Build and Maintain a Successful ESG Practice and Program at Your Law Firm

It’s been almost two decades since global leaders first examined the role of environmental, social and governance (ESG) value drivers in asset management and financial research. Their research confirmed “who cares wins,” a tagline that has held true as consumers continue to demonstrate more belief-driven behavior. But for many years, ESG was not in the mainstream. The Financial Times cited data from Pimco that found ESG was mentioned in fewer than 1% of earnings calls between 2005 to 2018. Today, it reports that “investing within an ESG framework is now the fastest-growing segment of the asset management industry.”

With the remarkable rise of ESG has come pressure on corporations and their outside law firms to establish more sustainable business strategies. Yet, the ubiquitous use of ESG as an umbrella term has reached a boiling point. Regulators, investors and consumers alike have become skeptical of both the veracity and relevance of ESG-branded initiatives. Some politicians have even established “anti-ESG” platforms to obstruct corporate investment in clean energy solutions. To avoid ESG controversy, remain relevant and truly achieve sustainable competitive advantage, now’s the time to reframe and refocus the effort.

Responsible business management is focused on the future

Let’s be clear. Establishing sustainable competitive advantages is the stuff of Management 101 courses and is hardly controversial. Successful corporations have long sought to outlast their competitors and future-proof their earnings. Those who embrace environmental considerations, conduct business in socially responsible ways and prioritize ethical corporate governance are poised to maintain or increase their sustainability over time. Responsible business management has always been focused on the future.

Three Ways to Make a Difference—and Manage ESG Risk

Although much has been written about the benefits of focusing on ESG to carve out a competitive advantage, less practical knowledge exists as organizations grapple with the scope of the ESG opportunity and its parallel risks. From our experience counseling corporations and law firms throughout the many stages of change and innovation, here are three ways to get started and avoid potential pitfalls.

Innovate from the inside. To be successful, business and law firm leaders must tune out of the rhetoric on ESG and tune into their stakeholders. Starting with internal stakeholders (ie, employees) is often a cost-effective option. Survey your team to learn what issues matter to them, what issues affect their lives the most now and also have the potential to affect their lives in the future. Ask them about the role they expect the company or firm to play with regard to those affects, and then use the information to develop areas of focus for your ESG program which are then communicated back to employees to strengthen trust and build engagement. You must be prepared to communicate and act on their feedback, using your mission and values ​​as your guide, in order to explain how their insights informed your actions. Taking such an inside-out approach allows you to gain a valuable proof-of-concept before engaging your external stakeholders.

Prioritize feedback. Creating a process or mechanism to obtain real-time stakeholder feedback is often overlooked, but it is the most critical component from both an innovation and risk management standpoint. Organizations that do not define their target audience and find ways to continuously monitor, measure and synthesize their feedback will find themselves easily distracted and overwhelmed. Instead, determine whose opinion matters most—and listen to them.

Disney provided an excellent example of prioritizing stakeholder feedback when it finally spoke out against Florida’s “Don’t Say Gay” bill. The decision to do so came after employee and consumer feedback demonstrated a clear imperative to Disney’s C-suite that being deferential to the political process in this instance would cause tremendous harm to the organization’s reputation as an inclusive company. In taking action to that end, Disney took a risk that has so far paid off—profitability recently soared 50% despite negative reactions from those who support the controversial bill.

Seek to achieve incremental advancements toward transformative change. As a society, we face tremendous challenges in combatting problems like climate change and social justice. It is admirable albeit unrealistic to think we can fully address such complex issues in one fell swoop—statements to the contrary can also lead to accusations of “greenwashing” or other false claims. ESG programs that build momentum off small, incremental changes over time stand the best chance for having a lasting, profound effect. Moreover, this approach builds invaluable trust among stakeholders. With this trust, organizations and firms are bolstered in taking more bold approaches as they’ve been shown to demonstrate success in the past. Management also wants to gain confidence and enthusiasm for ESG initiatives as they reap benefits like increased profitability.

Who Cares Wins: The Law Firm Imperatives

As trusted counselors to corporate and other organizational clients, law firms stand to gain a particular competitive advantage in establishing expertise and demonstrating success in their adoption of ESG-focused business strategies. Law firms have already seen an increase in demand for ESG services. Thomson Reuters found nearly half (42%) of its large law firm clients have ESG practices to advise clients in this complex and rapidly evolving area of ​​the law. But what about their own ESG efforts?

Law firms are uniquely positioned to capitalize on ESG both as a practice area and in their own operations. Within firms themselves, the adoption of sustainable, strategic growth opportunities can be a major differentiator in terms of recruitment and retention, maintaining valuable client relationships and winning new work. Establishing strong ESG principles, for example, can help attract top-tier talent as attorneys and professional staff seek more meaningful work opportunities. Demonstrating commitment to such defined values, for example pro bono representation, can likewise increase reputational capital that makes the firm and its services more attractive to new and existing clients.

While the conversation on ESG continues to evolve, there remains little doubt that law firms and their clients stand to gain considerable competitive advantage from its tenets. By adopting a strategic approach to ESG and sharing out their success, law firms can take the lead in both the short and long term.

Dave Poston is chief executive officer, general counsel and co-managing partner of Poston Communications, a national public relations, content and crisis communications firm.

Megan Paquin is a partner at the firm.

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