As Environmental, Social, and Governance (ESG) principles grow in importance across sectors, the legal industry’s approach to them is transforming. What was once considered a compliance issue has become a core strategic and reputational imperative: today, ESG is not merely about adhering to regulatory requirements but has evolved into a key component in a firm’s ability to attract clients, talent, and investment.
The 2024 PwC Law Firms’ Survey highlights the shift in law firms’ attitudes towards ESG, emphasising that ESG considerations have moved from a ‘nice-to-have’ to an essential part of firm strategy, with 56% of Top 100 UK firms seeing ESG as a priority. This impacts everything from client service to internal culture, presenting both challenges and, for forward-thinking firms, opportunities to differentiate themselves in a competitive market.
One of the most striking insights from the PwC report is that clients are increasingly evaluating law firms on ESG criteria – 63% of law firms believe their clients are actively assessing their ESG credentials. Today’s organisations, particularly those in regulated and high-profile industries, expect their legal advisers to have a deep understanding of ESG issues that can directly impact their business operations, risk profiles and public image. For businesses with strong commitments in this area, working with a law firm that mirrors their values is essential.
Conversely, firms that lack a robust ESG strategy risk being overlooked by potential clients who increasingly view this as a reflection of corporate integrity and future-readiness.
Just as ESG presents opportunities for growth, deprioritising ESG can expose firms to a range of reputational and operational risks. In an industry that is inherently risk-averse, this means avoidance is no longer a viable option.
Environmental considerations, for instance, are increasingly a focus for clients and regulators alike. Firms that fail to implement sustainable practices or address DEI issues may find themselves vulnerable to reputational damage, regulatory fines, and risk falling behind.
Meanwhile, with the growth in cyber threats the governance component of ESG has taken on renewed importance, as clients expect robust cybersecurity measures to protect sensitive information. With 90% of Top 100 firms in PwC’s report concerned about cyber risk, there is consensus across the industry that this is a focal area for improvement, which will require bringing additional skills and knowledge into teams.
With need rising for lawyers who understand ESG principles and can guide their clients or organisations through related challenges, professionals with expertise in relevant areas, such as climate law, human rights and compliance, are in high demand. According to PwC, 48% of Top 100 firms are investing in upskilling teams to meet this demand, with the ability to advise on ESG becoming a crucial differentiator across practice areas.
ESG is also becoming a critical factor in attracting and retaining top legal talent. Younger lawyers increasingly look to employers to demonstrate a strong commitment to social and environmental principles, seeking out workplaces that align with their personal values, where ESG is not simply namechecked, but embedded into core organisational culture. Firms with meaningful policies – from carbon reduction initiatives to championing diversity and inclusion – are better positioned to appeal to a wider field of talent.
By embedding ESG principles into hiring processes, law firms can not only reinforce their own commitment to them, but also attract purpose-driven candidates invested in making a positive impact, which helps build a more resilient, engaged workforce.
ESG’s journey from a compliance check box to a strategic necessity is well underway, with firms that proactively embrace these values standing to gain a significant edge. Analysis such as PwC’s report finds them better positioned to handle regulatory shifts, attract clients and maintain a positive reputation in the market.
Building a resilient ESG strategy involves both policy commitments and practical investment, from establishing dedicated teams and improving data on environmental impact, to training lawyers in sustainability concerns of client industries. Forward-thinking legal teams are already positioning themselves as ESG leaders, not merely meeting regulatory requirements but going beyond to offer strategic advice on risks and opportunities.
Lawyers have a unique role to play in shaping the broader corporate landscape and, by taking ESG seriously, can contribute to a positive impact that extends beyond their own business and even industry. For those that take up this challenge, ESG represents not only a pathway to responsible business but also a competitive advantage in a rapidly changing world.
