Ioannis Ioannou
London Business School, London
iioannou@london.edu

In June, the IBA Law Firm Management Committee,^[1] supported by the IBA Section on Energy, Environment, Natural Resources and Infrastructure Law (SEERIL), Banking and Financial Law Committee, European Regional Forum and the IBA Legal Policy and Research Unit, convened a webinar on ‘Championing sustainability in changing times: how can law firms adapt and thrive?’.^[2]

The session brought together legal experts from across the UK, EU and US for a rich discussion about how law firms can adapt to today’s evolving and uncertain regulatory landscape and continue to champion sustainability through their work with clients and at an operational level. This article captures highlights from the discussion.^[3]

The term ‘ESG’ might be going out of style, but the underlying issues remain as important as ever

In opening comments, Adrian Peyer^[4] observed that while environmental, social and governance (ESG) regulations had generally seen increasing momentum in recent years, especially in the EU, recent political and legislative trends in both Europe (where the ‘Omnibus’ proposal is under consideration^[5]) and the US (where the new administration has taken a strong anti-ESG position and various regulations including climate regulations are subject to legal challenge) may be reversing – or at least pausing – this trend.

Considering the issue of the politicisation of the term ‘ESG’ and whether law firms are changing the language of their client marketing approaches in response, Sarah-Jane Denton^[6] observed a shift toward shorter sustainability reports with toned-down language. ‘Control-F ESG and replace it with sustainability,’ has become a common strategy, Denton remarked.

Denton emphasised that despite politicisation of the term ‘ESG’ itself, the underlying environmental, social and governance issues remain critical for clients. Clients need to be careful to use language that communicates sustainability objectives without triggering unnecessary political resistance. ‘The advice we give is kind of the same as it always was,’ she remarked, ‘but we now have to introduce these difficult dynamics into that advice.’

Ulysses Smith^[7] observed that general opposition to ‘ESG’ in some jurisdictions creates an opportunity for lawyers to engage with clients on sustainability matters in a way that is more focused on value creation and risk mitigation, tailored to clients’ material priorities. ‘Clients are becoming more clear-eyed and concrete about why they’re engaging on these issues,’ Smith noted, stressing that the ESG backlash has prompted clients to reflect carefully on their governance structures and operational risks.

Clients need help navigating an increasingly complex regulatory environment

In discussing how the regulatory and political environment is shaping client expectations in the US, Smith emphasised that now more than ever, clients need lawyers with commercial awareness who can provide practical advice on how to navigate contradictory regulatory trends, such as federal-level anti-ESG laws versus stronger sustainability regulations in states such as California and New York.

Denton observed that while there is some deregulatory momentum in the UK and EU, many mandatory sustainability reporting frameworks are already well established, such as the UK’s climate-related financial disclosure standards. Denton also highlighted that due diligence regulations such as the EU Corporate Sustainability Due Diligence Directive^[8] have already had the impact of deeper discussions at board level regarding how to manage supply chain risks and adapt their business models to identify and manage ESG risks. Many businesses have already spent significant funds on double materiality assessments, and data gained through these exercises remain valuable even if changes introduced by the Omnibus proposal remove an immediate legal requirement to undertake such assessments. ‘Don’t let that expensive work go to waste,’ she advised.

Praveen Gopalan^[9] highlighted the diversity of client profiles that can be observed in the market: some clients are aiming for regulatory compliance alone, while others continue to adopt voluntary sustainability standards (such as B Corp or the Science Based Targets initiative). ‘Even within the same jurisdiction, clients can have very different wants,’ he said. Gopalan also noted that public and employee perceptions, protests and reputational risks are all continuing to shape client behaviour, making ESG advice essential even in the face of potential sustainability regulation rollbacks.

Law firms continue to innovate to embed sustainability at an operational level

It was clear from discussions that recent geopolitical developments need not impede law firms’ efforts to embed sustainability at an operational level. Gopalan emphasised the importance of collaboration between internal and client-facing sustainability teams to help ensure consistency between sustainability operations and client advice. For instance, while legal advisors understand regulatory frameworks, internal operations staff understand practical barriers such as quarterly data reporting or well-being constraints. ‘The more we talk, the better the outcome.’

‘Avoid the “this is my patch, that’s your patch” mindset,’ he advised. He illustrated this with examples from Macfarlanes, where internal teams dealing with energy efficiency and travel policies work closely with ESG lawyers.

Gopalan also noted how internal discussions on travel policies must consider not only carbon impacts but also diversity and inclusion concerns, such as the needs of people who may not be able to stay overnight.

Denton highlighted that, ‘you can dress up an energy efficiency measure as a cost-saving tactic or as decarbonization, but either way, it improves sustainability.’ She acknowledged that participating in public climate initiatives like Legal Charter 1.5 (a forum that encourages and enables law firms to transition their strategies, operations and client work in line with a 1.5-degree world) can expose firms to political backlash, but added that ‘many firms still choose to stay the course.’^[10]

Smith shared that Debevoise & Plimpton is preparing to comply with California’s climate disclosure laws, which require Scope 1 and 2 emissions reporting and Task Force on Climate-related Financial Disclosures (TCFD)-style risk disclosures. ‘Our emissions matter to clients,’ he said. Clients increasingly ask about EcoVadis scores[11] (which reflect a company’s sustainability performance, ranging from zero to 100, with higher scores indicating better management of sustainability criteria), CDP reporting and net zero alignment.

Praveen confirmed this continuing scrutiny from clients: ‘even if one client asks for it, you have to do the work anyway. So you might as well do it properly.’

Greenwashing and ‘greenhushing’ were also key concerns. Smith noted, ‘don’t exaggerate. Be concrete and specific.’ Denton added, ‘transparency is your biggest mitigator of risk.’ She warned that some clients now prefer to say less for fear of legal exposure in the US, and that ‘greenhushing’ might be a bigger concern than greenwashing this year.

Opportunities abound for lawyers to build a sustainability-focused legal practice

In closing, panellists shared their tips and tricks for lawyers looking to meaningfully build sustainability into their legal careers.

Smith emphasised that sustainability cuts across all legal practice areas and encouraged young lawyers to ‘crystallise where the intersections between the E, the S and the G are’ within their domain. Rather than leaving ESG issues to niche teams, Smith urged junior lawyers to ‘own it’ in their practice areas and become key ESG resources. He also encouraged young lawyers to ‘roll up their sleeves’ and actively participate in internal sustainability committees or projects – such as those focused on emissions tracking or regulatory compliance. ‘Be a voice and really encourage your firm to keep engaging on these issues.’

Denton stressed the importance of speaking up and acting. ‘Be brave and get involved, and do not fall into the trap of thinking, “I’m just one person, what on earth can I do in the face of something as substantial as climate change?”.’ She added that small actions matter – whether that means joining an internal committee or gently encouraging clients toward more sustainable practices.

Gopalan emphasised that all lawyers and business services professionals have a critical role to play in improving environmental and social outcomes through their work. ESG, he emphasised, affects everyone, not just dedicated ESG teams.

He advised professionals in all sectors to speak with their ESG colleagues to understand how sustainability might affect their specific field – whether in agriculture, energy or otherwise.

Peyer closed the discussion by highlighting the importance of lawyers and their clients taking a long-term perspective, and not to be sidetracked by immediate events from the long-term environmental and social challenges that ‘ESG’ seeks to address: ‘The ESG backlash will pass eventually. So will the headlines. What will remain are the decisions being made right now.’