老司机午夜福利

Companies are under a growing amount of pressure by customers and investors alike to increase transparency around environmental, social & governance (ESG) issues 鈥� and to, subsequently, make changes to improve performance.

All this can place a lot of pressure on companies. Aside from the substantial challenges in genuinely making quantifiable and qualitative progress to ESG targets and policies, companies are also expected to report on an ever-expanding portfolio of risks and threats to their business model.

Climate and sustainability generally attract all the attention, but modern risk assessment and mitigation is now expected to tackle complex issues related to diversity and inclusion, modern slavery, bribery and corruption, cyber security, geopolitical risk and many more.

For companies that have made significant improvements, however, the feedback has been overwhelmingly positive. Not only does it have a positive influence on brand reputation, there is now a clear correlation between a company's ESG performance and their longer-term financial health. According to , strong ESG performance correlates with higher equity returns and a reduction in downside risk.

While the ESG agenda falls outside the traditional legal remit, many general counsel and their legal teams are taking it upon themselves to use their internal reach and external influence to drive ESG initiatives forward.

ESG reporting, disclosure and regulatory issues

Catie Sheret, General Counsel and Company Secretary at Cambridge University Press & Assessment, says lawyers are well-suited to driving the ESG agenda as they end up engaging with colleagues all across the business, giving them a unique perspective.

"A legal team which is curious, connected and engaged can drive change through sharing best practice and helping break down silos, as well as through the legal advice and contract drafting it provides.鈥�

View 老司机午夜福利 environmental reporting practice notes

In-house counsel shouldn't wait for others within the business to step up and take the lead, advises Neil Campbell, Managing Legal Counsel at NatWest.

鈥淚t's not someone else's problem, it's not just for ESG specialists, it鈥檚 for all of us.鈥�

There is growing regulation around climate-related reporting. In just the last two years, we've seen a significant increase in the number of governmental bodies around the globe legally requiring organisations to report on ESG metrics, with the UK being one of them.

TCFD recommendations and other ESG reporting frameworks, standards and benchmarks

Yet making changes at pace can be a challenge, particularly for large, global organisations.

鈥淲e are one big ship and trying to turn it can be slow," says Nichola Westlake, Associate General Counsel, Commercial Legal Services at Centrica.

A 2022 survey by found 95% of law departments said reconciling the trade-offs between financial and sustainability goals presented a challenge. And 99% said their workloads would increase over the next three years because of environmental and social concerns.

Neil Dodds, General Counsel and Company Secretary from Arco says:

鈥淵ou need to provide a window into your supply chain, that's what customers are demanding. There is a fine line between compliance and sustainability."

Another risk is "greenwashing" 鈥� when a company makes people believe through marketing and PR that its products or services are more environmentally friendly or sustainable than they really are.

There have been numerous greenwashing scandals in recent years 鈥� perhaps the most famous of which involved asset manager , which falsely claimed more than half the group鈥檚 $900bn assets were invested using environmental, social and governance criteria.

"Having the right level of risk [around greenwashing] means getting the right people focused, it's not a niche area. It must be part of the operating rhythm of the business," says Campbell.

Governance鈥攅nvironmental, social, governance (ESG) and corporate social responsibility (CSR)

As we have lightly touched on, there is a seemingly infinite amount of data for companies to try and get their heads around. Tackling it without the use of generative AI could put firms at greater risk of failing to analyse all the relevant data in time to make an adequate difference.

General Counsel take pride in being early-adopters of new technology 鈥� often learning from, collaborating with, or borrowing technology from other departments to improve their operations.

A July 2023 老司机午夜福利 survey revealed that, while in-house lawyers are the most likely group to be using generative AI in a personal or professional capacity, still only a mere 17% have ever used it.

Almost half (47%) of respondents to the same survey said their team was looking at opportunities to use it.

With adoption rates soaring and a wave of AI-powered products being released to the market in recent months, these figures would have surely risen since 鈥� but it still hints at a hesitancy to take the risk.

The most talked about feature of generative AI by far is the technology's ability to save lawyers a huge amount of time. Three-quarters (73%) of in-house respondents said generative AI would help their team to increase efficiency.

When asked how they would like to use generative AI specifically in their work, respondents said researching matters (66%), briefing documents (59%) and document analysis (47%) had the most potential.

One interesting use case came from Andy Cooke, General Counsel at TravelPerk, who says his team are using generative AI tools to eliminate low value tickets, answering questions like 鈥渨hat鈥檚 the registered address of [company]鈥�. They're also using it to provide knowledge on demand to increase accessibility to policy and provide basic legal advice.

Generative AI could, theoretically, be used to carry out ESG assessments of an organisation, too.

For instance, it could use pattern detection to pinpoint anomalies across multiple data sets, and then highlight findings that are worthy of review.

Isabel Parker, Partner at Deloitte Legal, says more sophisticated use cases will be developed, specifically in the area of legal risk management.

"Generative AI鈥檚 ability to digest and analyse large volumes of data from multiple sources makes continuous audit of legal risk across the entire enterprise a real possibility 鈥� provided the right guardrails are in place."

However, in-house teams will also require a full scope of emissions-tracking and broader ESG performance management metrics in order to truly benefit from generative AI.

A 2023 survey by found 43% of UK CEOs are investing in technology to support their ESG efforts. A further 55% said they are investing in the technology skills and capabilities of their teams to support their ESG efforts.

Generative AI could also be useful when tracking ESG regulations across multiple countries, such as determining if supplier contracts across different regions have Scope 3 emission clauses or not.

Many publicly available generative AI platforms have not yet reached a point where they can be fully trusted, and hallucinations are still very much commonplace.

Kay Firth-Butterfield, executive director of the Centre for Trustworthy Technology, a World Economic Forum Centre for the Fourth Industrial Revolution, says these systems are only as good as the data in them.

"Generative AI tools can give biased and other non-ethical advice and should be used, especially at this early stage, very carefully indeed."

"All the concerns we have had in the past about whether we can design, develop and use AI responsibly are extended by generative systems where we simply cannot interrogate how they have reached a particular answer."

When generative AI tools don't have access to the relevant data, they have a tendency to make up the answers, or hallucinate, says Alison Rees-Blanchard, Head of TMT Legal Guidance at 老司机午夜福利.

"This means any generated output must be checked thoroughly. However, where those tools are trained on a closed and trusted data source, the user can have greater confidence in the generated output and hallucinations will be easier to identify, as verification of the output is made easier."

Find a legal framework and regulatory guidance around explainability on Lexis+.

The elephant in the legal department, of course, is that generative AI uses a huge amount of computing power. While companies are making efforts to reduce their carbon footprint, they will need to be mindful of the impact this new technology could also have.

Recent years have seen the role of the in-house legal department cast in a new light. Instead of being seen as box-tickers, General Counsel and their teams have become strategic partners within their organisations, and are now pulled in on everything from product inception and creation, to supply chain logistics, to business development and marketing.

As a result, in-house teams are investing in specialist knowledge 鈥� the more niche areas of the law or of a particular industry that branches outside their traditional remit 鈥� to meet these new responsibilities. When they don't have the expertise or resources, General Counsel are turning to their external counsel.

Read our report on the rise in demand for specialist knowledge

The most obvious example of specialist knowledge is, as I'm sure you can guess, ESG.

Clients now expect their outside counsel to be well-versed in this relatively niche area of the law, says Mike Francies, Managing Partner of Weil, Gotshal & Manges' London office.

The firm, which has a 1,100+ strong team of lawyers globally, is currently working with University of Oxford鈥檚 Sa茂d Business School to create a specialist ESG-focused training programme for its London-based lawyers to help guide clients through ESG-related challenges.

"The purpose-built programme will cover the role of ESG in investing, reporting and metrics, ESG-linked financing, sustainable finance, and future trends affecting all areas of our clients鈥� businesses," he says.

Most other top tier firms have developed a strong ESG offering for their clients in recent years. According to , the best firms for ESG and environmental law are Allen & Overy, Clifford Chance LLP, CMS, Latham & Watkins, Leigh Day, Linklaters and Travers Smith.

Read 老司机午夜福利 practice notes and precedents on ESG and sustainability

We are also seeing law firms paying more attention to the ESG activities of the clients they take on, with .

Firms are also paying closer attention to their own ESG performance. Earlier this year we saw publicly listed firm, , which measures the ESG performance of more than 1,000 firms globally.

Alongside ESG, top-tier firms have also been quick to jump on the generative AI bandwagon 鈥� and in-house counsel have high expectations.

When it comes to implementing generative AI, just under half (49%) of in-house counsel expect their law firms to be using generative AI in the next 12 months, according to the July 老司机午夜福利 survey. Of that percentage, one in 10 (11%) expect firms to be already using generative AI.

While most in-house counsel are in favour of their law firms using generative AI, four out of five (82%) said they expect to be made aware when their firms are using it.

The firms that fail to adopt generative AI tools will find themselves priced out of certain types of repeatable work, highlights Halliwell from Pinsent Masons.

"Generative AI is going to raise the standard for how law firms add value. Firms without it will struggle to provide the same level of data-driven insight and depth of analysis that clients will come to expect."

Many firms have already launched AI-powered products to the market. We could soon see a wave of firms offering AI-powered ESG solutions that enable businesses to create and enforce their ESG commitments.