ESG: Society Reinstated - an article for Modern Lawyer
ESG: Society Reinstated - a perspective by me in this issue of Modern Lawyer, a journal for legal leaders, about the S that is on the rise in the legal world, though its star should never have fallen, and what that means for BAU in business and institutions.
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ESG: society reinstated
At a recent industry event in London, a room of lawyers were asked to raise their hands if they were involved in Environment Societal and Governance matters (ESG). About a third raised their hand for most days. A third for occasionally.
As with many things in the law, definitions are everything. It strikes me that in this case if we have only a third of a very big room acknowledging a connection between the practice of law and environment, societal and governance issues, we either have our collective definition and thereby understanding askew, or we have a way bigger problem in the legal profession. It’s similar to not connecting everyday legal work to the rule of law, which can also be a distancing concept.
ESG is a loaded and sometimes polarizing term. It is easy to see it as something relevant only to projects such as supply chain emissions, waste reduction, and recruitment diversity. Its association with greenwashing and the new trending term ‘greenhushing’, put some people off entirely. The ESG backlash we are seeing, particularly in America, is understandable through that lens. The term is used and misused for vast influence. Nonetheless, the concepts that sit within it and which are already and increasingly embedded into legislation worldwide are a reality for every lawyer, every business and every institution. Its relevance is of broad applicability to integrity, responsibility and people-first leadership in business. We can claim and frame the term in a way that makes it meaningful and valuable beyond its current reputation.
The proper functioning of society is the reason lawyers exist. Whether we are achieving that aim today is for debate. Nonetheless, people need to be able to navigate and be protected by the law, and to be held to account in relation to it. Service to society - the S in ESG and the fulsome, upstream meaning of the more commonly used term ‘social’ - is part of the very fabric of the legal profession. Society in the universal sense, and society in terms of the clients, collectives and communities most proximate to our lives and work.
Professional regulations around the world that underpin the practice of law are built upon the responsibilities to society that flow from this. This is where the duty to the courts, the rule of law and administration of justice comes from, which bring definition to generality. Citizens and the state need to be able to trust that lawyers will not put conflicting interests of any one client above the interests of the all. This underpins the duties of integrity and of independence that all lawyers must uphold.
Every day we go to work as lawyers with or without our duty of integrity and independence clear and intact, we are in the arena of society:
Every time we seek simplicity instead of wielding complexity.
Every contract we write in clear language with an intention to transparency and collaboration, rather than negotiate with sleeper cells to usurp the ‘other side’.
Every time we depict a witness or circumstance with or without manipulation of facts.
Every time we speak up or not when something is not right, particularly in the face of pressure to capitulate.
Every time we infuse wellbeing into delivery rather than have it sit secondary.
Every time we prioritise ethics on the agenda, not skip over it because we’re out of time.
Every time we acknowledge a conflict and pause deep enough in its consideration.
Every hiring decision, every firing decision.
Every time we remind ourselves who and what we actually represent.
There are no some days on, some days off in this context. There is just the one day which is every day on repeat with our responsibility.
So too for corporations and institutions. The basis of every organisation is its contract with society. It cannot operate without entering into that contract on incorporation. Its legal existence thereafter depends on complying with its terms - ie. with legislation. In the UK, section 172 of the Companies Act requires directors to build into their operations the interests of many not only the self; to think long term about consequences; to consider employees, suppliers and customers, the community and the environment; to maintain high standards of business conduct and act fairly. These factors sit within a definition of success for companies expressed in the title of that section - to be lived operationally day to day. Perhaps except for B Corps, this is not something that finds its way into mission and value statements by design. But whether or not it is lived, it is required. It is the foundation of the right to operate, to generate revenue, to distribute that revenue, and to impact our collective lives.
And so what of a shared definition of success in this context - in the context of big S society? Is this not what should be at the heart of all laws, all systems, all organisations, all communities? A definition of success that accounts for and advances everyone?
ESG is really and foremost about the S - society. Insofar as we need reminding and as our collective buying power in public life is increasingly demanding, we deserve integrity, transparency and respect from and within our businesses and institutions worldwide, and between each other. It is true society that binds and supports us and that we can build in all our interactions. Without utopianism, this is society in its original meaning: bringing a deep care and respect for each other - honouring even - and holding that at the core of our relationships and activities. When we do that, people become paramount, decisions become easy, the law becomes secondary, and we make money in a sustainable way, i.e. without harm.
Growth and the generation of wealth is critical to society and it is something many lawyers are spectacular at supporting. This is a core part of the job. It is viable societally only when it comes at no cost of harm. This, however, is about fact not ideology. It is not for the legal community to strong arm against activity that we have as a society decided is legal, but which some feel should not be. For example fossil fuels, alcohol and cigarettes. One day these may be outlawed, but until that day, they have been given legitimacy in society and businesses are entirely within their rights to trade in them, serving societal demand, however diminishing they may be to personal or societal wellbeing. Lawyers will have views and values as citizens and can and should shape and participate in legislative change, but as professional advisors, if they are acting for clients in these spaces, it is their job to serve them - just as those clients have a right to be represented in full. This is subject to professional obligations to the rule of law and administration of justice in fact-based application, not to pervading narratives and principles of ideology.
When we then look at the wider acronym of ESG, the E - environment - is an aspect that has emerged as a first priority in and for our society. It only exists because of the S. It goes beyond climate to the creation and preservation of environments that support our collective success. This means environments of all kinds, as well as ‘the environment’ as we have come to term it. Corporate environments for example, are key to success in business. Toxicity and corruption might fuel revenue in the short term, but are not an enduring business model, as we see in the many examples of corporate and institutional scandal and collapse. The truth always bears out. Building sustainable environments where people can operate without fear and have what they need to do their best work towards shared goals, is as much part of the E imperative as carbon emissions and sustainable consumption.
The G in ESG - governance - is simply a core aspect of how we get there, establishing the standards and building the rigour and infrastructure we need to hold ourselves to those standards in society - at large, and in the smaller ecosystems in which we operate day to day. Governance is a significantly underplayed opportunity of our time. Going way beyond compliance, this is about the quality of our decision making and our shared commitment to the prevention of harm between us. We currently see its rise in increased regulatory complexity and volume, which is to miss the point of its value. It is not about more rules, more administration, more cost. It is about quality, well informed decisions taken at the right level and the right time with the right collaboration and right visibility, mindful of the risks and value those decisions present to the relevant ecosystem. And it is about the systems, behaviours and empowerment that ensure those decisions are tracked through to implementation and beyond. Whether that is a fast growth business on a scaling journey, with an innovative organisational structure and distributed model of decision-making, or a more traditional environment with a pyramid hierarchy, the governance infrastructure can be a handbrake or an accelerator to the fulfilment of its purpose.
In the legal world, the S is on the rise, though its star should never have fallen. The aftershocks of the Post Office Horizon Scandal have not yet landed in full. Nor has the dawning of the death of law firm partner Vanessa Ford. Toxicity, concealment and overwork are actually killing people. There is increasing activity in ESG within the in-house counsel community, leaning into its leadership in their organisations and demanding diversity and greater care from their external advisors. Developments in technology such as the explosion of generative AI are awakening lawyers to the accelerated pace, volume and level of risks to be handled at equivalent scale with a wide eye to all stakeholders. Within law firms, alongside advisory work on the proliferation of ESG reporting and regulation, there is a lot of head scratching on what ESG means for long term growth and future client demand.
The movement rising is deeper and wider than this. It goes to the very heart of the why of law, the why of lawyering, and to the future of both. Whether or not by reference to an acronym, it is addressing the contract lawyers have with society that will ultimately define success in law. The movement is in generating value based on client need, in a way that tracks to the intersection of that need with the responsibility of the client to society. That society is its stakeholders. Each organisation taking care of those in its direct and indirect orbit is what collectively takes care of all of us.
This then is core to the role of the legal community. We can role model true society within our ways of working, businesses and communities in a way that to pass that on to our clients in our standards, style, and service offerings, is substantive BAU (business as usual) - the type that goes enduringly viral.