Harrison Jowett - Sustainability as a Commercial Tool

Businesses and strategy in the service sector are ultimately driven by competition. Familiar battlegrounds include price competition and quality, where firms will make some sacrifices and strategic stands in order to win market share. For a long time, there has been a limited pool of these commercial tools. However, sustainability is gradually working its way into this arena as a means for firms to compete and is permeating into every sector. Firms with eco-conscious business practices are increasingly winning market share as the consumer becomes more eco-literate. This shift in attitude will have long-reaching effects from the consumer all the way up the supply chain, and law firms should be prepared.

Increasingly, sustainability and sustainable living is being pushed into the public interest. The campaigns across all forms of media coincide with political targets to put pressure on consumers. Whilst ‘big business’ and producers are ultimately responsible for what goes into their goods – and their appetite for sustainable development will naturally increase (as a result of incentives and policy that grows as a result of these campaigns and targets), this emphasis is being broadly placed on consumers. Every-day people are being asked to consider sustainability more in their day-to-day lives. As a result, trends suggest that consumers are consciously considering environmental as well as economic factors when making decisions.

As consumers build these sustainable preferences there must be a simultaneous development in what firms offer. The simple principles of demand and supply are at play here; as consumers demand increasingly sustainable goods fuelled by changing social tastes and biases, there is a growing share of the open market that is becoming available to conscious firms. This leads to a fantastic opportunity for firms to change their business practices and supply goods in line with this increasing group of consumers. By contrast, other firms focused on profitability or who are reluctant to pursue sustainable development will likely see their market share fall (along with revenue), as a result of their consumers becoming more eco-aware. As such, there is a strong motivation for all firms that are consumer-facing to change their business practices in order to attract this increasingly influential consumer base.

This shift will lead to competition. Ultimately, as firms become conscious of a shift in consumer taste towards sustainability, they will develop their market practices. Perhaps by launching sustainability campaigns, developing their business practice or investment portfolio to grow their green credentials. However they do it, firms will be implementing the basic tactics used in competition. Firms are no longer solely relying on their price or quality to attract consumers; they know that the appetite for sustainable products is enough to draw consumers away from competitors, often regardless of price. But, rather than mere ‘advertising puff’, I would argue that this shift in consumer taste has resulted in changes to ingrained practice areas and business practice.

One area where this is apparent is sustainable product development. This is the area that has penetrated deepest into our social consciousness. Where plastic once stood, paper, metal or bamboo emerge as ecological replacements. Increasing numbers of electric vehicles (including a new fleet of vans for Amazon) are replacing traditional gas-guzzling transporters. Even in energy manufacturing, there has been a structural shift in reliance from coal and oil to hydro and wind power – with turbines being erected in almost every major city. Taken in conjunction, developments like this are proof of a structural shift to accommodate a developing consumer taste for sustainable consumption (assisted by, not solely the result of, target-setting and stimulus). As competition in this area develops, changes will emerge throughout business practice.

Soon, mere eco-conscious produce will not be enough to compete in this market. Increasingly we are seeing firms lording over their sustainable credentials. However, for common strategies such as ‘carbon offsetting’ (often seen as firms buying their way out of pollution), consumers are losing confidence and the market appears to be moving on. This has led to two outcomes. Firstly, consumers are becoming acutely aware of the impact of sustainable policy and its effects. This leads to an increased level of scrutiny on firms who cannot simply pull the wool over the eyes of the unwitting consumer. Secondly, a developing complexity and impact of sustainable policy.

Firms' attitude towards sustainability and business practice is shifting, and this is where law firms should be aware. Not only is pressure from scrupulous consumers growing regarding individual accountability for products and practice; firms are also being held to account for decisions that go beyond their direct control. This includes inter alia their use of professional service firms. Sustainable firms who market eco-friendly practice cannot be seen using accountants linked to investments in dirty fuels, for example. This has caused a knock-on growth in appetite for sustainable service firms. One notable area where supply is bending to meet sustainable demand is the increased offering for ‘ESG’-focused sustainable investment packages by finance firms, who are reacting to an increased scrutiny from more eco-focused clients. But this shift can also be seen in the legal sector.

Within the last decade there has been a substantial shift in the approach of law firms towards sustainability and ESG targets. To prevent this article descending into a who’s-who of sustainable targets, I will refrain as much as possible from comparing firms to each other. With this in mind, there is a general policy trend that can be tracked. Large global corporate firms can be seen complying with standardised ISO 14001 and 50001 Environmental and Energy Management Systems alongside the regularly mentioned UN Sustainable Development Goals and detailed commitments to reducing energy and carbon consumption.

Regional and city firms interact less with the recognised standards for efficiency but generally commit to reducing energy consumption and managing their carbon footprint. There is often something featured about mitigating employees’ travel, or informing and educating staff on environmentally-friendly working practices. This trend has not yet trickled down to some regional or high street firms because they may not have the same level of commercial pressure or available funds to force or facilitate this shift at this time. However, that does go against the general trend which clearly indicates a growing awareness for sustainability as another development objective for law firms.

Whilst ostensibly this is a positive development rooted in the growth of sustainable practice and social good; there is potential that it could come at the cost of business to some firms. Sustainable targets and practice will, whilst aligning law firms with a growing classification of potential clients, inevitably alienate some of their existing client base. Traditionally, client retention would have fallen to two variables, quality and price. However, as we have seen with the engagement of clients, the attitude of the firm towards sustainability could certainly factor in. This may result in firms in traditionally non- environmentally friendly practices being driven away.

The primary effect of this is, as consumers shift their tastes there will be a gradual fazing out of those firms seemingly stuck in their ways, their refusal to collaborate with a changing marketplace will in part facilitate this. Secondarily, it may lead to a bubble of demand for a law firm to represent this particular type of client. It is theoretically possible for a select group of law firms who are not engaging with sustainable practice to see a rise in demand for their services. However, as demand for those consumer-facing businesses falls it will ultimately draw the practice, and its reputation, down. This illustrates the pressure on law firms to change as a result of this building demand for sustainable practice and the challenges that may arise if they do not. Additional to this, though, is a potential impact on recruitment and retention of talent.

Law firms face this pressure from an employment perspective, creating an independent requirement for sustainable policy. The knock-on effect of consumers becoming more focused on sustainable consumption is that there may be a shift in their attitude to production. Increased pressure for consumers to act responsibly may result in them indirectly holding their employers to account for their business practice, by seeking employment at firms who match their values. Rising pressure in this area could come from existing employees pressuring the firm to improve its values and threatening to leave; or from potential employees challenging the firm against its competitors, where poor sustainable credentials comparative to the market may lead to a loss in potential talent. Either way, it is clear that as sustainability permeates the social interest more, it will filter through the entire fabric of business to consolidate the shift to sustainable business practices.

There is therefore no doubt that sustainability and its penetration into the public interest has had broad and uncompromising effects on current business practice. The shift in consumer appetite has resulted in a desire from firms to develop a more sustainable product-base, and these factors come together to form a double squeeze on professional service firms. In this light, law firms are forced to develop their sustainability credentials to entice both prospective clients and talent who are aware and scrutinised for their decisions. This shift in focus for competition has been both swift and stark, and clients have overlooked more traditional firms who are not represented by the new policy. Whilst this may result in a changing client base, it is ultimately in line with consumer tastes in this moment.

Furthermore, it consolidates a structural shift in the market which will make it easier to control the ecological impacts of the entire economy – great for the government. Therefore, though governments set the targets and businesses react with enticing related policy and production methods, it is the consumer that holds the power when it comes to building sustainable consciousness into the economy – after all, they all work within it.