The sustainability landscape — which broadly defined includes environmental, social and governance issues — is expanding and becoming increasingly diverse, complex and risk-laden. New laws, regulations and changes in the way investors, regulators, customers, employees and the public view environmental and social issues are having broad implications for organizations.
“We are seeing a major pivot from a world in which sustainability was about messaging and voluntary commitments, to a world in which implementation is key and reputational risks are becoming more acute,” says Cornelius Grossmann, EY Global Law Leader. “The public no longer expects companies to simply do no harm, but also expects them to appropriately address environmental and social matters. This puts a huge amount of pressure on organizations.”
While this shift will affect most business functions, General Counsel and your law departments are likely to play a key role, given your focus on compliance and risk management and your involvement in a broad range of challenges that connect into sustainability.
Against this backdrop, EY Law and the Harvard Law School Center on the Legal Profession recently interviewed 1,000 General Counsel and Chief Legal Officers from businesses representing 12 industries across 20 countries. The purpose was to understand how law departments are responding to the rising importance of sustainability1 issues.
The key findings of the 2022 General Counsel Sustainability Study reveal that law departments are facing a broad set of pressures from stakeholders on sustainability matters that are challenging them in new ways, including:
- General Counsel report that changing public attitudes are reshaping their organization’s risk profile, but their leadership does not fully appreciate the implications.
- Reputational risks linked to sustainability are causing law departments to rapidly expand their focus into areas traditionally managed by other parts of the business.
- Law departments’ expanded remit is causing them to become more involved in day-to-day decision-making and increase their collaboration across business functions.
- General Counsel’s most significant sustainability challenge is advising leadership on matters where the public’s expectations exceed the organization’s legal and regulatory obligations.
- Law departments don’t have the necessary talent and budget to handle increasing workloads linked to sustainability and are split on how to handle those challenges.
To successfully chart a way forward, it will be important for General Counsel to define where and how your law department should get involved in sustainability. Defining how your law department partners with other areas of the organization will also be crucial.
Working across the business to develop a framework for decision-making around complex sustainability questions will be critical, as many of the most pressing issues are not clearly addressed by regulations. Law departments are well-placed to undertake this work. Your role, at the center of a mass of interconnected sustainability questions and challenges, gives you unique insight into these topics.
Addressing sustainably will likely create operational challenges for your law department. The rising importance of sustainability is producing a growing volume of work that is adding to the pressure many law departments already face. Developing an operating model for your law department that provides the flexibility, scale and the unique expertise required for sustainability work will be essential.