Of mountains and molehills
Some years ago, I was invited by one of the leading Danish law firms to their annual partners conference. We spent a great day together, exploring how the practice and business of law is evolving and how that might impact their firm. Afterwards, the driver of the car taking me from Aarhus back to the airport pointed to a nondescript hill some distance from the road. “That,” he said, “is Ejer Baunehøj, the highest point in Denmark.”
Møllehøj stands at just under 171m above sea level. Denmark has no [material] mountains.
Imagine then (very hypothetically) that a requirements emerge for states to have special ecological plans for their mountains. Would it make sense for Denmark to develop the same kinds of plans as, say, Austria or Switzerland? Would it be ethical to for the country to proudly report its success in implementing these? Clearly not. Doing so might even be said to be “peak-washing”, especially if Denmark did things to harm montane ecology elsewhere but chose to ignore those.
My craggy metaphor fits well with efforts by some law and other professional service firms (PSFs) to signal high”ESG” standards by targeting their own (largely immaterial) greenhouse gas (GHG) emissions, while wilfully ignoring (material) advise they render to clients, that contributes to the world’s forecast failure to limit global temperature rise to 1.5 degrees Celsius about pre-industrial levels. This approach is as sensible as it would be for asset managers to manage their own GHG emissions while ignoring those of the assets in their portfolios. Which is precisely the opposite approach to that which this industry is adopting.
IPCC scientists and other experts say that climate change and its associated sea level rise pose existential threats to humanity, unprecedented in 10,000 years of civilization. This also applies in different ways to biodiversity loss, pollution, and freshwater scarcity. If this is true then wilful ignorance of the effects of one’s advice constitutes malpractice, in my opinion.
Materiality is crucial in developing strategies to deal with these challenges. Of course law firms occupy offices that consume energy. Lawyers tend to fly a lot, which uses fossil fuels and releases greenhouse gases (GHGs). Resources are also consumed in manufacturing the paper, furniture, computers and all the other goods that firms use and in their disposal afterwards. Reducing these make for impressive bar charts, but how material is this in the greater scheme of things?
As can be seen in fugure 1, materiality is a pyramid with four layers:
Legal and other requirements. The former is obvious. The latter includes other requirements to which the firm agrees to be bound, for instance in contracts of through charters of organisations of which it is a member. This layer forms the base of that pyramid.
Strategic alignment. Requirements imposed by the firm’s strategy, including the mix of services, markets and clients upon which it seeks to focus on growing.
Stakeholder perceptions. Most modern sustainability and similar standards require that organisations consider views of their stakeholders when determining whether or not something is material, in developing policies, in setting objectives, and in making important decisions about how to achieve these. In cases where stakeholders (such as clients or employees) believe something to be material, then that stakeholder belief can, of itself, make that thing material.
Altruism and values. This layer involves investments that the firm makes that are not specifically required by the lower layers, but which it chooses to simply because it is “the right thing to do.”
Law firms have considerable agency in deciding which clients they will advise, the services they will render to those clients, and the substance of the advice that they deliver. Most clients are on their own sustainability journeys, feeling their way more often than not through what is also for them a dramatic paradigm shift. Law firms can (and very arguably should) play a crucial role in helping them achieve their own climate change objectives and reduce their own GHG emissions. And to hold clients’ feet to the fire, so to speak, when their actions might increase GHG emissions or otherwise worsen the climate crisis.
The Law Society of England & Wales tackle this thorny issue head-on with their recently-published Guidance on the Impact of Climate Change on Solicitors. Their approach is exactly right!
The photo of Møllehøj (which is just behind the farm building) is by J. Miall, published on Wikipedia under Creative Commons.