The Double Hypocrisy Problem of the Legal Industry’s Promotion of ESG

Article

One of the basic tenets of the legal industry, reflected in jurisdictions across the world, is lawyers’ duty to act in their client’s best interest. Yet, whereas Milton Friedman’s view of shareholder wealth maximization has prevailed for decades, we are slowly moving towards a more stakeholder-inclusive model of doing business. Our interpretation of what the client’s best interest is must therefore change accordingly. However, while business is evolving, the legal industry’s interpretation of who they are serving as their client is lagging behind.

A lack of pro-active inclusion of Environment, Social and Governance (ESG) issues in legal advice stems from the notion that addressing these issues is not profit-making. Corporate lawyers should not be able to hide behind the ‘client’s best interest’ argument when the client is having an obvious adverse impact on people and the planet. Many (financial) reasons can be cited as to why considering ESG actually is in the clients’ best interest (consumer/employee satisfaction, attracting investment, long-term financial gain). Ultimately, it will boil down to law firm culture and morality whether they can move beyond what they were traditionally expected to advise on. This is where the second hurdle comes in. Given the ongoing epidemic of sexual harassment and mental health issues in the legal industry, can clients trust corporate lawyers to address the issues they fail to handle internally?

Corporate Lawyers and Their Clients’ ESG Programs

Currently, the legal industry has not yet caught up to the rapid developments in other industries when it comes to ESG matters. Notwithstanding the power and influence of the industry, it is not harnessing their strengths to protect vulnerable people and our planet. This is mainly due to one main reason: corporate lawyers and law firms like to morally separate themselves from their clients, referring to their obligation to act in their best interest. Given the traditional, shareholder-oriented perspective of corporate lawyers, sustainability and human rights programs are only pro-actively suggested where they serve a profit-making or loss-prevention purpose.

However, in today’s changing business world, corporate lawyers can no longer claim that they carry no moral responsibility for their corporate clients. Certainly, every client is (legally) entitled to legal representation. But this does not automatically strip the lawyer of all moral responsibility with regard to the adverse impact of their client on the latter’s stakeholders. This is not to say every corporate lawyer must necessarily promote the environment or human rights; even though in an ideal world, they would. Rather, wherever the corporate lawyer is representing an unsustainable, or irresponsible client, there is no artificial veil of moral responsibility separating the lawyer from the client. If you’re willing to represent the client despite its adverse impact, that is a moral choice to live by.

The State of the Legal Industry

Although corporate lawyers theoretically are in a strong position to help bring about transformation, this ability is severely undermined by the state of the legal industry. In the last few years, sexual misconduct cases in the UK have reached a record high. Moreover, research conducted just last year shows that 71% of legal workers in the UK reports that their job has a negative impact on their mental health. Over 55% of respondents had been diagnosed with a specific condition by a mental health professional. Reasons cited for declining mental health in the legal industry include long hours, overwork, and a relentless pressure to meet billing targets.

Overall, the legal industry has massive steps to take during the upcoming years. Corporate lawyers have great potential to proactively become involved in integrating sustainability and human rights-related advice in their clients’ businesses and operations. Whether this be through changing contracts and transactions, adapting a corporate structure, implementing policies, or just promoting an alternative culture, corporate lawyers can shape our future way of doing business.

Corporate lawyers can, and should, take more responsibility to positively contribute to ESG issues. In order to do so, they first need to address the rampant issues within their own industry to also give credence to their advice. There is already a shift taking place where new law firm models are being set up, intended to run their legal business in a more ethical and transparent manner. Free from internal allegations, these firms are best equipped to overcome the double hypocrisy of the legal industry and truly serve their client in having a better impact on the world. Law firm culture has to change before the legal industry can reach its true potential in relation to ESG issues.