Introduction
Law firms were caught unprepared by the disruptions of 2020 and subsequent upheavals during 2021. However, firms that followed previous recommendations such as promoting flexibility, adaptability, and centralizing procurement fared better than those who took a fragmented approach. The pandemic and social justice movements have caused a shift in the mission statement of many procurement departments, with a focus on environmental, social, and governance initiatives. For the new year, three strategic priorities for law firm procurement offices are increasing supplier diversity, managing spend, and enhancing sustainability.
The continued pandemic and social justice movements have shifted the mission statements of many procurement departments.
Increasing supplier diversity
- Law firms are increasingly adopting supplier diversity programs driven by client expectations and societal changes.
- Fortune 500 companies set supplier diversity goals, and many law firms are incorporating diversity information into their RFPs or selection processes.
- The U.S. minority population is growing, which will further increase the demand for supplier diversity.
- Supporting underrepresented suppliers, including small business enterprises and those owned by women, minorities, veterans, LGBTQ+ individuals, and people with disabilities, offers various benefits to law firms.
- While 65% of law firms have established supplier diversity programs, there is room for improvement, as 40% of surveyed law firm procurement leaders have not taken formal steps to increase supplier diversity. Procurement teams can play a crucial role in advocating for engaging diverse suppliers.
How law firms can increase their supplier diversity maturity
To progress to the next level of maturity, firms must take thoughtful, intentional actions. Here are some suggested steps:
- Build a sustainable supplier diversity program with clear goals and measurable objectives aligned with long-term firm goals.
- Actively seek opportunities to engage with diverse suppliers, going beyond existing networks and conducting proactive research to add more diverse options to vendor rosters.
- Ensure current processes do not exclude diverse suppliers by evaluating selection criteria, contracting requirements, and preferred vendor lists for inclusivity.
- Support the growth of diverse suppliers through providing specific feedback on RFP submissions, assisting with certification processes, and offering training, onboarding, or mentorship programs.
Centralizing procurement and increasing spend under management
Many law firms face challenges in managing costs due to decentralized contract negotiation and spending authority. Centralizing procurement functions can provide visibility into spending, streamline contracting processes, and negotiate better rates. Clients' increasing interest in vendor management encourages firms to adopt a centralized model, enabling alignment of vendor and firm priorities, control over spending, and leadership in sustainability and diversity initiatives.
The goal in many procurement functions is to centralize the negotiation and contracting processes to add visibility to the firm’s spending and ensure the coordination of efforts across the firm.
How law firms can improve their spend management
Many firms begin centralizing procurement’s control in phases. Here are four suggested steps to take:
- Create a set of policies and procedures governing spend. Your policies should set forth who has the ability to negotiate and sign contracts as well as who must review the contract terms before signing. Other policies should set forth expense management guidelines and explain how you will monitor compliance.
- Start tracking budgets. All firms should take a proactive approach to budgeting. Include a process for capturing and realizing budget savings in your plans.
- Improve financial hygiene. To gain greater visibility into spend, centralize the intake of all firm invoices. Set a fixed cycle for firm payments rather than paying invoices daily or on a rolling basis.
- Establish control over the accounts payable function. Curbing expenses requires procurement to have a say in how every dollar above a certain threshold is spent. To accomplish this goal, mandate multiple levels of approval for all spending over a certain limit. Consider restricting the responsibility for adding new vendors to the system.
Building greater sustainability
- Establishing a sustainability program helps firms tackle climate change, meet employee and recruit expectations, show market leadership, and achieve financial sustainability through carbon reduction initiatives.
- Pressure from clients and communities is driving firms to prioritize environmental efforts due to increased reporting and accountability demands.
How procurement teams can help law firms address sustainability
We have established three levels to denote sustainability program maturity in law firms:
- Level 1: Implementing firm-wide policies that support environmental initiatives and provide company-wide buy-in and accountability.
- Level 2: Setting and reporting on key performance indicators to deliver insight into where firms are doing well and where they need to improve and to quantify the firm’s sustainability initiatives.
- Level 3: Establishing long-term goals for travel and community, usage of energy and other resources, recycling, and pro bono and volunteer work.
To start a sustainability program, procurement teams need to take three steps:
- Develop a baseline of understanding. To implement an effective sustainability program, work with stakeholders and third-party vendors to assess current emission and waste metrics, focusing on Scopes 2 and 3 emissions as per Greenhouse Gas Protocol standards. Consider factors such as spending with sustainable suppliers, travel frequency, commuting methods, recycling efforts, and LEED certification of real estate.
- Determine what you can control. Identify key areas of emissions and waste where your firm can make meaningful progress. Look for opportunities to reduce consumption of resources, such as energy and water, or to promote recycling, reduce travel, and downsize real estate holdings. Set the appropriate measurements, then benchmark your metrics, goals, and progress with peer firms.
- Communicate your goals. The firm needs to walk the talk. Procurement leaders should set and communicate goals and policies using science-based targets to facilitate the steps necessary for the firm to achieve reductions in each key area identified in step 2.
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