In-house lawyers drive climate action
The recent Law Society In-house and Public Sector conference focused on the theme of environmental, social, and governance and its impact on businesses across the public and private sectors. Mary Hallissey reports.
Environmental, social and governance (ESG) and its impact for businesses across the public and private sectors was the theme of the recent In-house and Public Sector Conference, organised by the Law Society’s committee of the same name. Committee chair Caroline Dee Brown said that it had been decided to further develop the theme of last year’s conference.
Adam Woodhall, chief executive of Lawyers for Net Zero, told the conference that big organisations make big promises, but those pledges need to be delivered. The organisation he founded now has over 100 in-house lawyers committed to ‘net zero’.
In-house lawyers can drive action with climate contract clauses and by being professionally curious about the strategies that are in place in their own businesses, he said. He pointed to the Russian invasion of Crimea in 2014, which was met with general indifference.
“Nobody particularly did much, especially businesses,” he stated, and Russia hosted the World Cup in 2018, although it was occupying another sovereign state at that time. However, the impact of sanctions following the invasion of Ukraine earlier this year saw matters change very quickly. “Things can change quickly,” he said.
Energy revolution
Fossil fuels may go the way of fax machines, which worked well for a long time as the ubiquitous business communication tool, Woodhall noted. “New technology suddenly takes over and that’s actually happening with the energy revolution,” he continued.
The working-from-home-revolution offered another example of sudden successful change, he added. What seemed impossible suddenly became possible, he said. The challenge is to prioritise and make things happen, he said.
In-house lawyers must examine the risks to their business, because reputation is extremely important in ESG, as is allaying accusations of ‘greenwashing’.
Lawyers need to “back themselves” and work out what is the right thing to do in each territory, and where to spend time and energy. The right thing for the organisation must also be the right thing for society and the world at large, he said. “This isn’t going to be an easy thing. We’ve got a big problem if they are treated as a second- or third-level priority.”
Leadership issue
“This is a leadership issue,” Woodhall added, and Lawyers for Net Zero offers peer-to-peer accountability, motivation, and learning through their impact programme. This process guides in-house lawyers to create an action plan and supports them to take meaningful action. “What’s clear is that Ireland is now really working to lead on this,” he said, with ambitious climate actions proposed.
While there may be fears that renewables will be more expensive, in fact, they are now generally much cheaper than fossil fuels, he said.
In-house lawyers are at the centre of the Venn diagram of climate transition, business, government and law, he added. The lawyer’s persona offers a position of influence and opportunity, particularly on greenwashing, where organisations might overstate or misrepresent environmental claims.
In-house counsel can ask the questions that will influence the senior leaders in their organisation. Lawyers must be careful not to allow business leaders to tell greenwashing ‘porkies’, he added. “This is a legal challenge and opportunity. You can be part of the legal future,” Woodhall added.
Abby Semple (senior associate, Greenville Procurement Partners) told the conference that in-house lawyers can be crucial to climate action.
Public procurement accounts for approximately 14% of GDP across European countries, she explained, and it’s also responsible for a large percentage of greenhouse-gas emissions.
Green public procurement (GPP) is not a new concept. From the mid to late ’90s, the local authority sector sought the delivery of environmental or social outcomes, for example in Nordic countries. “Local governments often see both the environmental and social impacts of their spending more directly in their local communities,” Semple noted.
EU law had to catch up with practice on the ground, and it was only in 2014 that the major reforms were undertaken to introduce provisions around sustainable procurement and lifecycle costing, which evaluates the total cost of ownership of an asset, such as a building or a
road.
Legal challenges rare
Despite an extensive history of sustainable procurement across Europe, legal challenges are relatively rare at European level. Only a handful have made it to the European Court of Justice, of which only two were partially successful.
“It’s not an area that is particularly fraught with legal risks,” she said, “but purchasers are sometimes concerned that if they set high environmental standards, there won’t be any products or services to meet them.”
An increasing suite of legislation effectively mandates public bodies towards green vehicles or buildings, in line with the European Commission’s flagship ‘Green Deal’ policy.
In 2021, the EPA published updated guidance for the public sector, which Semple worked on. The EPA and local-authority sector have also sponsored large-scale training programmes on GPP. “We’re really seeing an attempt to use public procurement as a lever to push the market in a particular direction,” said Semple.
Social risks
The public sector, as a major purchaser, must also take note of social risks, such as low pay or human-rights abuses in supply chains – for example for ICT equipment, textiles or medical supplies.
Ireland does not have any concrete policy or guidance on socially responsible procurement, but the public sector has an equality and human-rights duty under the Irish Human Rights and Equality Commission Act 2014, Semple explained, which also extends to procurement.
Public bodies must focus on environmental or social impacts that are directly linked to what they are purchasing, she added, rather than looking for general corporate ESG policies. An example would be to source reused or upcycled furniture from a social enterprise.
Investment funds
Patrick Daly (legal director of the product legal team at Fidelity International) spoke about recent major changes in the investment funds sector, with a move to sustainable investing and an increased demand for financial products with an ESG focus.
Though clean and socially responsible investment is long established, it was previously a relatively niche area, but is now all-encompassing, with much more focus on ESG issues, he said.
Policy and regulatory changes have spurred this on, in particular the European Commission’s Action Plan: Financing Sustainable Growth, published in March 2018, and a package of sustainable finance measures adopted following this in May 2018. The primary measures have been the EU’s Sustainability-related Disclosures in the Financial Services Sector Regulation (SFDR) and the Taxonomy (for Sustainable Activities) Regulation.
This has forced asset managers to pay attention to ESG issues, with disclosure obligations on how sustainability risks are integrated into investment decisions and on the principal adverse impacts of investment decisions on sustainability factors.
Additional obligations
Additional disclosure obligations apply under the SFDR with respect to funds with an ESG focus, namely funds that promote environmental and/or social characteristics, and those with sustainable investment as their objective.
These disclosure obligations are being implemented on a phased basis since March 2021. The industry has been grappling with how to apply the complex regulations, together with a large volume of supplementary implementing rules and guidance.
As an in-house lawyer within a large, global asset manager, Daly has been closely involved in the project for implementing these regulations across various fund ranges, and says that it has been a highly complex process.
For example, given managers must determine for themselves whether their funds are within the correct classifications and decide how to apply the rather broad definition of ‘sustainable investment’ under the SFDR, they have needed to put in place a robust framework around this.
Staff turnover rates
Dr Sinead Brennan (chief people officer, NTMA) said that recruitment and retention challenges were leading to high staff turnover rates.
‘The great resignation’ is a reality in a very buoyant job market, she added, as employees reflect on their priorities, post-virus, and reimagine their futures. There is now a greater interest in freelance, part-time and contract work, and self-employment.
Employees have also experienced greater autonomy over their working lives and do not wish to relinquish that freedom.
Professional services saw a 13.4% turnover of staff in the past year (based on LinkedIn global data) – but figures approaching 20% would be deemed more problematic.
Staff retention
Empathetic and inspiring leadership will help an organisation to retain staff, Brennan noted, and employees want their work to mean something. They also desire flexibility, which is a real factor in talent retention.
“Micromanagement does not make people feel autonomous,” she warned, and experienced staff don’t require the same supervision as juniors.
Surveys show that remote workers do not feel any less aligned to company culture, she said. Leaders may also have to address skills gaps in managing remote-working environments, with clear communication lines. When staff come into the office, it must be clear what they are coming in for, she suggested. This could be social connection, mentoring, or networking. Managers also needed to be aware of ‘proximity bias’, where staff on-site get interesting projects and promotions, she said.
Candidate-driven market
Solicitor John Cronin (legal recruitment manager, Morgan McKinley) echoed the point that Ireland is currently in a candidate-driven market, which is particularly strong at mid-career level.
Lawyers who had moved in-house, in search of better work/life balance, are now being tempted back into the private sector because of hybrid work policies, he said.
Hybrid and remote set-ups are now the first item on the candidate agenda, ahead of salary, he noted. “Previously, it would always have been salary,” Cronin said, and compensation has now plateaued after 10% increases.
Younger lawyers also want to know about the ESG policies of the firms where they work, he added.
“Now is a good time to move if you are a lawyer with in-demand skills,” he said, with no sign of a market slowdown.
Remote work has also opened up opportunities for lawyers based around the country, he said. “Niche skills in investment funds and data protection/privacy are in huge demand. ESG experience is also sought after,” he said.
Broadening diversity
Michelle Noone (head of senior executive recruitment, Public Appointments Service) described the extensive efforts to broaden diversity on State boards.
In 2021, there were 187 vacancies across 71 competitions with 152 appointments, with 55% female appointees and 45% male appointees.
The Public Appointments Service has developed and implemented its strategic approach to equality, diversity and inclusion, building their understanding of the public-service workforce and workplaces and how they reflect and embrace the diversity of Irish society.
There is high transparency in the process for State boards, with the general goal of driving up corporate-governance standards, Noone explained. There are over 230 State boards covering commercial, non-commercial, voluntary, regulatory, and other public bodies. The sectors are wide ranging and include areas as diverse as arts and heritage, health, environment, transport, and education.
There are several key skills required that are common across many boards – corporate governance, financial expertise, legal skills, strategic ability, sustainability, innovation, and commercial/business nous.
The webinar was well-received, with very positive feedback from delegates, who said that the training was beneficial to them.
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