As you may know, central to our commitment to provide legal support only to SDG-aligned projects, is our SDG Tracker, which is the tool we developed to help us assess the net impact of potential mandates.
As we noted in version 1.0 of the SDG Tracker, there are limitations to our version 1.0 methodology which proved to be pain points when we attempted to apply the methodology to certain of our mandates. Some of the crucial pain points include:
- The assessment indicators did not always adequately reflect the nature of law firm mandates.
- Whereas many mandates may be project-focused, there are also mandates which relate to the internal operations of a client (such as employment matters, M&A, credit for general working capital, etc.). In these circumstances, we may not be able to assess impact based on the underlying transaction, but would instead need to take a general impact assessment of the business activities of the client.
- The SDG targets were promulgated by the UN with the intention of guiding government policy towards sustainable development objectives, and so, the SDG targets are generally not applicable to business initiatives, and tend to focus more on developing countries as beneficiaries. A wider interpretative lens would therefore need to be adopted in order to factor in the various ways in which sustainable development objectives may be advanced in other contexts.
- Whereas many mandates may be project-focused, there are also mandates which relate to the internal operations of a client (such as employment matters, M&A, credit for general working capital, etc.). In these circumstances, we may not be able to assess impact based on the underlying transaction, but would instead need to take a general impact assessment of the business activities of the client.
- Since the assessments are made when potential client mandates are received and before the commencement of the underlying projects, mandates are scored based on a qualitative assessment of the intended outcomes and externalities of the mandate against the SDGs. Inherent in the nature of qualitative assessments and hypothetical outcomes is the possibility of subjective bias applied by the assessor when making assessments.
- By adopting a scoring methodology, coupled with the limitations we have identified in point #2, there is a risk that our assessment of our impact overstates actual impact.
As we anticipated from the outset, our SDG Tracker will evolve over time as we make improvements to the methodology. Reflecting on the lessons we have learned from our first year in business, we also want to build on our realisation that we can deliver more value in advancing the sustainability transition by helping our clients identify ways in which they can integrate more positive ESG/sustainability outcomes into their projects, practices or strategy. These considerations have informed our efforts in reworking and improving our SDG Tracker methodology.
Version 2.0 of our methodology is currently a work in progress, which we aim to publish in February 2023. Based on the considerations we have identified above, version 2.0 will feature the following changes:
- The assessment indicators will be updated, so that SDG targets are adapted to apply more directly to business initiatives. The set of assessment indicators that will form version 2.0 of our SDG Tracker will aim to assess: (a) whether a client is positively aligned with the SDGs in terms of its business activities (i.e. products/services that it offers) and business practices (and in the context of projects / initiatives, project objectives and project operations), (b) how it is so aligned, and (c) whether it has put in place processes and procedures to enable it to effectively carry out its ESG/impact objectives.
- We have decided to scrap our scoring methodology. Instead of a scoring methodology, we have decided to adopt a checklist approach, to help us identify how clients have integrated SDG alignment and ESG considerations in their business activities and business practices (and in the context of projects / initiatives, project objectives and project operations). Where potential clients / projects do not check certain mandatory SDG/ESG criteria, the client will have to agree to work with us on bridging the gaps before we would take on the mandate.
In terms of methodology, this removes the need to make subjective evaluations when working through the assessments.
In terms of deliverables, using the new checklist approach can help us surface gaps in client’s sustainability/ESG integration, enabling us to help clients identify opportunities to create value (or more value) through aligning with SDG objectives.
We believe the enhanced SDG Tracker version 2.0 will allow us to build on the impact delivery model we have shaped for ourselves in this first year of business, and allow us to scale the additionality we are able to deliver as a law firm.
Again, version 2.0 of our SDG Tracker methodology will be made open source so that interested parties may use it and/or collaborate with us on improving it. Follow our LinkedIn page to keep up with our latest initiatives.
