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Commercial Question

Net zero and the legal profession

updated on 05 April 2022

Question

Why should lawyers care about net zero?

Answer

Introduction

As awareness increases of the serious risks to our planet from climate change, the pressure increases for a regulatory and legal framework to seriously tackle the challenge. 

Internationally, over 130 countries (including the UK) have pledged to reach net-zero emissions by 2050, and at COP26 plans were drawn up to reduce the use of coal, which is responsible for more than 40% of annual carbon emissions.

In this country, over 300 councils have declared a climate emergency to reduce carbon emissions and tackle the impact of climate change. 

What is net zero?

Net zero refers to a state in which the greenhouse gases going into the atmosphere are balanced by removal of such gases out of the atmosphere. Because not all emissions can be reduced to zero, those that remain are compensated for, or offset. Offsetting measures can include planting trees or purchasing emission reduction credits.

The most senior members of organisations, including law firms and the public sector, must be totally committed to net-zero ambitions and ensure these are aligned to the wider organisational strategy. Data collection and a sustainable strategy will also need to be considered in accordance with environmental, social and governance (ESG) policies.

How does the drive to net-zero impact a firm’s clients?

Since 1 April 2019, large UK companies have been required to report publicly on their UK energy use and carbon emissions in their directors’ report. The Streamlined Energy and Carbon Reporting requirements require companies to report on energy use and direct and indirect emissions. 

In addition, from 6 April 2022, over 1,300 of the largest UK-registered companies and financial institutions will have to disclose climate-related financial information on a mandatory basis – in line with recommendations from the Task Force on Climate-Related Financial Disclosures (TFCD). The TFCD encourages disclosure of information on how companies are preparing for a low-carbon economy to allow investors, insurers and lenders to make informed decisions on long-term resilience.

Increasingly, organisations are expected to demonstrate their ESG policies – of which transparency on carbon emissions is one component. Under section 172 of the Companies Act 2006, directors also have a duty to promote the best interests of the company – that may include considering the impact of any investment decisions that are not environmentally friendly, or continuing to trade in a carbon intensive way if this will impact on reputation.

Climate change will impact on a number of sectors. For example, local authorities and housing associations are putting in place programmes to retrofit social housing in order to reduce carbon emissions. Local authorities will also need to take into consideration their net-zero targets when approving planning applications, or developing regeneration schemes, including the establishment of heat networks and electric car charging points.

In construction, there is an increasing emphasis on Modern Methods of Construction and low carbon alternatives to traditional construction. Technological advances will also no doubt see other opportunities open up in different sectors. As the UK government looks to diversify our energy sources, opportunities are likely to arise in wind, solar and nuclear. 

What are lawyers doing to take a commercial approach?

In commercial practice, staying up-to-date with news, regulations and government guidance has been essential in being able to respond efficiently in an ever-changing framework and not only understand the impact the focus on net zero will have on clients, but also how to address this. Lawyers must appreciate what leads to the success of a client’s business in light of the challenges posed by net zero and plan ahead to minimise the impact of upcoming changes.

Net zero will increasingly be relevant across a range of legal specialisms: not just energy, but also construction, property, finance, corporate, pensions and litigation. 

Many law firms are also working to reduce their own carbon emissions. Examples of this include encouraging remote working, reducing business travel, introducing cycle to work schemes, transitioning to renewable energy, carbon offsetting and reducing paper use.

How has the pandemic affected the drive to net zero?

Besides staying safe indoors, another huge positive from imposing a national lockdown was air pollution falling in UK cities and on a larger scale a temporary reduction on global emissions of CO2 and other emissions.   

On the other hand, the pandemic has contributed significantly towards the plastic waste rise alongside increased medical waste, haphazard disposal of PPE, increased municipal waste and reduced recycling efforts. While the UK was in lockdown and consequently generating more waste at home, due to social distancing and illness, many waste recycling centres were forced to close which placed pressure on waste and recycling management.

Top tips for aspiring lawyers

  • Useful resources to stay commercially aware include: Finimize, City A.M., The Law Society Gazette, The Economist, Financial Times and LawCareers.Net’s weekly commercial news round-ups.
  • In applications for training contracts, consider how issues are directly impacting the firm as a business and its workstreams. This requires in-depth research into the firm.
  • Network to connect with like-minded people and build relationships.

Natalie Cernuschi is a trainee solicitor at Bevan Brittan LLP.