Clients are making more requests for their outside law firms to calculate their own greenhouse gas emissions and disclose that information
One global law firm recently noted that it had received 50 requests from RFPs to share the firm’s Environment, Social & Governance (ESG) information, including carbon emissions, between October 2022 and March 2023. Further, ESG was cited as top 3 risk on the horizon by in-house lawyers, according to the recent Thomson Reuters Institute’s 2023 State of the Corporate Law Department report.
But, how does a law firm go about calculating carbon emissions, also referred to as greenhouse gas (GHG) emissions, which is the first of many topics that U.S. regulators among others are starting to require? The process for quantifying this is known as carbon accounting.
Components of carbon emissions
The most common elements of the firm’s operations that are key to calculating carbon emissions are categorized in Scope 1, 2 and 3 type emissions.
Scope 1 emissions overview — Law firms are office-based and usually serve as tenants. Direct emissions (known as Scope 1) come from activities under control of the firm. Not surprisingly, law firms generally have smaller amounts of Scope 1 emissions. Typically, these emissions will come from any fuel and gas related to the operation of the building as well as from refrigerants (i.e., refrigeration, air conditioning) and fall into several areas of combustion:
- stationary (fuel and gas onsite);
- mobile (firm-owned vehicles using fossil fuels); and
- fugitive emissions (vapors directly released, like refrigerants, fire suppression).
Details of Scope 2 and 3 — Law firms will have most of their emissions come from Scope 2 and 3 categories. For Scope 2, indirect emissions come from purchased energy in the form of electricity, steam, heat, and cooling. Purchased electricity is the biggest emissions area in Scope 2.
For Scope 3 the most common indirect emissions are in the categories of measuring business travel, commuting, and purchased goods & services, including paper and waste. In the commuting category, some firms will include remote work by staff. Remote work emissions include emissions generated by equipment, such as lights, laptops, and other office equipment at home.
Key factors in carbon emissions calculations
Quantifying GHG emissions can get complicated pretty quickly, and this is why it is important to identify the subcomponents by Scope and focus on data collection first.
For Scope 1 and Scope 2, law firms will use their metered (or sub-metered) data, such as utility bills or purchase receipts and contracts. If they don’t have this, estimates based on square footage by region is the next best option.
For Scope 3, travel data can usually be found with the firm’s corporate travel agency or in the expense management system with purchase records. Commuting data and data related to remote work emissions can be obtained through surveys to employees.
In the area of purchased goods and services, it’s best to first try to obtain the data from the provider, but if the data is not available, using external databases, such as the data from the Intergovernmental Panel on Climate Change (IPCC), is the next best option. For water, the data can be obtained through sub-metered data or water bill. For waste, it is best to work with the building management.
Gather a multidisciplinary team for emissions data gathering & calculation
Compiling a cross-functional team within the support functions of the firm is necessary for the most efficient way to initiate and complete the data gathering process.
- Real estate, facilities & operations — Facilities and operations need to work with the building management to obtain critical data for utility data, water, waste, etc. The internal real estate department can be helpful as well.
- Procurement & finance — Members in the procurement and finance function can help to view and track spending within the supply chain to gather Scope 3 data. Many positions within the procurement team now encompass the responsibility of emissions and decarbonization.
- Technology — The firm’s IT group also play a role in emissions management by providing more insights on data centers, energy usage, life-cycle assessments, etc. from the procurement and e-waste perspectives.
- Human resources — HR has a critical role to play in obtaining commuting data, sending out surveys, helping to determine remote work emissions, and other items related to the workforce.
Doing the calculation
Combining the carbon emissions is the next step once the Scope 1, 2, and 3 data sources are collected. The challenge in this step is understanding what emission factors to apply — not surprisingly, this is the point when some organizations choose to hire a consultant.
Some of the emissions factors, which is a representative value that attempts to relate the quantity of a GHG being released to the atmosphere with an activity associated with the release of the GHG, can be found on the Environmental Protection Agency (EPA) web site in the U.S., and on the U.K.’s departmental websites for the Department for Business, Energy, and Industrial Strategy; and the Department for Environment, Food & Rural Affairs. For other jurisdictions, the IPCC also has an emission factor database.
Measuring emissions will continue to evolve with the ability to gather more emission factors to create higher quality baselines. While it is important to start with the data collection, it is imperative for law firms to prioritize the biggest areas of emissions, such as travel, with low-quality data. This is where there is the opportunity for significant improvements, and law firms can refine the calculation over time.
Driving the need for continuous improvement in the calculations are the RFP requests to measure and disclose carbon emissions data from clients. Indeed, this number is likely to increase exponentially, and there will be increasing pressure for third-party verification and assurance.
An enhanced reputation is a huge benefit of carbon accounting and is a big driver to making meaningful change. Striving for this incentivizes law firms to find better ways to do things to reduce inefficiencies, waste, and consumption, which benefits everyone.