Do Law Firms Risk Becoming "Grudge Purchases" by Stalling on Sustainability?

by Aman Singh Das | July 08, 2010

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"We’re a profession that, over the last hundred years, has not done anything differently, and the only industry that is proud of that. For us not to embrace change and innovation over the next 18 months, over the next 18 years we’re all going to fail."—Rich Baer, EVP, general counsel and chief administrative officer with Qwest Communications, discussing the legal industry's failure to embrace innovation and technology.

Baer isn't alone in believing that law firms are stragglers when it comes to embracing change, especially when it comes to offering sustainability solutions. Malcolm Dowden, a UK-based environmental law consultant and solicitor had much to say on the topic in a recent issue of the UK Law Business Review. Returning from the Copenhagen Climate Change Summit last year, Dowden noted that representatives from the legal sector were largely absent from the otherwise well-attended event. He worries that this places the entire profession at risk of losing out on the flurry of business opportunities on offer to those who are serious about corporate sustainability and energy efficiency.

Contrast that with the consulting and financial services sectors, which are responding by offering multi-disciplinary practices and a cohesive full service experience.

Corporate sustainability and energy efficiency measures represent a whole gamut of new jobs, careers and business opportunities.

For those firms, a baseline premise of what it means for them to be a trusted producer of goods and services is behind their push into sustainability. This trust factor reigns supreme in a marketplace riddled with ethical malpractice suits, news of mismanaged judgments and a lack of corporate transparency. As Ernst & Young's CEO Jim Turley put it, "the financial services industry operates on trust."

Unfortunately, public engagement in policy and debate—which tends to produce long term returns rather than quick profits—hasn’t been a priority for the legal industry. And that failure to establish trust is doing the industry a disservice, according to Dowden, especially in a realigned marketplace amid a recession. As he puts it: "For all but large international law firms, or firms with clients directly involved in emissions trading, carbon credit projects or other billable transactions, the direct and opportunity costs tend to be seen as too high, or the returns too distant. That, however, is not the view taken by other professional advisers and consultants, and as the pace of transition to a low-carbon economy picks up, law firms risk ceding to others the role of trusted adviser."

In the rest of that article, Dowden identifies three key challenges for the law industry:

1) Competition from consulting firms

"Other advisory practices offer genuine multi-disciplinary solutions," says Dowden, adding that law firms "continue to offer only narrow legal services for particular transactions or disputes." The Big 4, for sure, have ramped up their sustainability and carbon management services, as well as outreach of their latest offerings. Representatives from Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers regularly participate in panels, organize debates, and engage in dialogue with civic organizations as well as think tanks.

What these firms offer is the "full service" experience. Their ability to generate multi-disciplinary teams ranging from economists, accountants, technical experts and corporate governance specialists, makes their targeting and resourcing comprehensive as well as targeted.

Compare this to the law firm equivalent of "full service" and the considerably narrower definition becomes obvious. "The emphasis is on (or arguably limited to) the provision of legal services in the context of particular transactions or disputes. If there is no transaction to progress, or dispute to resolve, business tends to look elsewhere for its strategic advice," writes Dowden. And that’s where the consulting industry gains edge.

2) Competition from professional services and specialist consultancy networks

Networks are springing up across the country with experts in various fields combining their strengths to produce coordinated services toward sustainability solutions. These networks offer the possibility of real expertise, real revenue and real business value for the members as well as the consumers. You only have to search the hash tag "#sustainability" on Twitter, for example, to see the many networks that are emerging focused on using their community to collaborate on real, relevant value propositions for companies. These solutions provide companies with a cohesive strategy as well as an easily-accessible team of experts.

As Dowden observes, "Pressure from the major advisory practices and the emergence of networks represent a further threat to law firms’ assertion of, or aspiration to, a position as indispensible business adviser. Legal services risk being marginalized as a 'grudge purchase' at the point when there is a transaction to be documented, or a dispute resolved."

3) Competition for a share of emerging business

Corporate sustainability and energy efficiency measures represent a whole gamut of new jobs, careers and business opportunities. While the consulting and financial services industries are well poised to take advantage of them, the law industry remains a straggler. Dowden points out, correctly, that so far dialogue and direction on this from lawyers has been, at best, in the form of straight commentary; what have been missing are the explanations. "The real bite of a new law is often found in its indirect impact and, generally, law firms have the edge when identifying, explaining and dealing with the 'law of unintended consequences,'" explains Dowden.

Filed Under: CSR

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