Weekly take: In-house must push IP firms towards sustainability
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Weekly take: In-house must push IP firms towards sustainability

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In-house lawyers have considerable influence over law firms’ actions, so they must use that power to push their external advisers to adopt sustainable practices

My colleagues at Managing IP and its sister brands, International Tax Review and IFLR, have often voiced the need for lawyers and law firms to be more cognisant of their actions.

They have argued that law firms need to stop representing fossil fuel companies and demonstrate that their actions match their commitments toward environmental sustainability.

But what’s stopping law firms, including intellectual property practices, from being more mindful of their environmental and social responsibilities, and what can be done to change that?

There’s possibly no better time to explore this than today, April 26, on World IP Day.

This year’s theme aims to encourage the IP industry to explore sustainable solutions for the common good.

I appreciate that, at the end of the day, law and IP firms are profit-driven entities just like any other business.

While it’s easy to make ethical arguments about why law firms should compromise on profits for the greater good, it’ll be hard to find any takers within the industry to follow that line of thought.

Indeed, a report published in November 2023 that analysed responsible business activity at 125 leading law firms headquartered in the US, UK, and Canada (including many with robust IP practices) revealed shockingly poor results.

The study showed that 68% of firms haven’t been clearly applying environmental, social, and governance (ESG) criteria to their supply chain. Indeed, 96% of firms failed to show they formally review the work they are taking on for clients from an ESG perspective.

What’s more few firms measure their carbon emissions and only 22% have set a ‘net zero’ target.

Client pressure

Clearly, law firms have a long way to go when it comes to sustainability.

The only thing that I can see pushing them to do more is a clear mandate from clients.

To prove my point, a study of US law firms last year revealed that law firms ramped up their diversity initiatives to stay competitive and gain points with clients. However, they reduced their efforts when gender diversity was less likely to have a positive influence on client relationships.

The research was specific to diversity but there’s no reason why the same logic shouldn’t apply to sustainability initiatives.

While it may seem that law firms’ clients have all the power, are they doing enough to push their external counsel in the right direction?

Less than one-third of law firms’ clients feel that the firms they work with are genuinely committed to ESG, and yet, it is rare for clients to put clear obligations on their external counsel to do better.

At the same time, research by Managing IP and its sister brands that surveyed more than 25,000 in-house counsel showed that while a prospective external counsel’s ESG or corporate social responsibility (CSR) initiatives create a favourable impression on clients, sustainability isn't a factor in-house lawyers take into account when deciding to hire them.

This is especially true for IP firms and their clients.

For instance, one in-house IP counsel told Managing IP that his organisation does not have any formal considerations for ESG, but that they would not hire counsel that they felt violated such efforts.

Another in-house IP counsel agreed that ESG compliance of potential law firm partners wasn’t the first thing he looked for and that it would only matter if all other factors based on which he was judging a list of potential external counsel were equal.

The same goes for CSR initiatives, although the research findings on this have yet to be published. In-house counsel Managing IP spoke to generally said CSR initiatives of their partner firms aren’t something they actively investigate.

If firms don’t think their clients are particularly bothered about their sustainability practices, they will only do the bare minimum. Even if they set sustainability targets, they are unlikely to try too hard to meet them or, dare I say it, be transparent about their efforts.

I have heard corporate counsel say plenty of times that they want to work with firms that demonstrate the same values as them and their organisations.

But mere words aren’t enough unless they put explicit mandates on their external counsel to do better.

I understand that in-house counsel are answerable to their management and under constant pressure to justify the expenses they incur. Naturally, they would want to pick external advisers that are best suited to take care of their legal needs.

While I’m not asking in-house counsel to stop picking firms and counsel that are good at their jobs, it certainly wouldn’t hurt them to add CSR and ESG initiatives as selection criteria.

After all, an adviser who cares for sustainability and the common good may also be better suited to find creative solutions that work well for everyone involved.

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