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.

Iceland: A Sustainability Case Study - Laurence Chapman

In August 2020, I joined two friends on a weekend trip to Iceland. We flew on the Friday and stayed until Sunday evening. During our short time there, we drove a hired 4X4 hundreds of miles from our Reykjavík AirBnb; covering many of the best waterfalls and attractions, from a glacier to the tectonic fault line and the original spot where Icelandic parliamentary democracy was founded.

From our short stay there, it was clear to me that Iceland is a global leader when it comes to environmental policy and promoting sustainability and environmental protection.

The use of geothermal energy is extensive. Unlike perhaps any other country, Iceland is in a unique position of having volcanic activity underneath most of its ground, meaning it can harness the energy for electricity and hot water. We experienced the unique use of geothermal energy at the Blue Lagoon which is said to be one of the twenty-five wonders of the world. Hosting a modern hotel and spa complex which looks like the extravagant home of a Bond villain, the Blue Lagoon is an outdoor pool which is naturally blue due to its silica content and is around forty degrees-celsius thanks to the thermal energy pumped up from underneath[1].

Although Iceland needs to use its unique features and protect its environment for its tourism-reliant economy, one gets the impression that, as a nation, they genuinely care about sustainability and environmental protection; from preserving wildlife and habitats, to using more sustainable energy sources.

Iceland being a world leader in addressing pollution control and management of natural resources was confirmed in an environmental performance report[2] by Yale and Columbia University. Iceland understands the balance and link between economic activity and sustainability, and how they can be complimentary. For example, their sustainable quota system for fisheries appear to be working by supporting an important section of the economy whilst remaining sustainable. Additionally, Iceland is a global fighter for cleaner waters, boasting some of the cleanest territorial oceans in the world.

Aiming to halt and reverse the soil erosion and desertification occurring in Iceland is one of the country’s main environmental priorities. This happens mainly due to wind erosion on the vast empty plains that scatter the Icelandic countryside between mountain ranges. The Icelandic Soil Conservation Service has been fighting to reclaim land lost to desertification since 1907[3].

One of the most important things that Iceland has to focus on is the fine balance between growing demand for energy from tourism which is important for the economy and preserving some of Europe’s last great, unique wildernesses. This can be done through careful planning, conservation efforts and pushing for clean energy such as from hydroelectric and geothermal sources in limited areas of land.

The Icelandic Ministry for Environment has seen growth in size and competencies since the 1990s. It now covers areas such as pollution control, nature preservation, mining and planning[4]. In recent years, environmental and land-related legislation has been extended, mostly as a result of participating in the European Economic Area and European Union which has resulted in a solid framework for managing resources. Although much has been done in balancing environmental and economic impacts in areas such as hazardous waste and fishing, there is arguably still scope for cutting down on emissions and increasing user fees for environmental services through the implementation of economic instruments.

This appears to be working slowly with economic activity increasing across all major industries whilst NOx and SOx are increasing slower than GDP. A major switch from oil to geothermal heating has also helped improve Iceland’s pollution management. As well as the aforementioned fishing quota system, Iceland maintains sustainable use of natural resources whilst protecting its important nature reserves through the use of planning restrictions, municipality boundaries and land ownership rights. Generally speaking, all this has been followed and developed from the plan put in place in The National Environmental Strategy, ‘Towards Sustainable Development’[5] and the subsequent 1997 National Sustainable Development Action Plan.

Iceland is always expanding and reviewing its sustainability goals and environmental protection rules through regular meetings. For instance, almost 2,000,000 hectares of land (in around 100 sites) are now protected under the Nature Conservation Act as well as under other laws. To balance the production of renewable energy and protect land, Iceland’s Ministry of Industry has now developed a master plan for hydro and geothermal energy resources[6].

Moreover, based upon EU regulations, Iceland has detailed legislation on Environmental Impact Assessments. The Icelandic Environmental Impact Assessment Act[7] aims to ensure that for projects which may have significant environmental, community and nature effects have a full assessment completed. This is then checked and used in the planning process whilst being published to encourage public contribution[8].

However, with the exception of several European micro-states, Iceland still has the second-highest rate of vehicle ownership in the world and has very few electric and hybrid cars which are unable to cover the vast distances required in the baron landscape in sub-zero temperatures. Iceland’s minimal public transport also induces a higher vehicle ownership rate. Perhaps in the future, Icelandic people may be able to use electric vehicles when the technology improves and use renewable energy to power them.

Moreover, Iceland’s greenhouse gas emissions are not what one may think. Exposed after the Paris Convention in 2015, Iceland’s greenhouse gas emissions increased by 19% between 2005 and 2013. Per capita, this equates to 14 tonnes which is higher than Japan, the UK, Germany, Russia and South Korea.[9]. Although Iceland was allowed to increase its carbon emissions under an exemption in the 1997 Kyoto Protocol, it is still expected to miss its next UN convention targets.

Iceland lacks the nuclear waste, pesticide factories and open pit mines of other developed.

Although Iceland is clearly working towards being a prosperous sustainable nation through its environmental protection laws, following EU regulations and expanding its Ministry for Environment, the country also profits from its green image.

Internationally, Iceland is seen as one of the most beautiful and environmentally friendly states in the world. However, much of this is thanks to some of its policies and branding. When you walk into Keflavík Airport, a large poster from Landsvirkjun, the state power utility, welcomes you to “the land of renewable energy.” The official government website even proclaims that “Iceland is the world’s greenest country.” Although, at a first glance, Iceland’s total footprint is very low, this is due to its population size (330,000). When scaled up to the size of France or Germany’s, this small island would be one of the worst on the planet.

To conclude, Iceland, although beautiful, has a more complex relationship with sustainability and environmental protection than previously thought. There is no doubt that some good progress has been made by Iceland, and that the country protects its valuable and unique land well by using renewable energy in many areas. However, it is also apparent that Iceland has an environmental paradox; the country profits from its strong green-image branding, and from protecting its prettiest environments as they are the country’s main tourist attraction. In reality, Iceland is not convincingly the sustainable world leader one might think it is, with surface research or even a weekend tourist trip there concluding this.

[1] Official Blue Lagoon Information Site [2] Environmental Performance Index (EPI); Yale Centre for Environmental Law & Policy and the Centre for International Earth Science Information Network at Columbia University, in collaboration with the World Economic Forum and the Joint Research Centre of the European Commission. [3] The Icelandic Soil Conservation Service. (Icelandic Government 2020) [4] The OECD Environment Programme: Environmental Performance Review of Iceland. [5] The National Environmental Strategy, ‘Towards Sustainable Development’, (1993) [6] Iceland Master Plan for Hydro and Geothermal Energy Resources [7] The Icelandic Environmental Impact Assessment Act [8] Iceland, D. Sigurðardóttir, European Procurement & Public Private Partnership Law Review Vol. 12, No. 3 (2017), pp. 358-364. [9] Greenhouse Gas Emissions Statistics: Tonnes Per Capita: Japan (9); the UK (8); Germany (9); Russia and South Korea each (12.5). See also: Iceland’s Environmental Paradox.

Sustainable Developments in the Legal Sector: A Brief Overview - Harrison Jowett.

Lethargy in the legal sector is something that we have come to expect. It was uncommon for a law firm to be at the cutting edge of a business operation or to operate with the newest technology. However this traditional view of the sector is shifting quickly, as firms develop new ways to tackle a changing business landscape. A real commitment to sustainability has been central to those developments. It is clear that legal service firms are intrinsically linked to detrimental environmental practices through international client meetings, mass consumption of electricity and hordes of commuters. However, it is motivating to see how long-standing environmental goals have competitively positioned large London firms and how the ‘great lockdown’ has affected these plans.

Starting with the magic circle. For a bit of background, focused mainly on commercial matters, these 5 firms are some of the largest and most prominent firms in the whole world. As such, many global firms look to these major players for direction on the sustainable agenda and the use of legal tech. As we would expect from any firm at the moment, there is a push to reduce paper use and waste; as well as to phase out single use plastics. Beyond these trends, all except Clifford Chance are following internationally recognised energy management programmes such as the UK ISO14001[1] and ISO 50001,[2] and all adopt sustainable development goals (SDGs) to track their progress – though most of these are gradually becoming outdated and are in need of amendment to reflect the current environmental situation.

A couple also claim to be carbon neutral.[3] They achieve this by investing in projects such as the Gola Rainforest Project[4] or the Reforestation in East Africa Programme[5] which although seems like good practice, it doesn’t tackle the ultimate issue – that the emissions are being created in the first place. Whilst I have only listed the goals these firms have in common, I was encouraged to read that every firm has a broad spectrum of promises and commitments to develop their sustainable credentials. It is impressive to see how these large firms commit to similar goals to their city competitors despite their size.

Large city/American firms have a broad spectrum of environmental policy and commitments, for the purpose of this article I will be choosing the two that stand out most to me:

In the forefront is Baker McKenzie. Not only does the firm leverage their insight and knowledge to assist firms achieving their environmental targets, but they also bring like-minded firms together through their annual Global Renewable Energy Conference. Their broad focus is on supporting the UN SDGs and taking a multi-faceted approach to improving their sustainable offering.[6] Specifically though, they have been recognised as the Best Law Firm in Voluntary Carbon Market Ranking for the 10th consecutive year by Environmental Finance 2019. These business, cultural and sustainable changes are the future of legal operations and I am sure that proactive investment will have a large impact on competitiveness in years to come.

Pinsent Masons is the second large firm that is pioneering the industry’s sustainable development. Recently they announced the introduction of a Climate Change Mitigation and Sustainability Platform which seeks to embed firm-wide strategy into a cohesive and conscious effort with clear goals and direction.[7] This follows the firm’s historic commitment to clean energy projects[8] and success of their previous efforts, in an attempt to keep ahead of government targets. The firm is also committed to integrating the Global Compact.[9] To me, this proves that Pinsent Masons is taking sustainability seriously, in making a real structural change to their processes as well as the changing demands of clients.This is a refreshing standpoint in a sector that is often so slow to react to change.

Importantly, I would like to note that all of the firms listed up to this point are members of the Legal Sustainability Alliance and their work is detailed on their website.[10]

I also want to draw attention to disruptor firms briefly. The idea and structure of a disruptor firm has two key advantages in the current business climate. Firstly, it already possesses the necessary equipment to facilitate working from home and secondly, it can implement changes to procedure and software more effectively than traditional firms. This should give it an advantage when approaching sustainable targets. However, when inspecting the websites of firms like Excello Law[11]and Carbon Law Partners[12] in preparation for this article I was unable to find any specific sustainable commitments. With everything that is going on regarding sustainability at the moment, I am surprised that these ‘innovators’ are not taking the opportunity to diversify their appeal. It seems that there is something to be said for the traditional business structure after all?

Ultimately, it will be interesting to see if the environmental revolution will resemble the technological one in any way. Clearly, change is needed and it is very exciting to see some big names making the jump to a more sustainable infrastructure so quickly, hedging their bets on the side of sustainable consumerism. I should expect that the ‘great lockdown’ and the ‘new normal’ of remote working will assist all firms in achieving sustainable goals. It is, for me, those firms that develop their goals to react to these changes who will emerge with the most effective plans. I do understand that targets and goals are as important to meet now as ever before, and those set for the end of 2020 are looming. But if it is ever going to happen, why not now? After all, it was the economist Milton who famously said: “Only a crisis – actual or perceived – produces real change”.

**Disclaimer – There is obviously plenty more happening in the business, political and legal world than what I have extracted in this series of articles. This is intended as merely an overview to suggest the progression of general trends, rather than a complete and comprehensive view of every industry or sector. **

Firms sustainability pages (mentioned in the article):

Linklaters: https://www.linklaters.com/en/about-us/responsibility/environment

Freshfields: https://www.freshfields.com/en-gb/about-us/responsible-business/environment/

Allen & Overy: https://www.allenovery.com/en-gb/global/about_us/corporate_responsibility/environment

Clifford Chance: https://www.cliffordchance.com/about_us/responsible-business/our-responsible-business-strategy/environment.html

Slaughter & May: https://www.slaughterandmay.com/our-firm/responsible-business/climate-action/

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Baker McKenzie: https://www.bakermckenzie.com/en/aboutus/corporate-social-responsibility

Pinsent Masons: https://www.pinsentmasons.com/about-us#4

[1] https://www.iso.org/publication/PUB100371.html [2] https://www.iso.org/iso-50001-energy-management.html [3] https://www.carbonneutral.com/how [4] https://www.linklaters.com/en/about-us/news-and-deals/news/2018/june/three-year-partnership-with-climatecare-on-world-environment-day [5] https://www.freshfields.com/en-gb/about-us/responsible-business/environment/case-studies/reap/ [6] https://www.bakermckenzie.com/en/newsroom/2020/03/global-sustainability-report-2020 [7] https://www.pinsentmasons.com/about-us/announcements/launch-climate-change-mitigation-sustainability-platform [8] https://www.pinsentmasons.com/about-us/announcements/pinsent-masons-advises-uks-largest-solar-park [9] https://www.pinsentmasons.com/-/media/pdfs/en-gb/responsible-business-2020.pdf?la=en-gb&hash=5524852D142B95CF989701FFD5D3728D [10] https://legalsustainabilityalliance.com/ [11] https://excellolaw.co.uk/ [12] https://viewpoints.carbonlawpartners.com/