Building Sustainable Strategies: Balancing Profit and Purpose
Being sustainable entails having a long-term perspective on how you operate, with regard to people, regular operations, the environment, or diversity. While it has a much wider definition, the term “sustainability” is frequently used in commercial and environmental contexts. Sustainability can be defined as an organization’s capability to maintain its competitive edge for a long length of time. It involves taking ownership of your behaviour and making sure that it doesn’t negatively affect other people or the environment. In this piece, we talk about the environmental impact and ESG practices in law firms.
The UN Global Compact is a voluntary initiative based on a commitment to implement universal sustainability goals as mandated by the United Nations. The endeavour is to strive to making global goals, local business. They offer initiatives and partnerships with civil society, governments and other business stakeholders to advance societal goals for the environment, human rights, labour and anti-corruption. Corporate sustainability starts with a company’s value system and a principles based approach to doing business. To realize these, The Ten Principles of the United Nations Global Compact concerns, Human Rights, Labour, Anti-corruption, and the Environment.
The United Nations has developed a roadmap for the next 15 years—the United Nations Sustainable Development Goals (UNSDGs) with a target date of 2030. The UNSDGs describe these Global Goals as an urgent call for action in a global partnership to end poverty, improve health and education, reduce inequality, and spur economic growth—all while addressing climate change and working to preserve our oceans and forests. Every lawyer, whether an in-house lawyer or law firm lawyer, should be familiarised with these goals and understand what it means for their company, their firm, their employees, their clients, and their community. By understanding the Global Compact initiative, and the Sustainable Development Goals, lawyers will be better positioned to advise and engage with clients, and become active with their clients in support of this initative.
According to the Law Firm Sustainability Network survey of April 2022 conducted in America, 87% of legal industry members now receive requests for proposals (RFPs) asking for information about their environmental practices, initiatives, and results. In June 2021 more than 40 percent of major American law firms created a practice centred around ESG (environmental, social, and governance) and according to Thomson Reuters— the number has since grown.
As a practice, ESG cannot function in isolation but will have to be driven collaboratively, through other practice areas like corporate, regulatory, finance, and litigation (can we afford to ignore the green energy deals in the last three years?). The legal industry has seen significant upheaval over the past decade. The conventional practice of running a law firm is less relevant than ever before. Lawyers must continue to fulfill their customary tasks while also finding innovative methods to add value. The name of this practice area is in direct response to the current boardroom sentiment around sustainability and corporate responsibility. It is not just about the environment; it is also about governance, risk management, and compliance.
According to the 2022 Wolters Kluwer Future Ready Lawyer Survey, “50% of law firms across Europe and the U.S. report that they created an ESG practice area in the past three years.” What spurred this major shift in law firm priorities? According to the report, “The overwhelming driver of ESG practices is client demand.” This shift in legal practice could be a boon for companies in the field of sustainability, which has resulted in an exponential rise for services related to clean energy and climate change mitigation.
Law firms have also begun to consider ESG as part of their wider missions, including through investing in thought leadership and law school opportunities to train and educate the next generation of ESG lawyers. This trend is partly driven by a desire to differentiate the firm from its competitors, but also reflects a growing recognition of the importance of ESG to the firm’s clients. Since law firms compete in an increasingly commoditized market with consultancies and other service providers, gaining a competitive edge through an effective ESG strategy is crucial. For example, in 2016 the UK-based law firm Dentons, partnered with the University of Cambridge Judge Business School to launch a program for Masters in Sustainable Investment. In the foreseeable future, we expect ESG to gain further ground in the legal industry as firms seek to better position themselves as trusted advisers and law schools continue to include ESG topics in their curricula. We’re also starting to see more law firm groups start to invest in ESG initiatives, with the aim of improving their own performance and reputation.
Some noteworthy initiatives by foreign law firms include:
Latham & Watkins LLP’s resolve to reduce their impact and take meaningful action to address climate change. Under the initiative, they provide free legal services to an array of individuals and organizations around the world acting to protect the environment. A few key initiatives include their involvement with:
- China International Business Dialogue on Environmental Governance, a coalition that facilitates dialogue between Chinese environmental regulatory authorities and multinational businesses active in China.
- Green Bond Principles and Social Bond Principles, where the firm is an inaugural member of the Advisory Council of the Green Bond Principles and Social Bond Principles Executive Committee, which promotes integrity in the green bond and social bond markets through guidelines that recommend transparency, disclosure, and reporting.
- World Business Council for Sustainable Development, since 2020, the firm has partnered with a global CEO-led organization of more than 200 leading businesses working together to accelerate the transition to a sustainable world on a range of projects.
Clifford Chance signed the United Nations (UN) Global Compact & Statement from Business leaders for Renewed Global Cooperation. The statement highlights the fact that peace, justice and strong institutions are beneficial to the long-term viability of businesses and are foundational for upholding the ten principles of the UN Global Compact and achieving the Sustainable Development Goals (SDGs). They advise clients internationally and locally as they incorporate ESG into business strategies and implement ESG in operations, supply chains, and business relationships throughout value chains and also support businesses as they seek to transition to net zero carbon emission and invest in new clean or low carbon businesses or products.
Allen & Overy is an executive member of the Legal Sustainability Alliance (LSA), a collective effort by law firms in the UK to take action to improve the environmental sustainability of their operations and activities. They support the UK Legal Renewables Initiative and are committed to procuring 100% renewable electricity for their UK offices by 2025.
As one of the world’s largest international law firms, Kirkland & Ellis LLP recognized its responsibility to reduce its environmental impact on a global scale. They are members of the Law Firm Sustainability Network (LFSN), a non-profit organization of global law firms committed to promoting the benefits of environmental sustainability within their firms and throughout the legal industry.
Herbert Smith Freehills has committed to achieving net-zero carbon emissions by 2030, through the adoption of science-based targets aligned with the Paris Agreement – which seeks to limit global warming to 2° Celsius above pre-industrial levels and pursue efforts to limit warming to 1.5°.
Simpson Thacher & Bartlett LLP, Hengeler Mueller, Stibbe, Sullivan & Cromwell, Dentons, and several others are committed to the highest standards of social, ethical, and environmental responsibility and conduct.
Indian law firms and their foreign counterparts will continue to work together and collaborate more so with the new BCI regulations, permitting foreign law firms into India. Clients become increasingly concerned about the cultural alignment with their chosen legal partners, it is becoming abundantly clear that modifying how you operate your law firm is inevitable. Green seems to be the new black and white for lawyers in India.
At The Grey Matter, we run a Green Impact Group (GIG) initiative for law firms. We intend to divert the waste going to landfills and recycle them and reduce our collective carbon footprint better. The attached document details the process and we would love for your firm to consider being a part of the initiative. To find out more, click here.