Legal Tech: how law firms are addressing the ESG challenge
Legal Geek - 07/12/2021
ESG Blog

What is good art? No simple answer can be given to that question because individual responses are subjective and consensus views change over time. The same could well be true of questions about ESG: originally developed in the investment community, this acronym for environmental, social and governance issues may now be universally recognised, but how these issues are perceived by different organisations and a consensus view on what they mean in practice remain in a constant state of flux. Currently, no standard international definition or set of rules exist covering ESG’s multiple diverse aspects to which organisations can sign up, although comprehensive regulation might be on the way in due course.

Nevertheless, for law firms and for their clients, ESG has become a ubiquitous umbrella term to define a broad range of commitments, objectives, standards and protocols which they target, support and endorse. Read the detail on the ESG website pages of a dozen global law firms and you will find a dozen different visions as to how they are seeking to embrace them.

ESG intervieweesESG visions

At a more granular level, technology should form a critical part of every firm’s ESG vision. But ask tech leaders in major law firms how legal tech integrates with their firms’ objectives and the answers also vary. “Our sustainability commitments are a core part of our firmwide strategy, and we are all keen to take them further: this means applying them to all elements of our business, including the technology we use to run our business and the tech that underpins our client offerings,” says Karen Jacks, Chief Technology Officer at Bird & Bird.

“Our overall ESG objectives, from human rights to climate change, apply to the whole business including our partners,” says Louise Zabbar, Senior Procurement Manager at Clifford Chance. “Legal tech is as much a part of our journey on this as anything else we do. To make this happen, and maintain the high ethical and professional standards we pride ourselves on, we launched our sustainable procurement programme in 2020, with policies and procedures to ensure we work alongside our technology suppliers to ensure that we are meeting the firm’s own ESG commitments.”

Adam Ryan, Chief Legal Innovation Officer at Freshfields Bruckhaus Deringer, adds: “We see legal tech as a strong enabler of our responsible business strategy. In particular, we have committed to science-based global environmental targets – we see legal tech as a way to enable us to help achieve them. We also see it as very good for enabling our diversity strategy and we have a variety of pro bono initiatives in the legal tech space. We do a lot of work with our clients, ensuring that we are working with them to meet their strategic goals in the ESG space.”

Reducing obsolete tech

So how are procurement decisions around legal tech evolving to incorporate ESG considerations? “Given the nature of our clients and our focus on the digital world, we realise that technology and digital solutions can be perceived as both part of the problem and a power for good in helping to progress organisations’ ESG goals,” says Jacks. “Take AI, for example. It can be extremely energy-intensive to properly ‘train’ the system, yet it is also used to aggregate data that helps inform ESG strategies and investments.

“Our advice to clients (and we take the same approach for our own solutions) on making data centres more energy-efficient, implementing energy management systems in physical premises and implementing renewable energy sources, all helps inform the conversations we have around the legal tech solutions we build ourselves, and procure elsewhere.

“However, it seems that LegalTech providers may still need to evolve in this space. Implementing LegalTech may help to improve reducing obsolete technologies, thereby reducing servers, for example. Likewise, cloud service providers need to publish their sustainability strategy and LegalTech providers should consider this when selecting a CSP.” She points to Microsoft, which has announced that all Azure data centres will have shifted to 100% renewable energy by 2025.

Zabbar articulates the Clifford Chance vision. “As a leader in our field, we believe that our licence to operate, the sustainability of our business and the achievement of our vision depend on inspiring trust and acting responsibly,” she says. “That means working collaboratively with our suppliers to ensure the right processes, procedures and controls are in place as part of our end-to-end supply chain.”

As the first law firm to partner with business sustainability ratings business EcoVadis, she explains how Clifford Chance benefits from the relationship. “This lets us robustly monitor both our own and our suppliers’ sustainability performance, using a globally recognised methodology aligned to our obligations, i.e. United Nations Global Compact, International Labour Organization, Global Reporting Initiative and ISO26000,” says Zabbar. “As well as monitoring environmental factors, such as greenhouse gas emissions, waste and energy consumption, we’re also independently assessing other criteria, including labour and human rights, ethical practices and controls, and ensuring we’re working with suppliers that support our own business objectives and strategy.”

Net Zero ambition

This is not just box-ticking or pushing the problems down to suppliers, suggests Zabbar. “It’s part of an ongoing process enabling us to work closely with our suppliers to help them to reduce their negative environmental and social impacts, while allowing us to move closer to our ambition of becoming Net Zero,” she says. “In April, we held our first sustainable procurement programme event, which included focus groups to help suppliers understand what truly matters to us as a firm, and how we can all work together to achieve our aspirations. This is something we will be building on with further roundtables next year.”

In working with a broad range of legal tech suppliers and when evaluating new potential suppliers, Freshfields also puts significant effort into quantifying their ESG credentials. “That falls into two parts,” says Ryan. “The first is from a functional perspective – does the software tool help meet our responsible business commitments? We look at things like the effect on paper reduction or energy consumption. DocuSign, the e-signature platform, is a fantastic example. We’ve got some great stats from their system, which estimate the environmental impact, such as the reduction in energy consumption and water waste.”

Freshfields’ second lens is due diligence in relation to whether suppliers meet the firm’s specific ESG requirements. Ryan explains: “We work with a range of suppliers from smaller start-ups to big vendors. What we’re looking for, in particular, is that they really share our vision in terms of what they’re trying to achieve. We make sure that each supplier shares our values and our strategy in this space.

Diversity matters

“A fantastic example is Definely, a start-up founded by two former Freshfields lawyers. Their software goes through a legal document, making it easier for people to review defined terms in their document. One of the co-founders is registered blind. As a lawyer, he was finding it very difficult to go up to the definition section of a document, and then back down into the operating clauses. One reason he started Definely was to make it easier to do that review.

“From a diversity perspective, we’re ensuring that all of our solutions are accessible to the highest standards. This start-up is a great example of that.”

How does ESG in legal tech integrate with Bird & Bird’s overall ESG objectives? “The environmental impact of new legal tech should be up there in the list of considerations, alongside cost, value, and efficiencies,” says Jacks. “The more we are able to understand the levers behind the efficiency of any solution we’re considering, the more insight we’re able to get on its energy efficiency too so it needs to be our responsibility to get this firmly into discussions.

“At a basic level, the transition of many of our knowledge-based resources, such as comparative country tools from paper to digital apps, used to be a more environmentally-friendly way to present the information and helped cut down on reams of paper being consumed by clients. Tools like Luminance and Relativity similarly help our lawyers and clients shift away from paper-based due diligence or disclosure, which was very prevalent not so long ago.

“Now, the considerations are more nuanced as we try to assess the environmental impact of higher data-processing software solutions. We know from our work with leading tech companies that while software is used to drive emission-cutting initiatives, it also contributes to an organisation’s carbon footprint as it runs. Ensuring that we focus on hardware and data centres is key.”

As the art of ESG develops into more of a science with defined parameters and unambiguous definitions, law firms’ deployment of legal tech seems set to become an integral part of the equation.

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Written by Dominic Carman