Looking at the most recent published sets of accounts for the top 50 law firms for 2020/2021, it is notable that some firms – around one in seven – are still not disclosing the data in their annual accounts. However, where there is data, it reveals tentative good news. Carbon emissions have decreased significantly from 2020 to 2021 for the legal profession as a whole – from 59,386 tonnes of CO2 last year to 39,532 tonnes of CO2 this year.
However, the figures are flattered by the impact of the pandemic. During this period, there were significant periods of lockdown when offices were closed. There was less business travel generally and more agile working. The expectation is that as the pandemic resides, carbon emissions will rise, but to what level, as it unclear what a ‘good level’ of emissions might be, other than perhaps stating the obvious of ‘zero’. Indeed, not only is it unclear what a reasonable target might be, it is noticeable that a number of firms re-reported their 2020 numbers, suggesting firms have not yet got to grips with the measuring of emissions.
Buildings and travel remain the most significant sources of carbon emissions for most law firms. Business travel is still a necessity for many groups, particularly for winning new business and building client relationships. However, as law firms adjust to agile working, a shift in premises needs provides an opportunity to move to more efficient buildings.
It is interesting to note the level of volatility in the figures, with no clear reasons why. Larger firms tend to benefit from economies of scale with emissions per head generally lower than their smaller rivals and firms with higher numbers of offices tend to emit more carbon per head. Of course comparing the results highlights the ‘cleanest’ firms and the ‘dirtiest’, which is perhaps of most interest to firms.
As to taking action to reduce their carbon footprint, there is – as yet - no industry-wide initiative to help law firms improve. In May 2022, Pinsent Masons became one of the first law firms to have its global 2040 net zero target verified by the Science-Based Targets initiative (https://www.pinsentmasons.com/about-us/announcements/pinsent-masons-has-2040-science-based-net-zero-target-verified). Its target includes reducing emissions resulting from business operations, while also tackling indirect emissions from the generation of purchased electricity and across global supply chains. This may set a path for other law firms to follow.
Equally, the majority of firms now have ESG committees, though it is not clear the extent to which they really influence decision-making. There are rising external pressures as potential clients and employees put pressure on law firms to report adequately and change their behaviour where necessary. To date, carbon emissions don’t appear to be the deciding factor in competitive tenders, but their importance is increasing.
Firms may also be galvanised by reputational considerations. Banks have come under fire for ‘financed emissions’ – the role they play in lending to carbon-intensive industries and organisation. It is possible that lawyers will see similar pressures where they are advising specific sectors. The potential for this type of problem has already been seen to some extent over the war in Ukraine. Lawyers with Russian clients have had to tread carefully to manage the reputational implications.
To date, it may well be the case that law firm management teams consider areas such as diversity as a greater priority. If a law firm can encourage cognitive diversity, it can achieve tangible improvements in performance. The link with environmental considerations isn’t as clear-cut. Nevertheless, it is evolving. Carbon reporting is becoming more important for clients and for employees, and this is likely to create change across the legal profession. Greater disclosure and analysis of the results will help drive this.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.