Legatics We explore the challenges of ESG for law firms and how legaltech can help
“ESG” (or Environmental, Social and Governance) is a current rising star in the legislative world. With a crackdown on the likes of greenwashing, emissions and diversity and inclusion disclosure, the legal industry is witnessing two key transformations:
1) demand for ESG legal guidance is growing; and
2) law firms’ ESG policies and procedures are coming under closer scrutiny
In this article, we look at the rise of ESG in the legal profession and how this might impact your firm.
What does the rise of ESG mean for law firms?
Law firms must be operationally ready to adapt to ESG as a rapidly changing practice area. Their ESG management must also be robust enough to measure up to clients’ rising standards. If law firms are to successfully navigate these changes, they’ll need to ensure they’re efficient, adaptable, and stakeholder-oriented. A determining factor for the success of ESG in the legal profession under these conditions will be how effectively law firms use legaltech. Let’s explore why!
1) Better long-term performance
Wolters Kluwer’s 2022 report found that tech-forward firms are the best overall performers. They’re also the most prepared for managing expanding practice areas, like ESG and data privacy. By streamlining their transactions using tech solutions, they operate more efficiently, reduce costs, and have the data and capacity to take on more complex work. They’re also more adept at meeting clients’ ESG criteria, thereby driving the expansion of their customer base.
Effective ESG practices help firms become more resilient and adaptable. CEE Legal Tech highlighted legaltech’s role in this, saying it will be “essential” to “dealing with the high level and amount of information” new ESG guidance demands.
In addition, 78% of survey participants in Wolters Kluwer’s report agreed that “properly digitalized legal departments will be at the forefront of managing ESG projects” going forward. This highlights the advantage firms will have in grasping new ESG-related opportunities in emerging markets if they’re both tech-savvy and practice what they preach.
2) Better data management and utilisation
Effective data governance, namely privacy, security, and analytics, is a key criterion of ESG – particularly for digital businesses. Legal technology, such as Legatics, enables firms to manage their transactions inside a platform – decreasing the risk of error and data loss, and improving collaboration.
Inside Legatics, access is strictly controlled, and your documents sit securely within the platform rather than being sent over email or stored in multiple locations in a document management system. This makes your legal data safer and more manageable.
Legaltech can also provide crucial insights into transactions on both an individual and firm-wide basis. This helps firms better understand the types of deals they’re working on and what they might want to focus on in the future. Data management has become a strategic necessity for clients and firms alike; as Adam Ryan, former Chief Legal Innovation Officer at Freshfields Bruckhaus Deringer, states in this article: “We see legal tech as a strong enabler of our responsible business strategy. […] 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.”
3) Better stakeholder experience
ESG has become an important element in hiring in recent years, both for employees and prospective candidates. Good ESG performance should mean ethical practice in a broader sense, as well as an improved employee experience. This might include initiatives such as robust parental policies and inclusive working environments, for example.
With burnout among lawyers high, ESG in the legal profession is an important area for firms to consider. Software that makes deals run more efficiently will reduce stress and support lawyers. This, in turn, will encourage employee retention efforts and minimize staff and operational costs.
ESG also prioritizes the client experience. When firms make transaction management more flexible for clients and facilitate effective internal ESG reporting, they become more attractive suppliers. Sustainability-driven investment continues to rise, so the more ethical, efficient, and transparent firms can be, the happier their clients will feel.
To gain some insights into the Legatics’ ESG journey, take a look at our top three ESG lessons.
