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“The whole thing is a bit over the top for us law firms. ESG is not relevant for us law firms. We are legal service providers and must help clients to conduct their transactions in a proper legal manner.” Thus a lawyer’s answer to the question asked by an HSG student (survey, February 2022), as to whether she already had to supply information about ESG in a request for proposal (RFP).
In my view, this view falls short in a variety of ways. Legal service providers are indeed challenged by questions of sustainability, and this on two fronts at the same time: as advisers of their customers and as individuals who bear responsibility in their own company or department.
Understanding customers is good for the business of legal advisers…
The good news first: there are always new fields in which customers require support from legal advisers. For law firms, this is good for business, and it helps legal departments with their raison d’être. In the last few years, the following new challenges can be adduced: compliance, data protection, cyber security, ESG and currently artificial intelligence. If legal advisers do not merely want to provide customers with legally correct advice but with advice that is also useful for themselves and their daily business, it is indispensable for them to be conversant with their customers’ environment, difficulties, and requirements. Today, this also includes the issue of sustainability.
To convince customers of the own services, it is not sufficient to be aware of the latest regulations concerning non-financial reporting and to draw customers’ attention to them. Rather, it is necessary to understand what this issue does to a company and its functions, which finally have to satisfy these requirements. This is not only about legal and compliance but also about further functions such as risk management, internal and external audit, finance, controlling, HR, marketing and communication, to name the most important ones. All these functions must closely cooperate with regard to this issue and to bring their specific perspectives on things into play in order to be able to achieve an optimal result for the company together.
… and relevant to an entrepreneur’s own operations
But this issue is also relevant for entrepreneurs, be they partners of a law firm or general counsel of a legal department. It does not only concern the top line, but also the bottom line. When companies purchase external goods and services (such as legal services), they must also pass on the demands made on them by their customers to their own suppliers in order to continue to remain compliant. In addition, employers must be able to stand their ground in the fiercely contested recruitment market. If they want to be successful in the “war for talent”, they must have convincing answers today to the question as to what their purpose is or what efforts they are making towards climate protection. And if they are familiar with the expectations and challenges of the various reference groups and stakeholders, they can position themselves accordingly and provide quick and competent support (key words: turnover, profit, specialist groups, trusted adviser).
Spring awakening in the matter of sustainability
Was sustainability a mere hype that is already over? Are we finally allowed to devote ourselves to new challenges such as artificial intelligence? By no means! After all, the next stage has just been heralded with a veritable bang, which might even boost the issue of sustainability. The KlimaSeniorinnen association has been conducting a legal action against Switzerland for years. The last stage to date is constituted by the ruling of 9 April 2024 by the European Court of Human Rights (ECHR), which found that Switzerland had violated Art. 8 ECHR (right to respect for private and family life) because it had not taken sufficient action to reduce global warming, which has adverse effects on the health of old-age pensioners, in particular. Whether the court went too far with this ruling or even passed a political judgement, which can be observed critically also in similar cases, need not be discussed any further here. The decisive factor is that this ruling will have an impact throughout Europe. The extent to which this ruling will change the behaviour of companies remains to be seen. In any case, companies will have to deal with the hazard of climate litigation even more than before – a blessing for litigating lawyers.
To return to the initial question as to whether the issues of sustainability and ESG are relevant for lawyers: yes, they are, in more than one respect. However, those who merely regard them as a further turnover option for law firms or a raison d’être for legal departments have not quite fathomed out all the consequences. If this is the case, it must be feared that this view will also be held with regard to issues such as innovation and artificial intelligence. But more about this in one of the next newsletters.