Key legal trends for 2024: Generative AI and increased focus on ESG

Each year the legal landscape shifts to accommodate (or control) changes in technology, industry and culture. This year is no different and there are a range of factors expected to shape the Australian legal landscape in 2024.

One key focus area that both practitioners and consumers of legal services need to be aware of is the rise of generative artificial intelligence in legal services. Recent reports on the development of AI, including the Future of Professionals Report by Thomson Reuters (the Report), expect the technology to be very high impact or even transformational for professional services. 

Another focus area for this year is on the continued development and centrality of environmental, social & governance issues, known in the professional services as simply ‘ESG’. ESG-related legal issues rose considerably in prominence during 2023 and the new year is expected to see the trend accelerate. 


Stephen Dyason

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Generative Artificial Intelligence 

The rise of generative artificial intelligence (AI) is continuing to impact the legal landscape, especially given the recent increases in its usability and availability. AI refers to computer platforms and systems that are built to replicate human cognitive functions which is primarily achieved by detecting algorithms and processing patterns in data to automate tasks and predict responses. Though there has been some reluctance from the professional services industry, and the legal industry in particular, to employ these systems and skills, it is becoming increasingly clear that those who don’t take advantage of such processes will eventually be outpaced and left behind. 

Thomson Reuters has recently launched its AI legal assistant product, CoCounsel Core in the Australian market, which is designed to assist legal professionals with a range of tasks including reviewing and summarising documents, and detecting non-compliant clauses in contracts.  This is one of a range of generative AI products which have been developed specifically for the legal industry and are currently being adopted by Australian law firms. 

Benefits of AI in a legal context

Undeniably, AI has the ability to increase productivity and efficiency within the legal sector. The Report notes that legal professionals have identified two ways in which AI can increase their efficiency, being through:

• saving time by conducting large-scale data analysis; and 
• performing non-billable administrative work with greater accuracy.

AI allows tasks that are largely repetitive or administrative (including certain due diligence processes, contract reviews and document preparation) to be automated or streamlined, which not only reduces costs for clients of legal services, but also allows lawyers to focus on more complex aspect of legal work and foster meaningful relationships with their clients. 
 

Challenges of AI in a legal context 

However, the use of AI in the legal industry presents a variety of challenges. In particular, there are currently ongoing concerns regarding data security, data accuracy and ethics. 

There is a degree of unease and a lack of trust among professionals in relation to information generated through AI chatbots such as ChatGPT. This is partly because these types of generative AI rely on the data that they already possess, which may be incomplete or erroneous. For example, ChatGPT’s training data is limited to information that predates September 2021, meaning that responses may not be fully up-to-date nor accurate. 

There are significant concerns regarding data security with using publicly available generative AI tools such as ChatGPT. This raises concerns in relation to inputting any information to which client confidentiality or legal professional privilege attaches. As a result, practitioners need to be especially cautious in relation to any confidential information that may be used or disclosed when utilising AI platforms. 
 

Best route forward

Despite the likely transformative change that AI will have on professional services, it is still not entirely clear what role it will play and the extent to which it will be utilised in the legal sector. It will be necessary for legal practitioners to define the role of AI in the legal space, especially in deciding which tasks are appropriate to automate, and those which must remain in the domain of human lawyers. 
 

Environmental, Social and Governance (ESG)

ESG is an all-encompassing governance framework that covers an array of issues such as climate change, modern slavery, human rights and corporate governance. This concept has continued to gain significant traction across the legal landscape, with an increasing expectation upon law firms, and the business community generally, to proactively engage with and adhere to ESG principles and be transparent about their business activities. 

In 2023 and early 2024, environmental and ethical issues have remained at the forefront of ESG-related activities, with an increased focus upon biodiversity, modern slavery and human rights.
 

Greenwashing 

There has been a particular focus on ‘greenwashing’, which relates to businesses making environmental claims in their advertising or marketing to present their products or services as environmentally friendly. Due to the increasing prevalence of greenwashing in the Australian market, the Australian, Competition & Consumer Commission published a guide in December 2023, titled ‘Making environmental claims: A guide for business’, which again, indicates a greater likelihood of the commencement of greenwashing investigations and proceedings in 2024. 

Similarly, the Australian Securities and Investments Commission (ASIC) have taken an increased interest in greenwashing as outlined in their May 2023 report titled ‘ASIC’s recent greenwashing interventions’, which provides an overview of ASIC’s recent activities in relation to greenwashing including details of its first court-based greenwashing enforcement action (which saw ASIC commence proceedings in the Federal Court in respect of alleged greenwashing). 
 

Sustainable Finance Strategy

In November 2023, the Commonwealth Treasury released a consultation paper in relation to Australia’s Sustainable Finance Strategy (SFS), with aims to support Australia’s pathway to net zero, and provide a comprehensive framework for reducing barriers to sustainable investing. The consultation paper indicates that the SFS will be focussed on three key pillars; improving transparency on climate and sustainability, financial system capabilities and the leadership and engagement of the Australian Government. 
 

Legislative changes

The Australian Government continues to consult on environment law reforms, with draft legislation to amend the Environment Protection and Biodiversity Conservation Act 1999 (Cth) expected in early 2024. 

There has been an increased focus on modern slavery, with the Attorney-General Department’s review of the Modern Slavery Act 2018 (Cth) recommending the introduction of mandatory human rights due diligence and amendments to the criteria to mandatory reporting. The Modern Slavery Amendment (Australian Anti-Slavery Commissioner) Bill 2023 (Cth) is expected to be passed into law at some stage during the course of 2024. 

The Commonwealth Treasury has also released draft legislation in relation to mandatory climate-related financial disclosure. Though in it’s early stages, this legislation aims to provide greater transparency about an entity’s exposure to climate-related financial risks, whilst allowing regulators to assess and manage said risks. 

Key takeaways for 2024 

With changing expectations from the public and increased attention from lawmakers and regulators, businesses and law firms alike should ensure that they keep ESG-related issues at the forefront of their minds during 2024. In particular, it will be important to pay close attention to legislative developments and regulatory action to ensure compliance with legal requirements in relation to issues such as greenwashing, sustainability and modern slavery. 

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Corporate & Private Clients Practice Group.

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of matters, such as:

• New Year, New ASIC: The 2024 Enforcement Priorities 
• Navigating The Future: Unveiling Australia's Financial Reforms For 2024
   

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