestion, measurement and reporting. 5G, virtual and augmented reality, IoT and related technologies will play important roles in business continuity functions, while AI-powered data analytics and visualisation solutions will allow enterprises to better manage, track and measure the vast amounts of sustainability data being gathered,” MinterEllison head of legal operations Naomi Hickey-Humble explained.

“Bringing these together through hyperautomation strategies will create integrated, end-to-end automated solutions for decision-makers in real time, enabling continuous improvement, predictive insights and adaptive decision making to elevate business intelligence and optimise ESG performance.”

New tech goes hand in hand with ESG

As Clayton Utz noted earlier this year, existing remote sensing and satellite technologies, advanced modelling, digital twins, drone technology, robotics, big data interfacing and advanced machine learning algorithms are all having significant impacts on different aspects of the ESG sector — and will only continue to.

Similarly, according to HSF’s ESG and Emerging Technology groups, AI and similar new tech have the “capacity to turbo-charge ESG agendas, delivering improved sustainability outcomes through a holistic approach to corporate performance provided proactive and considered adoption of emerging technologies”.

The firm has already encountered this in a number of areas across ESG broadly.

Within the government realm, the use of IoT sensors in combination with powerful data analytics and automation is enabling “smart” technologies to operate buildings, plants and equipment more efficiently, reducing emissions.

“We’re also seeing the use of blockchains and digital assets to facilitate tokenisation of verifiable environmental credits to drive positive environmental outcomes. Sensors and satellite imagery can provide real-time data on key environmental metrics, like water quality and pollution, and allow companies to understand environmental impacts in their value chains, for example, in relation to deforestation and land management,” the groups said.

“AI systems can help companies better map and understand their Scope 3 emissions, for example, by collecting available data and allowing more accurate transpositions or estimations of data where primary data is lacking.”

The deployment of emerging technologies can also have significant impacts on society, especially where historical bias is perpetuated or magnified.

Because of this, HSF said that “companies should consider how blockchain can be used to ensure traceability of material through the value chain, for example, to mitigate against risks that forced labour has not been used in extracting raw materials”.

Data governance in the “modern age” also needs tight controls around the protection of personal information, which HSF said could be improved with the use of AI.

“As human interactions with and through digital systems increase, businesses will have heightened obligations to protect customer’s data through principles of data stewardship. This will become increasingly important as our digital interactions continue to map out our increasingly detailed unique digital twins,” the firm said.

“The use of artificial intelligence carries with it a risk of unanticipated outcomes, with potential to infringe the rights of others, whether it is employees, customers, trading partners or rights holders whose data has been exploited without consent. To understand the risks involved and to mitigate the harm to individuals, a business must have an ethical AI governance policy to address and control the implementation and use of AI across the business.”

As suppliers to organisations, being across these new technologies and how they can improve client outcomes and drive ESG strategies should be high on the priority list for law firms, added Ms Millar.

“In terms of ESG specifically, many companies are looking to align the values of their suppliers with their own. Law firms, like other suppliers, will increasingly be expected to disclose performance across key ESG areas,” she said.

“Being able to accurately capture and report on performance (for example, through the use of some of these emerging ESG tools) will be important to facilitate this type of disclosure. Firms should be ready to embrace innovation and technology as a means to deliver more efficient client outcomes across all aspects of legal practice.”

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