The Council of the EU recently green-lit new requirements for ESG reporting, meaning organisations are now under more pressure than ever to publicly disclose how their business plans intersect with social and environmental rights as well as governance factors. As ESG reporting regulations continue to evolve, organisations must be prepared to tackle higher volumes of contract data in order to remain compliant. In this blog, we explore how next-generation technology is helping legal teams to meet this challenge, with cutting-edge features including an AI-powered contract index, automated contract generation and AI-powered contract negotiation helping businesses to ensure compliance and manage risk in this new regulatory environment.
The Challenge of Siloed Knowledge
Compounding the challenge of heightened reporting requirements is increasingly siloed legal knowledge, with fragmented knowledge creating barriers to effective ESG reviewing processes. Today, corporate data is often stored across various cloud storage environments, different computers due to bring-your-own-device policies and employees working from home, or even in the minds or emails of former employees following personnel changes.
With Luminance, a company’s entire contract repository is centralised. By consolidating contracts within Luminance’s AI-powered contract index, legal and non-legal teams can locate, surface and analyse all relevant ESG data. For example, Luminance’s AI can instantly flag all anti-bribery clauses present in a dataset, as well as highlighting those where such crucial provisions are not included. Luminance’s AI also highlights out-of-the-box all governing laws across contracts, allowing the company to gauge its operations and exposure to any volatile regions or countries that have yet to sign up to the pledges made at COP27, for instance.
Unlike more basic technologies that rely on rules and signatures, and often rely on lawyers knowing exactly what they want to search for in advance, Luminance’s AI has a conceptual understanding of language, and crucially, understands the context in which certain words are used. To put this into perspective: If, for example, a legal team were to search for mentions of "coal" within their documents, as part of assessing climate risk in their investment portfolio, Luminance’s AI would understand that words such as "emissions" or "mines" would likely also be relevant to the search, and thus should be brought to the lawyer’s attention.
Future-Proofing Your Business
Ensuring ESG compliance is not just an issue of retrospective reporting. Managing risk when it comes to sustainability requirements must be maintained at a day-to-day level. This is where Luminance’s Automated Contract Drafting tool is proving critical for organisations around the world, helping both legal and non-legal teams to draft compliant contracts, safe in the knowledge that they meet internal standards and, thus, external regulations. Furthermore, with every new legal or regulatory change that causes a company’s internal standards to change, GCs and their teams can simply provide Luminance with rationale for why a term is now acceptable or unacceptable, and Luminance will learn on-the-fly, retaining this knowledge and applying it to all future negotiations. This is critical for future-proofing businesses in an ever-changing regulatory landscape.
The power of AI for regulatory compliance reviews was clear in March 2022, when leading biotechnology company, IDEXX Laboratories, used Luminance to analyse contracts across their entire supply chain and identify any ties to recently sanctioned Russian entities. With Luminance, IDEXX completed the time-sensitive review, which they had projected to take weeks manually, in just twenty minutes, allowing IDEXX’s GC to dedicate more time to advising and navigating the business through the uncertain time.
To learn more about how Luminance’s AI is helping organisations to meet the growing ESG challenge, catch our upcoming webinar at 11am ET/3pm GMT next Thursday 15th December. Alternatively, request a demonstration of Luminance’s legal process automation technology here.
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