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We’re All Climate Professionals Now

August 27, 2021
Insight

“You are all climate lawyers now,” John Kerry told the American Bar Association’s annual meeting on 5 August 2021. His audience was unlikely to disagree as they’d already adopted a resolution on climate change back in 2019. Meanwhile, around the world commercial lawyers’ heads nodded and we wondered what chance there was of a US-led acceleration of regulatory pressure to decarbonise our clients’ business operations.

Kerry was speaking in his role as President Biden’s Special Presidential Envoy for Climate. Note for Climate, a deliberate deviation from the title of the equivalent officers appointed by the United Nations - Special Envoys on Climate Change. That linguistic sleight-of-hand gives a nod to the entrenched political divisions in the US on the subject which may scupper any plans the Biden Administration has to legislate a greening of the US economy.

Indeed, it was clear from the speech that the US focus, in public at least, is on the role that businesses and individuals must play. Translating that focus into what lawyers will therefore be involved in, Kerry highlighted three main areas for legal work:

(1) aiding individuals displaced by the impacts of climate change,

(2) assisting companies on restructuring as climate-damaging assets become liabilities and

(3) advising companies on transitioning to greener energy sources and innovating for decarbonizing their operations.

With exquisite timing, four days after Kerry’s speech, the Intergovernmental Panel on Climate Change (IPCC) issued its Sixth Assessment Report. “It is,” according to the report’s Headline Statements, “unequivocal that human influence has warmed the atmosphere, ocean and land” causing “rapid changes” and with “observed changes [since 2008] in extremes such as heatwaves, heavy precipitation, droughts, and tropical cyclones”. Big business, meanwhile, had not waited for that new report and many had already committed (again, in public at least) to net zero. For example, a year before Kerry’s speech, BP published its strategy to transition “from being an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers”.

So yes, people around the world are now directly feeling the negative effects of climate change and even oil companies see the necessity of a greener, net zero carbon for their operations. And in between are all the medium and smaller sized companies which comprise the greater part of the economy in many countries, such as the United Kingdom. How they now respond in terms of adapting their products and services, reimagining their manufacturing and distribution models and reorganizing the operating model (more home working, fewer car and plane trips) will be a significant factor in whether we move to a more sustainable way of life in time to avert the worst case scenarios of catastrophic global warming.

One thing that is certain is that such companies really have little choice but to act. As susceptible as they are to the personal preference of their owners (not all of whom want to make the required investment or are even convinced that there is a climate emergency), there are three inescapable pressures that will drive them out of business if they are not accommodated.

Regulation

The British Government, which is hosting the Cop26 summit in November, has set a goal of net zero emissions for the UK by 2050 (with a 68% reduction in emissions by 2030 and by 78% by 2035). The current plethora of environmental regulations and controls will therefore only increase, both in scope and in detail. One example is the new Environment Bill, due back in the House of Lords in September 2021, which includes measures to prevent UK businesses from using commodities linked to illegal deforestation abroad. These measures are already being criticised as not going far enough so we may in time see them extended to refer to more kinds of environmental degradation. Given how much raw material and how many components are imported by British manufacturers, these new rules will require many to find new suppliers.

Consumer Demand

Extinction Rebellion launched protests in London over the past week, closing off Oxford Circus at one point. And whilst public polls often indicate people are less keen on their methods than their message, they have achieved a high public awareness. Indeed, almost all polls show the majority of the British public are keenly aware and concerned about climate change with a 2021 poll putting the figure at 80%. Other recent surveys have shown that 72% pay attention to whether a brand operates in a climate-friendly way, and 65% prefer to buy products and services which do not harm the environment. We’ve seen brands rapidly fall and rise through consumer activism on social media but the steady gain or haemorrhaging of sales as greener products and services become available will do the same job over time.

Supply Chain Requirements

This final pressure is the one least reported on but is arguably the most pervasive. In the same way we saw Modern Slavery controls and GDPR compliance flow up- and down-stream through the supply chain, driven primarily by the largest customers and the largest suppliers, we are now seeing environmental and climate change conditions expand and develop in all the main framework agreements. Whether included at the outset or bolted onto existing agreements as enhanced schedules of requirements, obligations to reducing carbon footprints are being imposed on every company from importers to manufacturers to distributors to retailers. Moving to greener energy suppliers, reducing waste and packaging, improving how products can be repaired and recycled: the obligations are increasingly specific and, crucially, they are increasingly being measured and audited.

The supply chain approach will mature rapidly, leading to standardised obligations which are essential for companies to be able to honour commitments to multiple customers and suppliers. The drive to standardise can already be seen in initiatives such as the Chancery Lane Project in the UK. Backed by over 200 organisations, it has already published model clauses on a diverse range of matters such as Target Product Carbon Footprint (Schedule for Consumer Goods Contracts) and Coolerplate Clauses (Climate Aligned Boilerplate) and all the way to Late Payment – Green Interest Remedies.

Back in the days before the first dot.com bubble burst, we would excitedly ask if a new business venture was an “internet company”. Now of course all companies are internet companies, as those which didn’t adapt to the new cyber environment were quickly outcompeted by those which did. We’re now at the stage where it no longer makes sense to ask if a company is “green”.

The only real question is, whether a company is turning green fast enough to avoid going out of business. So it’s not just lawyers. Lawyers, accountants, tax advisers, project managers, engineers, marketeers, everyone: if we work in business, we are all climate professionals now.

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