Pro bono and ESG: new standards for law firms

Stephanie Cruz

Albagli Zaliasnik, Santiago

scruz@az.cl

The initials ESG stand for Environmental, Social, and (Corporate) Governance. The term refers to a subset of performance indicators of a non-financial nature which include ethical, sustainable, and corporate government. These three factors are key criteria for measuring the sustainability and ethical impact of an investment in a business.

The environmental indicator refers to a company’s policies regarding its impact in the natural environment: air or water pollution, waste management, resource depletion, climate breakdown and other contamination factors. The social indicator refers to the interaction between a company and its employees or other third parties. This factor concentrates on working conditions, health and safety, effects of the company’s products, supply chain policies, and local communities. The governance indicator refers to how a company organises and governs itself. These concerns generally relate to diversity in the designation of the board, executive structure and remuneration, corruption and other policies.

In recent years there has been a notable positive shift towards implementing ESG standards in companies of all industries and sectors. Many companies have implemented ESG initiatives because it attracts more investors as ESG-conscious corporations tend to instil more trust in consumers thereby generating increased business. Consequently, it has become a ‘must-have’ for top tier companies and those hoping to be one.

These sorts of standards will slowly become a matter of public policy for many more countries including those in Latin America, where we can see that this tendency is increasing. For example, Chile became the first country in Latin America to set carbon neutrality targets for 2050 through the Climate Change Law which was approved in 2022. As a matter of public urgency, this law establishes principles for the public policies that refer to climate change, while also integrating a gender perspective into climate change policy. More importantly, this law involves the private as well as the public sector, establishing both as major actors in reaching carbon neutrality goals.

As lawyers, we are in an exceptional position to accompany and support our clients to react to regulatory changes in this area and to create forward-thinking structures to meet and, ideally, surpass government and investor demands.

What does ESG have to do with pro bono?

ESG standards cross over and intersect all industries and sectors, including the legal profession. Law firms are also under scrutiny to meet their ESG standards by building, maintaining, and enhancing their own environmental, social and governance standards. In this context, law offices should also implement policies which conform to the new socially conscious benchmarks.

On the environmental side, law offices are not traditionally considered to have a significant impact on the environment. That said, this could be measured not only by eco-friendly waste and utility rules, but also by the very client portfolios that a firm chooses to manage or represent. On the governance factor, firms can be gauged by their own board diversity, remuneration structure, gender-based career plans, and work environment. When it comes to the social factor, law firms worldwide have the major advantage of being able to meet this standard continually through their pro bono work.

The impact that a law firm can have in its local community through pro bono work is truly immeasurable. While some law firms decide to take on a few special cases during the year, other firms have instituted their own pro bono legal departments dedicated to making thoughtful decisions about the focus of their programmes. Then there are also other law firms that have pro bono as part of their core institutional values and have established internal protocols and objectives for their lawyers who are expected to take on pro bono work. There are even a small number of firms which have become B corporations. As we can see, there are many ways that law offices can make pro bono part of their culture and comply with their corporate responsibility.

Furthermore, it is possible for law firms to take a firmer and broader stride in this path by taking on specific ESG-oriented pro bono cases that will have an impact on any of the three indicators.

Overall, through pro bono work, firms can effectively demonstrate that they are not only professionally capable of assessing and advising their ESG conscious clients in their regulatory concerns and needs, but that they also mirror their efforts in promoting their own social ideals by offering their legal services to improve their support of the people and communities they serve.