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The top 50 UK law firms and Corporate Responsibility
A report for Business in the Community
Vanessa Wood
In April 2004 Freshfields Bruckhaus Deringer published a client brochure on Corporate Responsibility (CR). In a business world in which The Economist and others are still so dismissive of CR, this seemed quite a bold move. This prompted the question what were other UK law firms doing about CR, both as businesses in their own right and as professional advisors, and if they were addressing CR, were the triggers internal or external? The following are the conclusions from research carried out on behalf of Business in the Community (BITC), which works with its 750 member companies to improve their impact on society in the community, environment, marketplace and workplace. It involved face to face interviews with 24 of the UK top 50 law firms2 as defined by The Lawyer.
The DTI describes Corporate Social Responsibility (CSR) as being "about how business takes account of its economic, social and environmental impacts in the way it operates" and "as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society". Increasingly CSR is now referred to as CR, to stress the fact that it involves the impact on environment, not just on society.
According to the Law Society's Firms Omnibus 2005 'a fifth of firms (20.9%) have a CSR policy. However, in advance of the survey, it was hypothesised that although firms may state that they do not have a CSR policy, they may, in fact, have policies in place which may be considered to have a CSR content. Indeed this was confirmed by the emerging data.' This research also found, perhaps unsurprisingly, that the larger firms were also significantly more likely to have policies than smaller ones. These findings echo those of the Business in the Community research.
The experience of CMS Cameron McKenna LLP is not untypical. "Our policy was created, or rather evolved about four or five years ago from a number of separate initiatives, a number of which came under the CR umbrella. The formal policy was created about two years ago," explained Dick Tyler, Managing Partner.
The Law Society research only reflects part of the picture. It did not indicate the significant number of firms such as, Freshfields Bruckhaus Deringer, Clifford Chance, Pinsent Masons, and Wragge & Co, which are in the process of developing comprehensive policies, and expect to have them in place in the next one to two years. The phrase 'codifying' existing policies under one umbrella was used by a number of partners.
For firms with offices outside of the UK, developing a policy raises particular issues. "Our community programmes are well-established in some offices, less so in others and there are particular challenges for global firms such as ours, where different jurisdictions have a different understanding of CR," said Michael Smyth, partner, Clifford Chance, "We would not wish to introduce a template that we could not live up to worldwide. London has all the policies, but we need to develop a comprehensive platform across our network."
Early on in the interview process, one partner suggested that a supplementary question be added to the research, on whether or not firms were using external consultants to help with CR policy. It will probably come as no surprise that none of the firms interviewed appeared to have done so. One firm, though, had taken some advice from a friend who was a CR expert. Ashurst, however, will consider seeking external advice if they do look to put in place such a policy. Lawyers seem to prefer to find out things for themselves. However, three firms were using external indexes to help identify areas they needed to address. Freshfields Bruckhaus Deringer is using the Global Reporting Initiative (www.globalreporting.org), Linklaters has used Business in the Community's Corporate Responsibility Index amongst others, and Cobbett used The Sunday Times Top 100 Companies To Work For survey.
With so many firms planning to introduce policies, there seemed to be a clear pattern emerging. Was this being driven by clients? The answer seems to be, in part, yes. However, this needs to be qualified. Client 'pressure' certainly accounts in a significant part for 'why now', but two other triggers were equally strong - namely firms believing it was fundamentally the right thing to do, based on their existing values as a firm, and because it supported their aim to be an 'employer of choice'.
Client requests for information on firms' CR polices has become an increasingly common aspect of the tender process in the last 18 months to two years, and, in particular, of beauty parade pitches for panel selections. Clients, such as Barclays and Reuters, were mentioned by a number of firms as requesting information on CR policies. For many firms, this is seen as a natural progression from the diversity information which American clients, in particular, have been requesting for years. Mark Brunton, a partner at Eversheds LLP, and David Widdowson, a partner at Bevan Brittan LLP both commented that they had been asked recently as part of public sector tenders to address questions on CR.
"In the past, many law firms' approach to CSR was that it was an internal matter. Recently it has become more of a real and transparent issue when pitching for client work or panel appointments especially for international clients and government departments," explained Patrick Farrell, partner at Norton Rose.
A few firms such as DLA Piper Rudnick Gray Cary, Clifford Chance and Norton Rose have even been producing CR brochures on what the firms are doing themselves, in part, to support their marketing.
Several firms saw the information requested by clients as nothing more than tick boxing and reflecting the latest corporate fad. This might, in part, be true. However, it reflects the stage at which most clients find themselves as they try to implement their CR policy.
Five years ago there was a significant shift in the business world as CR entered mainstream business strategy. This was a response to pressure from the general public which was becoming increasingly less trusting of big business, and noted by David Varney, Chairman, HMRC: "In recent years, the institutional importance of business has risen dramatically.... With influence comes increased vulnerability. Corporate behaviour is scrutinised like never before...
And now there is a new weapon in the public arsenal: social sanctions. Whenever there are lapses in the corporate sphere, the press, shareholder activists, environmentalists, politicians, even angry consumers are on hand to dispense opprobrium with astonishing speed. Social controls effect change far more rapidly than regulatory reforms or litigations.
Not so long ago, Enron and Arthur Anderson seemed relatively insulated from the general public. But within the past year, both firms perished through the exercise of social sanctions - long before the plaintiffs were found guilty in the courtroom."
Initially businesses focussed on their internal policies and practices where they had direct control. Increasingly companies are now looking at their supply chains, and that includes service providers such as law firms. Just as the first CR reports were little more than tick boxing, it is not unrealistic to anticipate that, in the future, clients will expect their suppliers to do more than just say they have a policy. They will also have to demonstrate they are measuring the impact of their policies for example, on community investment or the environment.
"Clients want their legal services provider to share the same values as them. We are asked about CR as part of their supply chain," noted Elaine Radford, Head of Corporate Social Responsibility at DLA Piper Rudnick Gray Cary.
This view was echoed by Jonathan Fortnam at Pinsent Masons: "Firms that have a CR policy can give clients comfort that they are dealing with 'people like us'. It does not necessarily mean that they will give you work but it is potentially a form of assurance."
Steven Butts, Head of Community Investment at Wragge & Co saw it as part of how clients are managing their brands, ensuring that they worked with suppliers who shared their values.
At the moment it is not necessarily a critical factor in the final decision by a client on the selection of a law firm. However, according to Dick Tyler, Managing Partner of CMS Cameron McKenna: "Although it may currently be fairly low down the pecking order in terms of the selection of a firm for some clients, as the market becomes more focussed on the issue, it will become more relevant. At the moment, lawyers are not in the category of suppliers who clients necessarily think of first in the context of CR."
Client pressure, though, is certainly proving to be helpful in persuading partners to accept that their firms should be addressing CR and investing resources in this area. One partner commented that: "If a partner questions why we have a CR policy, I tell them to look at this tender - without a policy, we would have failed at the first hurdle." Another partner talked about how client pressure was helpful in terms of forcing partners, who hitherto had not been inclined towards being supportive of the community programme, to talk about the community policy. In his words: "Client leverage is proving to be helpful in raising consciousnesses."
Of course, even in those businesses which outwardly purport to be addressing CR, there will be people who believe that the 'business of business is business'. However, the nature of partnerships means that those dissenters need to be persuaded before policies can really be implemented throughout a firm. This can mean that when a firm adopts a policy, there really is a strong body of support for it, that it is really embedded in the business processes throughout the firm. Though the increasing corporate structure of some firms and the LLP status of others is, perhaps, changing the importance of this.
Ashurst's Graeme Ward reflected that: "LLP status is helping to create a culture in which law firms accept that they need to be more open both to their employees and other stakeholders - clients and the wider community."
Clients might be providing the impetus as to why firms are introducing policies now, but a strong thread throughout all the interviews with those firms with policies, or developing them, was that they were doing it because it was the right thing to do. It was seen as underlining values they were already held. The general public might not share lawyers' perceptions of themselves, but a significant number of partners commented on how lawyers were different.
In the view of Michael Smyth of Clifford Chance: "The law is a liberal profession. I continue to believe that men and women join it with a sense of public interest. What is striking is that corporates increasingly acknowledge that they too have to have regard for interests beyond those of shareholders. Whether or not they welcome that change, they recognise they have to deal with it."
As Michael Skrein, partner at Richards Butler, a firm that does not have a formal policy pointed out: "Honesty and integrity are obviously key to social responsibility. They are values that should underpin every lawyer's creed. And nowadays professional ethics is part of a solicitor's formal training."
A couple of partners, including Laurie Watt, Senior Partner at Charles Russell, did recognise that the wider community might not share this view. "CSR is now very much the thing," he commented "So one view is that if you are already doing it, you might as well make more of it by having a policy, if that assists people's perception. Lawyers can be seen as parasitic but we have to be a part of society and reflect society's views and if that means, in the process, genuinely putting something back then so much the better."
That sense of doing it because it is the right thing to do, rather than seeking publicity for it, has certainly underpinned most firms' approach to Pro Bono. Without exception, all the firms interviewed were involved in Pro Bono projects. The general public, including many clients and, possibly even some partners, would be genuinely surprised at the generosity of the resources invested in this area, which ranged from dedicated members of staff overseeing its organisation, the provision of transport to projects through to the substantial value of potentially billable hours provided by the professional staff.
How this should be valued, both in terms of resources invested and impact delivered in the community is something that firms will probably have to address, as this aspect of their community programme becomes one of the measurable CR issues that clients increasingly request information on. Business in the Community's ProHelp initiative (www.prohelp.org.uk) which is supported by firms such as Eversheds LLP and Allen & Overy, measure the value chargeable to clients. This ensures that the client organisations, which they provide advice to, can gain the maximum leverage in grant applications, where in-kind donations might be matched. The London Benchmarking Group (www.lbg-online.net) whose members include Freshfields Bruckhaus Deringer, Herbert Smith and CMS Cameron McKenna, measure in terms of the true cost to the firm which they feel ensures figures are not over inflated.
Clients' need to monitor their own supply chains might be providing the impetus as to why firms are addressing CR this year, but another strong trigger is the need to attract the best employees in an increasingly competitive market. When asked if the need to be recognised as a good employer was a driver for introducing a CR policy, Jeffrey Ng, Director of Communications at Beachcroft Wansbrough replied: "Yes, definitely....One of our key objectives is to be seen as 'a progressive and attractive employer." Steve Butts at Wragge & Co saw the impetus for their CR policy as coming from "our people".
According to Herbert Smith: "Research has shown that our staff value our commitment to Corporate Social Responsibility. We also recognise that it ensures we are fresh-thinking and outward looking, by enhancing our awareness of the wider social, ethical, environmental and economic climate within which we operate."
Lawrence Graham's Senior Partner, Bill Richards, said: "I don't pick up that our absence of a codified set of values for CSR has been, or is, a bar to recruiting the best people. But I do ultimately see us producing a policy, codifying what we already do. It is rather like the LLP question. In a few years, it will be a question of why are you not an LLP rather than why are you one - it is a trend in the sector."
Others saw any increased ability to retain or attract staff because of having a CR policy as a happy by-product. This was, perhaps, a reflection of the fact that there is a tendency for law firms to focus mainly on the community aspects of CR; in part reflecting the background in many firms of the internal champions who are involved with the firms' community or Pro Bono work.
Two other triggers for introducing a policy that emerged were protecting the firm's reputation, and supporting the firm's role as a professional advisor on CR matters.
For many businesses developing a CR policy has been a response to managing business risk. Many have taken on board the advice of the Association of British Insurers: 'A company can put its business at risk if it fails to respond appropriately to social, ethical and environmental matters.'
However, managing its reputation has always been fundamental to the health of a law firm. As Arthur Anderson found to its cost, reputations can be lost very quickly. A firm is only as good as its clients. It would probably be impossible today to find a firm that did not think carefully about the clients it takes on. Money laundering and conflict checks are standard practice.
There may be a fundamental right to legal representation, but lawyers are not obliged to take on every client that approaches them. Law firms do have a choice about what they take on. Several firms interviewed acknowledged that they would turn down a client purely on ethical or moral grounds. However, only a few firms saw a connection between their CR policy and the selection of clients. The legal world has not reached the stage of some financial services organisations, such as those involved in ethical funds or banking, who are using their CR values as way to differentiate themselves and their services from their competitors.
Most firms recognised that having a CR policy supported their work on managing their reputation, even though it was not a major trigger for introducing one. In the view of Dick Tyler, CMS Cameron McKenna: "It is a key aspect but not from a defensive point of view, but as part of our overall reputation. If a firm does not have a policy, it probably will not hurt them in the short term, but in the long term it could help to differentiate them from them other firms." This was also the view of Eversheds' Mark Brunton who said: "Whilst we are, of course, aware that a CR programme has a positive impact on our reputation we are not developing our programme for defensive reasons - we are doing this because it is the right thing to do."
Interestingly many of the firms interviewed did not seem to see the adoption of CR policy as being strongly connected with supporting the marketing of CR-related practice areas. However, Dick Tyler, CMS Cameron McKenna, commented that: "In terms of practice areas, it supports a number of areas - environment, pharmaceutical, corporate governance. Increasingly, clients expect us to help them in areas where we have demonstrated that we have applied best practice to ourselves. We can learn from our own experience in order to help us advise them."
Conclusion
A clear conclusion from the conversations with these 24 firms is that the majority either have policies, or are planning to introduce CR policies over the next year or so. This is, in part, a reflection of the increasing expectations by the wider society, that business should be addressing CR as part of its 'license to operate'. It is a reflection of what is happening to clients. Managing their supply chain means that more and more clients are asking their suppliers, including their legal advisors to explain how they are addressing CR.
At the moment, this is often little less than tick boxing, but as measuring CR, with the introduction of the non-financial reporting as part of the Enhance Directors' Report (under the EU Accounts Modernisation Directive), becomes more sophisticated, this will change. It is probable that firms in the future will be asked to provide verifiable data or benchmarking against competitors, for example on their environmental impact or the effectiveness of their community investment programme.
Employee expectations and desires were clearly strong internal triggers for introducing a policy. Most firms recognised that employees wanted to work in firms that shared their values and a CR policy is a strong way of expressing this. However, a strong internal trigger was that it was just seen to be the right thing to do, that introducing a policy was just a way of drawing together existing polices under one heading.
Those firms who are still considering whether or not to have a policy should consider the advice of consultants, Arthur D Little, 'Corporate Responsibility should be seen as a journey rather than a destination, and as society's expectations of business continue to get more demanding, the sooner companies start out the better....'
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