Kristian Rönn, chief executive officer and co-founder at Normative explores the main drivers and benefits of carbon emissions reduction in the legal sector, the challenges organisations face, and a path forward.
With a wave of environmental disclosure legislation on the horizon – CSRD, SECR, and more – legal firms are filling a new niche: advising clients and organisations on sustainability compliance, greenwashing-proof marketing, and financial communications with new emissions line items. More than ever, legal firms recognise the need to implement their own carbon reporting and to build meaningful reduction plans.
This article explores the main drivers and benefits of carbon emissions reduction in the legal sector, the challenges organisations face, and a path forward.
Main drivers of carbon reduction in the legal sector
Some disclosure legislation already impacts legal firms. The Corporate Sustainability Reporting Directive (CSRD), now mandates nearly 50,000 EU companies to comprehensively report on their sustainability efforts, including the challenging scope 3 emissions. Meanwhile, the UK’s Streamlined Energy and Carbon Reporting (SECR) framework requires large companies to report on their energy use, greenhouse gas emissions, and energy efficiency measures. Under the policy, businesses and organisations are obligated to
disclose energy consumption and carbon emissions data in their annual reports.
Additionally, there’s growing demand from clients for legal firms to reveal their own greenhouse gas emissions. A prominent law firm reported receiving 50 requests from RFPs between October 2022 and March 2023, asking for the disclosure of the firm’s ESG data, including carbon emissions. Furthermore, a report by Thomson Reuters Institute revealed in-house lawyers consider ESG as one of the top three risks on the horizon.
Even for those not yet required to report, there’s a critical need for transparent carbon reporting and effective reduction strategies. Reducing carbon emissions is not only encouraged through legislative pressures, but it can help legal firms save money, differentiate their businesses, develop new areas of practice, and attract new clients.
Adopting carbon reduction measures offers significant financial benefits. A McKinsey study revealed investors would be willing to pay 10% more for a company with a positive ESG record, another reason why carbon reduction directly contributes beyond mere compliance, to enhancing a firm’s bottom line and market competitiveness.
Legal firms also face unique risks in ignoring climate action. Tightening regulations and increasing energy and business costs due to inflation pose real risks, especially to areas of operation heavily reliant on emission-intensive processes like travel, office heating and material costs.
Further opportunities come with the strategic and cultural benefits of conducting comprehensive sustainability work and sharing it with clients and employees. Clients have always preferred to partner with firms sharing their core values, which often means sustainability commitment. Legal firms pursuing carbon reduction strategies align with these values and stand out from competitors. This alignment is not just corporate responsibility but also a strategic differentiation point.
In addition, legal firms are experiencing increasing pressure from their employees to act against climate change. A Deloitte report found 50% of Gen Z employees are pushing employers to drive change on environmental issues.
A focus on carbon reduction and net-zero targets presents opportunities for new practice areas and niche firms. New firms could specialise in navigating the complexities of sustainability legislation, surpassing competitors in compliance credentials. They could leverage their specialised expertise to offer bespoke guidance, differentiating themselves to traditional law firms. And for legacy legal firms, this new practice area could be a big revenue stream, underscoring the urgency to embed sustainability and decarbonisation into their practice.
Challenge: the business execution gap
Even with the additional cost and time required to complete sustainability reporting and reduction planning, more and more legal firms are committing to comprehensive carbon reporting and net-zero plans. However, progress towards net zero often stops after tackling low-hanging fruit like switching to renewable energy or reducing office supplies. Overcoming this execution
gap requires detailed emissions insights across scopes 1, 2, and especially 3.
On average, scope 3, or value chain emissions, make up over 90% of a law firm’s total emissions and are challenging to calculate and understand.
Tracking scope 3 emissions is particularly complex for legal firms, necessitating insights into the operations of multiple external entities. Without designated specialists and automated technology solutions equipped with the know-how to track, measure and reduce emissions, these initiatives can become fragmented and lose momentum.
Carbon accounting is no longer just part of annual reporting; it’s used daily to evaluate and improve business models and performance. For instance, businesses are using carbon data regularly to improve their offering. Our work with transportation company Hitachi Rail allowed it to optimise its carbon accounting processes. The outcome was a significant enhancement in the organisation’s sustainability reporting. For the first time, Hitachi Rail could claim a comprehensive account of its scope 3 emissions, catapulting its reported figures from 10-13% to over 90% of total emissions.
This success in data accuracy and granularity has paved the way for targeted strategies in decarbonising the organisation’s supply chain and has solidified Hitachi Rail’s position as an industry frontrunner in environmental accountability.
Solution: how can legal organisations overcome the execution gap and reach net-zero goals?
To overcome the execution gap and make meaningful reduction progress, legal organisations should gather precise data across all scopes. This includes pairing business and activity data with relevant, scientific emissions factors for an accurate carbon footprint. Enterprise carbon platforms like Normative can speed up this process with over 40,000 vetted emissions factors and AI-powered calculations. Once complete, firms can examine their emissions footprint in detail and forecast the impacts of sustainability initiatives. This level of insight is required to identify, design, implement, and ultimately verify specific reduction projects.
It is especially important to access primary data from a firm’s value chain, the suppliers that contribute to scope 3 emissions. The Normative Carbon Network assists legal firms in connecting with their suppliers to obtain essential carbon data. This network streamlines data sharing and encourages ongoing cooperation.
Conclusion
Legal firms must prioritise carbon reduction to stay competitive, sustainable, and responsive to the expectations of clients and investors. By embedding it into their core operations and legal practice, these firms showcase their commitment to a positive environmental impact and distinguish themselves as industry leaders. This strategic focus not only aids in steering the global economy towards lower carbon emissions but also aligns firms with clients and partners dedicated to achieving net zero.
E: info@normative.io