Prioritising ESG

ESG is a pressing issue for law firms for a number of reasons:

First, and with a focus on the E in ESG, the science is unequivocal in the fact that we have no more than thirty years to save the planet from a catastrophic climate crisis. The criticality of this issue means that businesses, including law firms, need to play their part in combatting climate change.

Second, law firms are facing mounting top-down pressure from regulators and investors and bottom-up pressure from clients and employees to take action and report progress. According to HSBC, 74% of law firm leaders say that clients always, regularly or sometimes assess ESG policies and targets as part of their processes for awarding the firm work.

Finally, there is growing evidence that a strong emphasis on ESG fundamentals enables companies to differentiate themselves, gain a competitive advantage and, therefore, accrue financial benefits. For the legal profession, new opportunities are emerging around green funding, climate litigation and climate change regulation.

Forward looking law firms are launching new ESG-focused business lines and setting ambitious ESG targets. One major initiative is the Net Zero Lawyers Alliance. Its 22 founding members have committed to achieving net zero emissions by 2050, along with interim targets to reduce operational emissions by at least 50% by 2030 against 2019 levels. The group has also pledged to educate clients and those in the legal profession on net zero legislation and policies.

Another key initiative is the “Race Fairness Commitment” signed by some 29 law firms. The commitment includes detailed targets around interview processes and the publication of more detailed diversity data as law firms seek to become more inclusive and representative of wider societal demographics.

A large proportion of a law firm’s ESG impact is connected to its office space and commuting patterns of its employees. Our law firm (Y)OUR SPACE survey indicates that law firm real estate decision makers recognise this, with 86% of respondents saying that ESG will either be somewhat influential or the key influence in determining their real estate strategies over the next three years. 

In light of this, we forecast an uptick in relocation activity, particularly given that currently just 25% of the offices occupied by the UK’s top 200 law firms in the UK are BREEAM rated.  Momentum is already building. 61% of 2021 law firm leasing transactions over 5,000 sq ft were for BREEAM rated buildings. This compares to 44% five years ago. Allen & Overy, for example, cited sustainability as a key driver for their planned relocation to 2 Broadgate in London saying that the move will help the firm meet its commitment to a 50% reduction in absolute carbon emissions by 2030. We also predict a gravitation towards office space that prioritises health and wellbeing, inclusivity and building community in order to aid the achievement of targets under the S and G categories of ESG.

Other actions law firms can take in relation to their real estate include:

• More efficient energy and water use. For example, using LED lights with sensors so that lights are turning off when rooms are not in use.
• Minimising waste and adopting circular economy principles, such as recycled furniture in fit-outs.
• Reducing paper consumption
• Sourcing renewable energy.
• Recycling and phasing out single-use plastics.
• Limiting business travel and incentivising staff to use “green transport” to get to work.
• Investing in energy and environmental data management systems.
• Proactive social inclusion strategies.
• Adopting inclusive design principles.

Amongst law firm real estate decision makers there is growing recognition of the relationship between tackling social, environmental and governance issues and commercial real estate. In light of this we expect more law firms will gravitate towards offices that reduce environmental impact and support corporate ambitions or requirements around ESG.