Why leading with your ESG strategy is good for business
ESG proponents often talk about the value capture opportunities for businesses that incorporate sustainability principles into their strategy, writes Dr Rachel Baird.
These opportunities can also be realised by legal practitioners who advise businesses on this sustainability journey, from those transitioning from a heavy carbon footprint to those simply seeking to reduce their environmental and social impacts.
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The business case
If government and businesses were in climate denial before the recent federal election, the clear voter message sent to Canberra, along with many green and teal members, is that sustainability matters. Yet it’s been a slow burn. The 1992 Rio Declaration states: “[H]uman beings are at the centre of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature.” Three decades later, this principle is a good starting point for businesses contemplating their strategy on ESG.
Let’s put to one side the clumsiness of the ESG acronym. At its heart, it is about managing the environmental and social impacts of human activities, balancing the planet, people and profit. When I started practising environmental law (last century), it was suggested more than a few times that perhaps this was a niche area that would not last. My reply was that environmental and social considerations touch every aspect of human activity and hence every aspect of legal practice. This is true now more than ever, but the stakes are higher and not just for the carbon-heavy industries.
Legal practitioners (and their firms) who demonstrate commitment to and understanding of their own environmental and social governance will benefit in two key aspects:
- They will be better equipped to advise clients navigating business transitions, and
- They will be seen as part of the sustainability solution moving forward, whilst laggards will slip away.
Professional services businesses, such as law firms, employ people, consume energy, generate waste, travel to meetings and buy supplies. These are just some of the impacts to measure and reduce. Then there are pro bono programs and community-giving initiatives, which many firms support and which deliver a direct social benefit. The positive impact on the wellbeing of lawyers involved is another benefit.
Advising on ESG from a place of knowledge and experience establishes authenticity and credibility not just with clients, but all firm stakeholders. Through developing their own sustainability strategy, firms (and chambers) can gain an understanding of the process, the challenges, resourcing constraints and pathways to successful outcomes. This translates to more informed and practical advice – something every client welcomes. As we’ve seen with the increasing number of greenwashing claims, ESG is an issue where credibility matters, so acting from a secure platform is an added benefit in establishing your firm’s commitment to this global challenge.
Lawyers are in the unique position of advising across a vast range of business activity. Aspects of ESG will touch on commercial activity from contracts to construction and investment in renewals to litigation. Those who can demonstrate an ability to consider and advise on the sustainability issues that arise will gain a commercial advantage.
In the examples outlined below, I’ve not directly addressed governance because it is such an integral part of good business that it should already be part of the business framework (acknowledging that it’s often executed poorly). Hence my lack of enthusiasm for the ESG acronym. For me, environmental and social sustainability is a critical factor for all businesses – boards and management alike – to consider when governing. Along with cyber security, workforce health and safety, financial performance, risk and compliance. Again, these aspects of governance touch upon legal practice areas.
This list is not exhaustive; rather it outlines some of the opportunities for lawyers to incorporate sustainability into their existing practice area, having first considered their own ESG strategy to lead the way.
- Banking and Finance – Advice to clients on de-risking investment approval opportunities via strategic sustainability practices, identifying sustainable investment options (e.g. renewables) and spotting “greenwashed” investment opportunities.
- Commercial law – Advice on tender selection criteria addressing ESG strategies or policies and positioning to meet selection criteria. Clauses on modern slavery, ethical supply chains and third-party ESG credentials. Litigation following false claims about the sustainability/origins of products.
- Construction law – Contract advice on sustainable materials or the carbon load of materials, green steel, building ratings, and lease terms for tenants seeking sustainable premises.
- Environment and Planning – Approvals advice, navigating objections, demonstrating new projects are sustainable, regulations, litigation.
- IP/Technology – Advice on investment and ownership of innovative design for new technology, renewables, research and development into green and clean technology, and trademarks.
- M&A – Corporate transactions as businesses transition from fossil fuels to renewals or clean energy, via demergers, mergers, and takeovers.
- Property – Advice on commercial transactions, property values, litigation as values decrease in areas impacted by adverse weather events, investment and sales.
- Estate planning – Advice on bequests for the benefit of the environment or community, establishing grants or scholarships to promote sustainability.
- Criminal law – Understanding the social impacts of criminal laws, impacts on disadvantaged communities and innovative solutions for rehabilitation.
- Family law – Promoting mediated outcomes that benefit families and communities.
- Employment and WHS law – Advice on employee contracts, benefits, leave, safety, community employment programs, traineeships, diversity and inclusion.