Law firm leaders navigate ESG’s increasing influence

For Raine, this area of employee satisfaction is growing in importance alongside the usual factors, such as pay.

Clients are also asking what firms are doing to address ESG as part of the panel selection or tender process. Zoya Todorova, Regional Fora Liaison Officer of the IBA European Regional Forum and a partner at Dimitrov, Petrov & Co in Bulgaria, says ESG topics have increased in importance for clients over the last two to three years and ‘will be crucial for client attraction and retention’ in future.

Law firm leaders are now taking concrete action to address ESG issues that are relevant to their business. For example, adopting science-based targets to reduce emissions within a set timeframe, undertaking a materiality assessment, using renewable energy sources or reducing business travel.  

ESG is different from corporate social responsibility because proponents seek to embed it in strategy in recognition of how it can drive long-term growth, rather than treating it as a cost centre that sits outside the main function of the business.

JP Douglas-Henry, Managing Director of Sustainability and Resilience at DLA Piper, describes ESG as a lens through which the firm makes certain decisions, much like a compliance lens, or an anti-bribery lens.

‘In the future we’ll stop talking about ESG as “other” or separate from the mainstream; it will become the mainstream’, he argues.

As part of the process of embedding ESG into strategy, law firm leaders will face difficult decisions about the clients they represent. Some lawyers feel uncomfortable undertaking work for fossil fuel companies, for example. However, many law firm leaders argue that representing clients that may be viewed as problematic from an ESG perspective, such as fossil fuel companies, allows them to work with those organisations to address ESG issues in a way that withdrawing representation would not.

‘The power of law and legal representation is in representing clients,’ argues Michael Watson, Global Head of Climate Change Mitigation and Sustainability at Pinsent Masons. ‘It’s better to have the best advice directed at the most difficult and thorniest problems.’

Law firm leaders will need to navigate this challenging and nuanced terrain more often as the ESG agenda becomes more powerful. Increasingly they’ll be required to think not only about their role as legal advisers but also about their firm’s broader contribution to society.

In this context a growing number of law firms are stating their purpose and values. Watson’s firm describes itself as a purpose-led, professional services business with law at the core. He describes an internal process of consulting with colleagues to establish the firm’s purpose and values, hinging on a ‘key question: what is the underlying purpose and reason for us as a firm to exist?’

Watson argues that establishing a sense of purpose in the business enables long-term decision-making and allows for a deeper connection with employees and other stakeholders. He says the next step is to demonstrate the manifestations of your purpose. For him, addressing the ESG agenda is a manifestation of being a purpose-led business.

‘What’s been beneficial from our business’ perspective is that the architecture and the understanding of our purpose and our values then leads us to understand why it’s important, internally, to articulate our sustainability agenda’, he says.

Raine describes a similar process at his firm, which has also outlined its purpose and values. ‘It’s the right thing for the business to do,’ he says, ‘otherwise we’re [practising] law in a vacuum and it won’t have any resonance with us as we face increasingly tough challenges.’

Both Raine and Watson describe placing the services their firms offer in the broader context of the challenges society faces, to ensure they remain relevant.

For Watson this means working with experts from other disciplines to offer a more rounded product to clients. He sees this type of service as particularly well suited to addressing the ESG agenda.

‘The client wants to be advised as to what they should do – the word “should” is a critical word here’, argues Watson. ‘That “should” involves pulling in your expert understanding of the law, but also your expert knowledge of other adjacent issues and matters.’ ​​​​​​​

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