Huge scope for smaller law firms to improve ESG

Peyer: Governance is an area where law firms can improve

There is huge scope for smaller law firms to improve their environmental, social and governance (ESG) performance, new research has found.

It also highlighted the growing importance of law firms having policies on which clients they would and would not work for.

The analysis by impactvise, which specialises in ESG data analytics, training and consulting, found that the top 25 global law firms for ESG, almost half of them based in the UK, achieved an average score of 54 out of 100 using its system that takes into account “governance, planet, people, and prosperity”. This compared to only 9 for the whole survey group of 1,000 global firms.

However, the report also found a large gap between the top law firms – headed by DLA Piper, Clifford Chance and DWF – and the big professional service providers, including PwC and EY, which achieved an average of 81.

Impactvise chief executive Adrian Peyer, a former general counsel at Zurich Insurance in Switzerland, said the Big Four accountants have been “much longer on the ESG journey with their clients” than law firms, and because they were much bigger organisations and had the resources to spend on it.

While the top 50 law firms had reasonable scores on ESG, beneath that size of firm there was “no consistency”, with scores ranging from “quite low to poor”, leaving smaller firms with a “huge opportunity” to improve.

“Law is a people business and DEI [diversity, equality and inclusion], is a longstanding issue, but so many law firms, particularly outside the UK and US, don’t talk about it.”

The report found that 12 of the top 25 global law firms for ESG were based in the UK. They include Linklaters, in joint fourth place with Baker McKenzie, Burges Salmon, in joint sixth place with Spanish firm Garrigues, Ashurst, and in joint ninth place, Freshfields Bruckhaus Deringer and Norton Rose Fulbright.

Six of the top 25 firms come from continental Europe, six from the US and one from Asia.

Law firms performed best in the people category, with the top 25 scoring an average of 68, compared to 17 for the whole group of 1,000 global law firms. The ‘people’ category includes DEI, pay equality, training, and health and safety.

This was followed by the planet category, where the top 25 law firms scored an average of 60, compared to 9 for the whole group, governance 50 compared to 6, and prosperity 40 compared to 4.

Mr Peyer said pressure from clients for diversity and pay equality was part of the reason why the people category topped the list.

Meanwhile, the “urgency” of the climate crisis, with pressure on law firms from clients who were asking law firms for their carbon footprints explained why planet came in second. In this area, US law firms were still “lagging behind” the UK and Europe.

Mr Peyer said one area where many law firms could improve was in governance, including in the area of client acceptance policies.

“There are those firms that won’t accept certain clients. It takes courage.”

Mr Peyer said the Ukraine war was the first time that law firms had to make public statements about accepting, or refusing, clients.

Regarding other kinds of client, for example fossil fuel companies, he added: “I’m not saying you need to make statements but you should have some client acceptance principles that you publish on what you take into account. The pressure from clients and employees is growing.”

    Readers Comments

  • Ray Clarke says:

    The final sentences offend the principle of equality before the law. From my experience of acting for those perceived as polluters the scales of justice ( and fairness ) are often out of balance to the detriment of those companies. Fossil fuel still makes an important contribution to our society whether we like it or not .

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