By Elizabeth Basten, CMO, Clarilis.
Have you levelled up your ESG score? Whether you respond with ‘it’s high already’, ‘it could be better’ or ‘what is an ESG score?’ will be indicative of your perceived commitment to environmental, social and governance matters in your boardroom and beyond.
Organisations are ‘scored’ on public information relating to these areas, so while putting a statement on your website has been enough in the past, that is no longer the case. Plus, we all know that change never happens if it lives solely in a policy statement. Commitment to developing and maintaining an ESG strategy should be implicit in all you do – shouldn’t it?
Why should I care?
ESG category scores are rolled up into three pillar scores – environmental, social and corporate governance. Your overall ESG score is a relative sum of the category weights which vary per industry for the ‘Environmental’ and ‘Social’ categories. For ‘Governance’, the weight remains the same across all industries. Historically, companies reported their ESG credentials voluntarily, without a legal or regulatory requirement to do so.
The writing is on the wall now; ESG reporting is likely to become mandatory as early as 2023, so it’s a good idea to brush up on the basics. Small to medium enterprises (SMEs) likely won’t be required to report by any regulatory agency. However, suppliers to larger companies will find this type of non-financial reporting becomes part of winning new business. Successfully managing relationships with larger customers (who are subject to reporting requirements) will also become increasingly more important.
Raising the bar
There’s no doubt about it – law firms are investing in raising their credentials in this area. Burges Salmon, recent recipients of the ‘Best Law Firm for Eco Friendliness, 2022’ award, has been recognised for its work in procuring an environmentally sustainable future for its firm. As a founding member of the Legal Sustainability Alliance, Burges Salmon has also been championing incremental environmental improvements across the firm and in the legal sector for many years.
They are not alone. The social aspects of ESG are also under the spotlight. White and Case, winners of the ‘Most Innovative Firm for Social Justice’ as part of their global Antitrust Practice, has created a Racial Justice Task Force to fight racism and social injustice through pro bono and volunteering projects related to criminal justice reform, education and economic empowerment.
From an ESG perspective, there is another good reason to tell the world about it – their ESG score will be mainly based on the publicly available information on their website. In future, simply putting this information on your website will not be enough. S&P Global ESG Scores, for example, are uniquely informed by a combination of verified company disclosures, media and stakeholder analysis, and in-depth company engagement. S&P Global analysts are validating disclosures for both accuracy and relevance. Approaches such as these are actively driving corporate disclosures and raising the bar on sustainability standards over time.
What’s the score, big law?
According to the RSGI Green Print Report (2021), based on the top 100 law firms (ranked by revenue) only 17 of the top 100 firms published an ESG report last year. The same report also tells us that just under a fifth of these firms have set carbon emissions reduction targets. However, businesses are increasingly holding their professional advisors accountable for their impact on the environment, their people and society in general. And it’s not just prospective clients asking these questions in RFPs.
We’re hearing more and more how existing clients and employees are equally concerned with a firm’s ESG intentions. This is driving legal practices to take decisive steps to show the world they’re sustainable and responsible businesses, mainly because if they don’t, they may be prevented from winning key business opportunities in the future.
Consequently, law firms should now expect to be asked about their gender pay gap, their inclusive and diverse culture, employee wellbeing agenda, along with their carbon reduction strategy – we’re living in an era where law firms acting on ESG commitments are likely to outperform their less sustainably minded rivals.
Good news: your score is likely to be higher than you think
It’s no surprise that the pressure to transition to more sustainable practices is having a huge effect on law firms. After all, shouldn’t lawyers set the example on corporate standards? And for this reason, there’s an assumption that law firms should be leading the charge towards more ethically and socially responsible practices. Herbert Smith Freehills recently stated that it’s time to say ‘Goodbye to Greenwashing’, referring to the change in investor behaviour redrawing the ESG map.
It’s clear that ESG can’t be tackled with a well-intentioned policy statement that’s copied and pasted into tender documents. It’s about firms taking measurable actions to improve the impact of their operations. It isn’t enough to just say it.
The good news is that what you are already doing (clue: more than you think) could quite possibly already be grouped under the ESG umbrella. It may be that you have not consolidated this information or put it out there as yet. Law firms integrating ESG deeper into the performance and personality of both their services to clients and the internal workings of their practices will, consequently, increase their ESG score – although admittedly the pace varies.
Two ESG opportunities for law firms
There are genuine altruistic reasons for increasing investment in ESG, but there are strong financial incentives too. The firms optimising the ESG opportunity are those tackling it from two angles: in how they operate as a practice and also by helping their clients boost their own ESG performance. ESG is of course increasing the workload of legal teams. General counsel are struggling to deal with the mounting obligations of reporting and ever-changing regulations. Then there’s the need for more transparency, the pressure to make disclosures on various ESG-related risks, to add sustainability clauses into contracts and the burden of supplementary due diligence.
The demand for ESG legal advice is driving law firms to develop new service lines dedicated to this area of law, in a variety of sectors, and to keep their clients up to date. Check out Hill Dickinson’s ESG Knowledge Hub for example, or Addleshaw Goddard’s ‘Sustainability Strategy; Pain to net Gain’ available on a website near you, right now.
What part does Legal Tech play in ESG agendas?
Quick answer: an integral part. Tech can touch all aspects of ESG from reducing waste, improving work/life balance and wellbeing and of course, better governance and risk-mitigation. At Clarilis, we’re increasingly hearing how our law firm clients use our platform to facilitate the delivery of their services in a more sustainable way. Clarilis client Burness Paull recently shared with us how candidates now ask about automation at the interview stage – taking hours out of first draft production times in busy teams has become a key asset for their employee value proposition. This is, of course, evidenced in their ESG agenda.
Don’t underestimate the part tech has to play in improving recruitment and retention due to the fact that lawyers are able to focus more time on higher value, more interesting work, often in a hybrid or remote working environment. The benefits of producing a high quality first draft of an SPA or investment suite and all ancillaries in under two hours, for example, tackles the damaging long-hours culture and provides evidence of action taken to improve employee well-being and of course, reduce the carbon footprint. This is adding kudos to a firm’s ‘social’ and ‘environmental’ ESG performance and levelling up their ESG score. What’s not to love?
The way to do it
ESG needs to be integral to the business. It needs to be woven in the fabric of the organisation, central to the brand narrative, linked to company purpose/culture/behaviours, until it becomes ‘the way we do things around here’.
If you would like to hear how in-house legal teams and leading law firms are doing just this, on 12th May at 4pm BST (11am EST), Clarilis is hosting a webinar where Mark Anderson, Forensics Partner at PwC, Kirsty Green-Mann, Head of Corporate Responsibility at Burges Salmon and Emma Bichet, Special Counsel at Cooley will share the approach they have taken, the pitfalls to avoid and the tools they’re using to improve their sustainability credentials and win awards in this regard. All this whilst also helping clients navigate their own ESG agenda and ‘level up’ their score.
Register for the May 12 webinar here.
[ Artificial Lawyer is proud to bring you this sponsored thought leadership article by Clarilis. ]