It seems the Big Law world has dodged a bullet. Prior to the midterm elections, in which the Democrats managed to maintain control of the U.S. Senate, Republican senators Marsha Blackburn (Tennessee), Chuck Grassley (Iowa), Tom Cotton (Arkansas), Mike Lee (Utah), and Marco Rubio (Florida) issued a not-so-veiled threat that a Republican-controlled Senate would step up attacks on companies embracing ESG (environmental, social, and governance) initiatives.
Part of the November 3 letter sent to 51 large law firms read thus:
“We are writing about your firm’s Environmental, Social, and Governance (ESG) practice. Although businesses would certainly be wise to lawyer up before undertaking ESG initiatives, your firm has a duty to fully inform clients of the risks they incur by participating in climate cartels and other ill-advised ESG schemes.”
There may be some truth to the idea that some of the most impactful responses to climate change may require the collaboration of industries to disincentivize “first movers” who might start a race to the bottom, undoing environmentally conscious policies. But the more logical response from politicians would be to reform antitrust law so that anticompetitive acts for environmental reasons will not be subject to penalty.
The senators’ letter to Big Law managing partners continued:
“Of particular concern is the collusive effort to restrict the supply of coal, oil, and gas, which is driving up energy costs across the globe and empowering America’s adversaries abroad.”
While Russia’s unprovoked invasion of Ukraine — which threw the world’s energy supply into turmoil — the cutting back of supply by OPEC (the Organization of the Petroleum Exporting Countries), and transnational energy companies taking advantage by doubling profits, have played not insignificant roles in raising energy prices, the Republican senators have chosen to set their sights elsewhere.
But the Republican warning does not make sense on a theoretical level, either. The environmental collusion being discussed would necessarily make it harder for industries to use fossil fuels, thus increasing the available supply for everyone else. Therefore, the ESG practices the Republicans are targeting would actually lower energy prices for the average American.
In the end, companies operating in the global economy cannot simply ignore ESG mandates. It would be too costly. The European market, investors, and sometimes even exchanges are demanding them. And most importantly, consumers are increasingly demanding them.
More than ever, corporations need to signal basic good behavior to consumers in order to succeed, whether the Republican senators like it or not.
