Exploring the possibilities of LLMs in environmental regulatory compliance - A grounded theory study of LLM use in the HyPELignum project

Abstract

EU’s shift from behavior-based to impact-based environmental regulation has placed more responsibility on organizations to interpret EU environmental law. This paper explores how LLMs, specifically Microsoft CoPilot, can support regulatory compliance to EU environmental law. Conducted as part of a collaboration with RISE and EU-funded HyPELignum project, the paper explores the risks and opportunities of using LLMs in legal contexts. Particularly in relation to the EU visions and directives; European Green Deal, Clean Industrial Deal and the WEEE directive. This by using a three-phase research design combining qualitative interviews, LLM prompting and expert evaluation. A grounded theory approach was used to inductively analyze the data and create a framework for effective and responsible use of LLMs in regulatory contexts to support regulatory compliance. The framework consists of four core components; (1) trust in the system and its users, (2) legal and technical proficiency, (3) LLM must deliver practical value and (4) risk governance and ethical responsibility. A key takeaway from this paper is that the LLM performed well for regulatory use in low-context tasks (summarization and translation tasks). However, the paper also identifies big risks of LLMs in regulatory use in high-context tasks (classification and amplification tasks). This paper offers both theoretical contributions and practical recommendations for organizations seeking to explore LLM use for legal compliance work.