Why Law Firms Should Get Serious About Sustainability
The business case for a more profitable, resilient law firm (and happier, healthier lawyers)
The business of business is changing
Customers and regulators are increasingly demanding more sustainable practices and transparent reporting of Environmental, Social and Governance (ESG) factors. Law firms of all sizes should pay close attention, because there are numerous risks and opportunities associated with this evolution. One key opportunity: capturing the benefits of healthier office spaces.
The market is increasingly demanding sustainable practices and robust, transparent disclosures.
Consider this: an estimated 90% of S&P 500 companies published some type of Corporate Social Responsibility (CSR) report in 2019 (a significant increase from 2011, when just 20% reported).¹
In addition, groups like the Institute for Wellbeing in Law are gaining an increased presence, job candidates are “interviewing the building” as well as the employer,² data on building operations is everywhere (there have been reports of parents putting CO2 sensors in their kids’ backpacks),³ and the Securities and Exchange Commission is incredibly active with respect to ESG.
Put simply, your employees and clients are paying attention to more than just the legal services your firm provides.
All of that said, the latest research clearly demonstrates that the design and operation of your office space — a significant monthly expense, especially for law firms with a strong preference for private offices — can actually improve your firm’s bottom line.
In this article, we explain the how and the why.
ESG reporting is changing the way every industry does business (and it’s about time)
Environmental, Social and Governance is essentially an investing (and risk management) framework that brings a broad range of what have traditionally been considered “non-financial” factors into financial decision-making.
ESG factors expand corporate accountability beyond shareholders and to include external stakeholder expectations on a variety of factors such as climate change, use of consumer data and racial justice (among many others).⁴
ESG factors and the associated frameworks (SASB, GRI, TFCD) are increasingly recognized as best practice. So much so that even insurance carriers are acknowledging the correlation between robust ESG initiatives and reduced risk.
In October, 2021, Marsh, “announced the launch of a new directors and officers liability (D&O) insurance initiative that will recognize US-based clients with superior environmental, social, and governance (ESG) frameworks.”⁵
As further explained by Maureen Gorman, Managing Director in Marsh’s D&O Practice:
“Our clients have endured one of the most challenging D&O markets in decades, and the risk landscape is only intensifying, especially as it relates to ESG issues like climate change and diversity…As clients continue to invest in ESG initiatives, it is right that they be recognized as a better risk by underwriters. By working with these select law firms, we are ensuring clients have access to leading independent ESG expertise that can help validate and elevate their ESG efforts, becoming eligible for more favorable coverage.”⁶
This financial incentive can have real benefits, especially as virtually all other forms of insurance increase in cost. For example, “Global property insurance premiums have grown by a double-digit percentage in each of the past seven quarters as real estate portfolios sustain physical damage from natural disasters.”⁷
How to stand out in the current market
Capture opportunities to better serve existing clients
Clients are increasingly asking all service providers — including law firms — questions related to their commitment to a variety of ESG factors. Both public and private clients, when selecting or renewing contracts with their outside legal counsel, are inquiring about not only their experience with the legal issues associated with ESG, but also substantive questions about the firm’s own commitments with respect to ESG factors.⁸
Additionally, future employees are asking questions, “Pressure to act on sustainability has also come from law firm recruits targeting firms’ choice of clients. Last year students at top U.S. law schools boycotted Paul Weiss Rifkind Wharton & Garrison for representing ExxonMobil in high-profile climate-change lawsuits. But clients can exert a different kind of leverage when it comes to firms’ own practices.”⁸
These types of inquiries (who are your clients and what are your firm’s values) are expected to increase. This is especially true as sustainability — and particularly carbon impacts — gain increased attention and scrutiny.
What is important to keep in mind is that when an organization makes a commitment with respect to reducing or eliminating carbon impacts, this commitment impacts all product and service providers in the supply chain.
For example, in early 2021, Salesforce introduced what it refers to as a “Sustainability Exhibit” into its supplier contracts.⁹ This Exhibit requires all suppliers to set science-based carbon targets — and actively work towards them — or face potential penalties (including the cost of carbon offsets of 0.5% of the amount invoiced to Salesforce over the past 12 months). Below is the preamble to the Exhibit:
These types of requirements will trickle down the supply chain to law firms and other service providers. In fact, they already are, “As pressure on corporations to cut carbon emissions grows, some companies are expecting their outside law firms, as vendors contributing to their footprint, to pull their weight.”¹⁰ And Salesforce is not unique in this type of contract language; other companies who have made bold carbon commitments have realized they need to engage their entire supply chain in order to meet their targets.
For law firms, in addition to travel, sprawling lobbies and private office spaces can be a large source of carbon emissions.¹¹ Office space can be used far more efficiently and the latest research also demonstrates that office space can be leveraged to deliver health and wellness benefits to employees.
Leverage your office space as a health and wellness tool.
There are quantifiable benefits to more sustainable office spaces and many ways to leverage office space to promote health and wellness. In addition, many healthy building strategies are in alignment with ESG factors and frameworks.
Your employees care about health and wellness
“In fact, Gallup recently asked employees what they look for most in an employer. The data showed that employees of all generations rank “the organization cares about employees’ wellbeing” in their top three criteria. For millennials and Generation Z, it’s their №1 workplace want. Also high on their list are diversity, equity and inclusion (DEI) and ethical corporate behavior.”¹²
In addition to wellbeing, your firm’s bottom line depends on engaged employees:
“Gallup Corporation has done years of research showing that worker well-being in the form of engagement is linked to a host of organizational success factors, including lower turnover, high client satisfaction, and higher productivity and profitability. The Gallup research also shows that few organizations fully benefit from their human capital because most employees (68 percent) are not engaged. Reducing turnover is especially important for law firms, where turnover rates can be high.”¹³
The high turnover rate for law firms can be incredibly expensive, which makes “enhancing lawyer health and well-being is good business and makes sound financial sense.”¹⁴
The good news is that we can create office space that supports occupant health, wellness and cognitive performance and increases employee engagement. One way to do that is through “healthy building” strategies.
What is a “healthy” building?
Healthy buildings take the concept of a “green” building and increase the focus to strategies designed to support the health and wellness of the building occupants. Put another way, healthy buildings aim to support both environmental and human health.
There are many different ways to describe a healthy building. As one example, researchers at Harvard’s T.H. Chan School of Public Health have developed the “9 Foundations of a Healthy Building”:
- Ventilation
- Air Quality
- Thermal Health
- Moisture
- Dust and Pests
- Safety and Security
- Water Quality
- Noise
- Lighting and Views¹⁵
Each of these Foundations is supported by underlying strategies. This framework is just one way to define a “healthy” building. There are may others, including certification programs like The WELL Building Standard™ and Fitwel.¹⁶
The quality of our buildings is of critical importance, given that we spend an average of 90% of our time indoors¹⁷ and one half to one third of our waking hours in office spaces. And these pre-pandemic figures are expected to increase as we increasingly seek refuge from the impacts of a changing climate.¹⁸
So where’s the data?
A 2015 study from Harvard’s School of Public Health outlines the benefits that healthier spaces can deliver to building occupants, and particularly to knowledge workers like lawyers.
In this study, a variety of knowledge workers were asked to complete their daily tasks in a controlled office setting. The researchers compared a baseline, “traditional” office building to what they called “Green Building days” and “Green Building+ days.”
- On the Green Building days, the researchers lowered the levels of Volatile Organic Compounds (VOCs) — one of the most pervasive indoor air pollutants that can originate from everything from printers to furnishings.
- On the Green Building+ days, the researchers lowered the VOC levels and increased the ventilation rates (brought in more fresh air).
The results were quite striking:
“On average, cognitive scores were 61% higher on the Green building day [low VOC] and 101% higher on the two Green+ building days [low VOC + higher ventilation rates] than on the Conventional building day [high VOC]….”¹⁹
Moreover, "The largest effects were seen for Crisis Response, Information Usage, and Strategy, all of which are indicators of higher level cognitive function and decision-making...."²⁰
What does this really mean? Healthy building strategies have real benefits, particularly if you care about things like responding to crises, utilizing information and developing strategies. And this study was recently expanded to a one year timeline, and including 6 countries, 42 buildings, 30 cities, and 302 participants. As explained by one of the researchers of this second study:
“Our research consistently finds that the value proposition of these strategies extends to cognitive function and productivity of workers, making healthy buildings foundational to public health and business strategy moving forward.”²¹
Taking this research one step further, co-authors Joseph Allen and John Macomber argue in their book Healthy Buildings, How Indoor Spaces Drive Performance and Productivity, that improved indoor air quality can increase productivity by 2–10%.²² They then use a conservative estimate of productivity (3%), and argue that if healthy building strategies are implemented, the bottom line net income for a service-based consulting firm would increase by more than 10%.²³
What does this all mean?
The latest research demonstrates that healthy building strategies can positively impact a business’s bottom line. They also help manage risk to the point that insurance carriers are noticing.
You should explore and implement healthy building strategies in your office space if you want to:
- Attract top talent
- Retain that talent (and your investment in them)
- Get the best performance out of lawyers and staff
- Build resilience and reduce business interruption
- Better serve existing clients and attract new ones.
And to take a deeper dive, explore the resources footnoted below.
[1] https://online.hbs.edu/blog/post/corporate-social-responsibility-statistics
[2] Allen and Macomber, Healthy Buildings: how indoor spaces drive performance and productivity, Harvard University Press (2020), pp. 234–35.
[4] See ESG Investing: What Every MBA Needs to Know (Dec. 16, 2020), https://centers.fuqua.duke.edu/edge/2020/12/16/esg-investing-what-every-mba-needs-to-know/
[5] Businesswire, Marsh to Recognize Clients with Robust ESG Frameworks, October 25, 2021, https://www.businesswire.com/news/home/20211025005276/en/
[6] Businesswire, Marsh to Recognize Clients with Robust ESG Frameworks, October 25, 2021, https://www.businesswire.com/news/home/20211025005276/en/
[7] ESG & Real Estate: Top 10 Things Investors Need to Know, CBRE Research, October 2021, p. 11
[8] Westlaw Today, Corporate Pressure to Cut Carbon Trickles Down to Law Firms (January 30, 2021), https://today.westlaw.com/Document/I6b82de80629511eba8cab51f2e1abe3d/View/FullText.html
[10] Westlaw Today, Corporate Pressure to Cut Carbon Trickles Down to Law Firms (January 30, 2021), https://today.westlaw.com/Document/I6b82de80629511eba8cab51f2e1abe3d/View/FullText.html
[11] Westlaw Today, Corporate Pressure to Cut Carbon Trickles Down to Law Firms (January 30, 2021), https://today.westlaw.com/Document/I6b82de80629511eba8cab51f2e1abe3d/View/FullText.html
[12]Gallup Workplace, Employees Want Wellbeing From Their Job, and They’ll Leave to Find It (August 3, 2021), https://www.gallup.com/workplace/352952/employees-wellbeing-job-leave-find.aspx
[13] https://lawyerwellbeing.net/wp-content/uploads/2017/11/Lawyer-Wellbeing-Report.pdf, p. 8
[13] https://lawyerwellbeing.net/wp-content/uploads/2017/11/Lawyer-Wellbeing-Report.pdf, p. 8
[14] https://lawyerwellbeing.net/wp-content/uploads/2017/11/Lawyer-Wellbeing-Report.pdf, p. 8
[15] https://9foundations.forhealth.org/
[16] https://www.wellcertified.com/ and https://www.fitwel.org/
[17] https://www.epa.gov/report-environment/indoor-air-quality
[18] https://www.hsph.harvard.edu/c-change/subtopics/coronavirus-and-climate-change/
[19] “Associations of Cognitive Function Scores with Carbon Dioxide, Ventilation, and Volatile Organic Compound Exposures in Office Workers: A Controlled Exposure Study of Green and Conventional Office Environments,” Joseph G. Allen, Piers MacNaughton, Usha Satish, Suresh Santanam, Jose Vallarino, John D. Spengler, Environmental Health Perspectives, October 26, 2015, doi: 10.1289/ehp.1510037
[20] “Associations of Cognitive Function Scores with Carbon Dioxide, Ventilation, and Volatile Organic Compound Exposures in Office Workers: A Controlled Exposure Study of Green and Conventional Office Environments,” Joseph G. Allen, Piers MacNaughton, Usha Satish, Suresh Santanam, Jose Vallarino, John D. Spengler, Environmental Health Perspectives, October 26, 2015, doi: 10.1289/ehp.1510037
[21]Joseph Allen, Associate Professor, Harvard’s T.H. Chan School of Public Health, https://www.hsph.harvard.edu/news/press-releases/office-air-quality-may-affect-employees-cognition-productivity/
[22–23] Allen and Macomber, Healthy Buildings: how indoor spaces drive performance and productivity, Harvard University Press (2020)
