Law Society publishes new climate change guidance for in-house legal counsel

The Law Society has issued new guidance for in-house legal counsel on how climate change risks should be managed (the “Guidance”). This supplements the broader guidance that the Law Society published in 2023 regarding the impact of climate change on solicitors’ practice more generally. In this new Guidance, the Law Society discusses best practice for managing climate risks and governance, as well as some practical steps on how to get started. 

Core climate duties applying to in-house solicitors

While there are no specific professional obligations on solicitors relating to climate matters, in-house solicitors share the same core professional duties to their internal clients as private practice solicitors, including duties of care, warning, disclosure and professional competence. The Guidance notes that climate change increasingly engages the wider professional ethics framework, particularly where climate change may present core business risks, and these broader duties should be kept in mind at all times as in house-solicitors advise on climate change matters. 

Board directors should also be mindful that their fiduciary duties under the Companies Act 2006 may require them to consider climate matters as part of their decision making, and particularly under their duty to promote the success of the company with regard to the environment and long-term consequences. 

Legal risk management

The Guidance identifies where climate-related legal risks are most likely to arise in practice for in-house solicitors: 

• Compliance – organisations must have appropriate systems to identify and monitor climate-related obligations, including those applied under law and any applicable voluntary codes. In-house solicitors should be in close contact with the relevant teams responsible for complying with these climate-related obligations to ensure those teams are aware of relevant regulatory changes and developments. Organisations should be clear who owns the various climate related topics, which include not only pure environment law but can extend to sustainability and transition, corporate reporting and supply chain due diligence.
• Commercial risks – in-house solicitors must be aware of how climate risks arise in regular workflows and how these are mitigated, perhaps through due diligence questions for new projects.
• Human rights, soft law and environmental defenders – climate matters are increasingly within the ambit of existing human rights frameworks, such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct and solicitors should understand how these frameworks apply to their business. Furthermore, solicitors should carefully consider how the organisation engages with environmental defenders, given that this can have significant legal and reputational impacts.
• Board oversight and directors’ duties – solicitors should ensure the board and executives understand both how climate impacts the business, for example through physical risks posed by climate change, and the impact the business may be having on the climate. Understanding climate risks and opportunities, and ensuring these are regularly discussed at a senior level, is a key way to reduce the risk of climate risks materialising.  

Governance

The Guidance emphasizes that organisations should have clear frameworks for addressing climate risk, including defined reporting lines, allocated responsibilities and coordination across functions and internal policies. 

The Guidance also identifies key areas where climate governance should be proactively considered, which include: 

• Risk management – in-house solicitors should assess what climate risks apply to the organisation. This can be supported by regular horizon scanning, which takes into account both transition risks (being risks related to the transition to a lower-carbon economy) and physical risks.
• Climate-related disclosures and reporting – solicitors should be appropriately involved in any mandatory and voluntary climate disclosures prepared by the business. This will likely include coordination with the finance teams that support on some of the key climate related metrics and data.
• Greenwashing – in-house solicitors should support the implementation of systems to ensure communications, marketing and product claims about sustainability and climate matters are accurate and substantiated.
• Insurance / asset values –climate change may impact the insurability or insurance premiums and conditions for assets vulnerable to the impacts of climate change.
• Procurement – procurement processes should take into account how the organisation manages climate risks. This may be through supplier questionnaires and/or standard contract terms.
• Education and training – solicitors should look to promote understanding of climate change risks and their legal management within the organization. 

Climate risk management in practice 

The Guidance includes suggested actions to support lawyers in implementing climate risk management and governance processes within a business. These actions are particularly focused on providing a helpful starting point as solicitors look to implement climate considerations. The applicability of these will depend on how developed your organisation’s processes for managing climate risks and opportunities currently is. 

In-house counsel can play a central role in developing and maintaining an organisation’s climate governance, and supporting the organisation in embedding climate considerations into its decision-making processes. This Guidance may be used by practitioners as a useful opportunity to take stock, and consider the opportunities to improve the organisation’s approach to climate risks. 

We regularly advise clients on the ley areas identified above and can assist in putting together the relevant frameworks to manage climate risks within an organisation.

If you would like to discuss this further, please get in touch with Michael Barlow or Lucinda Huntsman. 

This article was written by Lucinda Huntsman. 

It helps in-house counsel translate those duties into practice within their organisations, recognising the distinctive constraints and opportunities of an in-house role.

https://www.lawsociety.org.uk/topics/climate-change/climate-change-in-house-counsel