There has been no shortage of eminent individuals (Fink, Carney) and austere institutions (World Economic Forum, British Academy) telling us lately that businesses need to behave more responsibly.
What this distils down to is taking account of the consequences of their actions on others: not taking decisions based solely on the short-term benefits to the business, and not assuming that increased profits are a failsafe proxy for the business’ best interests.
The experience of the pandemic adds weight to that approach, as it has shone a light on the interdependence pervading our existence. If the government had not acted to impose measures to protect public health at the expense of the economy, there would quickly have been neither workers healthy enough to provide goods and services nor customers healthy or confident enough to purchase them. Conversely, not offering economic protection to citizens and businesses would have quickly had devastating social consequences as bankruptcies and insolvencies, forfeitures and foreclosures threatened the homes, livelihoods and health of millions.
This direction of travel (from a solitary metric to a dashboard of considerations) can feel uncomfortable for us lawyers. We like certainty and the opportunity to be authoritative. Act in the interests of the client, which means optimising their financial returns, is a simple message to communicate and straightforward aspiration to implement. It is also consistent with how lawyers and law firms generally behave. Inviting clients to consider what the implications of their decisions and actions will be, in the long term as well as short, for local communities and for the environment, for staff and for suppliers, as well as for the clients themselves, inevitably raises questions to which there are not simple or easily replicable answers. I would want to be pretty confident the client was interested in this sort of conversation before instigating it. And I would want to feel I had something constructive to offer if they responded positively.
Yet, isn’t this what the opinion formers of the opening paragraph are advocating? Isn’t it what the experience of the last year demands (and, on reflection, the last decade or more, if we take the financial crash and the climate and biodiversity crises and increasing social unrest into account)? I am clear it would not mean trying, with every decision, to make everyone happy (which will never happen) or invariably defaulting to some anodyne solution demotivating everyone (which will never succeed). However, the fact it may be more challenging feels a reason to embrace, not to evade it.
I have seen many law firms posting blogs commenting on this debate and hosting events exploring its implications. As you would expect, there is a range of views and generally the law firm or lawyer outlines what these are and indicates they are ready and able to assist any client, or potential client, who may want to engage in greater detail.
What has been notable by its absence is much evidence of law firms publicly acknowledging that they too are a business, equally affected by the imperative to act responsibly. Considering that in 2018 the legal services sector generated over £50billion of GVA and employed over 500,000 FTEs, there is lots of scope for legal businesses to have positive impact by acting responsibly. Yet I am aware of few law firms publicly embracing this approach, saying they believe it is the right way to go and sharing the challenges they are wrestling with in putting it into practice. This would demonstrate leadership and a distinctive authenticity, marking them out from all those for whom this is just another market opportunity, which they are happy to advise on, arm’s length, the same as any other.
The largest asset owners in the financial markets are realising that it is not enough either to divest from fossil fuels, or simply to continue holding stakes in them. Either way, the oil and gas majors continuing to operate as they do will ultimately harm the value of the market as a whole, and therefore the universal owners’ interests. This is why they are increasingly engaging with the fossil fuel sector (and others with negative environmental impacts) to encourage them to change their practices for collective benefit. This was demonstrated last month by the votes at the AGMs of both Exxon Mobil and Chevron in the US, where investors voted against the boards wishes to force greater focus on climate impacts. In the same way, it may be that businesses, including law firms, need to start taking the wider picture into account as a matter of course, including their impact upon it.
American jurist Oliver Wendell Holmes said, “I wouldn’t give a fig for the simplicity this side of complexity, but I’d give my life for the simplicity on the other side of complexity”. In other words, it is worth wrestling with the complexity involved in balancing competing interests, even if the process is uncomfortable and difficult. Shed the pretence of having all the answers, work alongside clients to find a reasonable way through, and client, lawyer and stakeholders may ultimately all be better off. Make that a way of working, of doing business, and ultimately it may indeed become easier to understand how to act and the challenge no longer appear insuperable. It may feel messier, but it also feels what responsible business practice in the 2020s might look like.
The Uncertain Solicitor on ... Responsible Business
Good morning The Uncertain Solicitor. Thank you for sharing another thoughtful piece. You say this:
"Inviting clients to consider what the implications of their decisions and actions will be, in the long term as well as short, for local communities and for the environment, for staff and for suppliers, as well as for the clients themselves, inevitably raises questions to which there are not simple or easily replicable answers. I would want to be pretty confident the client was interested in this sort of conversation before instigating it. And I would want to feel I had something constructive to offer if they responded positively."
I wouldn't demur that there needs to be a much more open and thoughtful conversation around the implications of a decision or action that may have consequences for the environment and the wider community but knowing how solicitors practices work, I'm very doubtful that they'd operate outside the terms of their prolix engagement letter for risk of being on the back foot with any potential claim. How you overcome this very binary approach I'm not sure but until firms are prepared to act more as trusted advisors -- as hackneyed as that sounds -- I wonder how much influence they'll truly have in shifting the debate around responsible business? Take care, Julian