Contributing to sustainable growth

The pandemic triggered a global wave of digitalisation, with organisations racing to facilitate seamless remote working through tech and to reach existing and new customers online. Now, before we have fully adapted to this new model, we are being challenged by the daunting power of generative Al.

Despite rapid technological change appearing as a significant factor in shaping the approach and direction of organisations today, it is not progressing into board action or long-term strategy. Digital transformation, making hybrid/remote working work and cyber and data security fall outside of the top board priorities in our study.

According to our research*, 23% of board executives admit that cyber security and data privacy are among the least significant priorities for their board today. But cybercrime poses a serious risk if organisations do not keep their digital operations up to date. In the event of a cyber security failure, businesses could be exposed to financial damage, reputational risk, and litigation. 

Could this reticence towards digital investment stem from a lack of knowledge? Forty-three percent of board executives identify insufficient implementation or understanding of new technology as one of the most significant barriers to achieving their board priorities. They acknowledge that cyber security and data privacy are some of the top areas in which boards need more support from their senior in-house legal team, behind only equality, diversity, inclusion, and wellbeing. And, despite more than a third (39%) of executives claiming that having quality data to aid decision-making is among the most significant enablers in helping to achieve their board priorities, nearly two-thirds (60%) believe their boards are focused on real-time technology considerations associated with hybrid working in place of prioritising future innovation.

General counsel may be able to help bridge the gap: 55% of board executives name cyber security and data privacy as an area in which their board needs more support from the senior in-house legal team, and over a quarter (27%) say the same of digital transformation. With boards feeling like they’re lacking a working knowledge of tech innovation and upcoming regulation for online and digital practices, in-house legal teams with digital ability can offer valuable strategic guidance.

"Digital transformation and Al should be dominating the board’s minds - and will dominate for the foreseeable. The pace of change is so fast in the emergence of new technologies and the transformations they create - it is impossible to avoid those conversations. These new technologies are now integral to the operations of any organisation.”

Daniel Lloyd
Partner, TLT

Ethical decision-making is still a driver for many organisations, and ‘doing the right thing’ is among the top five most significant enablers for helping executives to achieve their board priorities. There is perhaps some way to go in translating this into action, as 59% of leaders feel that boards lack sufficient focus on their purpose and impact.

But general counsel could help to unlock this – two in five (40%) of executives believe their board needs senior legal teams to help their board’s alignment of purpose, profit, and planet. And this will have an important impact on people. In an era where reputation and talent retention are critical aspects of competitive advantage, organisations should be prepared to evaluate their role in society and address the human impact of their business.

Today the ‘E’ comes out as the top focus area within ESG, as boards aim to progress environmental action – waste and pollution management, energy efficiency, greenhouse gas emissions – within their organisation. Despite this, under the weight of boosting productivity, growth and revenue/cashflow management, direct action appears to be slipping down today’s board agenda. Reducing their organisation’s impact on biodiversity did not come out as a top priority, nor did achieving net zero carbon. The reality for organisations today is that, despite the appetite for environmental sustainability that was sparked by COP26, progress towards a low-carbon economy is being significantly hampered while businesses are occupied with surviving day-to-day.

But three in 10 (30%) executives say that their board needs more support from their senior in-house legal team when it comes to decarbonisation and achieving net zero, suggesting that – for some organisations at least – general counsel have the potential to steer business strategy back towards sustainability.

"The current economic and geopolitical climate does mean that we’re being confronted by the social agenda every day and it’s climbing up the list of priorities. But the environmental focus must be maintained too. Yes, more frameworks are in place - and it’s a positive sign that, at a global level, renewable investment was equal to fossil fuels last year- but the hard work is not finished.”

Matthew Clayton
Managing Director, Thrive Renewables

Over the next three years, boards expect their focus within ESG strategy to shift towards social considerations, particularly their employee offering (benefits, welfare, health, and safety), but also their human rights impact and impact on local communities.

Employee wellbeing is a top priority on the board agenda, and leaders predict that EDI will still be among the top concerns for boards in three years. This ties into a topic discussed by our advisory panel: stewardship, or a stewardship mindset, where leaders feel responsible for promoting the long-term sustainable interests of people, the environment, and society.

Almost three in five board executives (69%) resonate with this and agree that today’s leaders are the ‘stewards of the next economy’. As the pressure on businesses to solve society’s problems increases, the role of boards is evolving; board members must lead the transformational change needed.

"Boards have been pushing environmental factors for some time now and social is a new area to explore, particularly a focus on equity rather than only equality.”

Sasha Butterworth
Senior Partner, TLT

Board executives recognise general counsel as being part of this change, identifying equality, diversity, inclusion, and wellbeing as the top strategic area in which their board needs more support from in-house senior legal teams (68%). Board executives also perceive general counsel to be a trusted barometer of what it means to ‘do the right thing,’ and in their ability to help boards to navigate ethical questions surrounding strategy.

“Businesses are having to balance investment in sustainability with the cost of talent and capital which can give rise to competing priorities. But it’s important to be doing ‘the right thing’.

Companies may find themselves losing a leading edge in terms of retaining and attracting the best talent as well as their wider market position if they aren’t being proactive enough or doing more than the bare minimum when it comes to ESG. Plus, regulations in this area are rapidly evolving, and boards should anticipate them ramping up and organisations being held much more accountable. ESG as a whole will have to rise up the board agenda. The time to be taking positive action is now.”

Maria Connolly
Partner, Head of Future Energy and Real Estate, TLT

Rapid growth and changes in the legislative landscape can make it hard for boards to keep up with regulation and reporting obligations in their supply networks. On top of that, a widening gap between government policy and economic, social, and technological demands may leave boards at an impasse.

On the one hand, new legislation can hamper established practices. In our research, board executives say that the increasing regulatory burden is among the top 10 most significant barriers to achieving their board priorities. Government policy in particular falls much lower on the list, but an average of one in five (18%) executives still place it among their most significant barriers to board activity. However, those at high-growth organisations are less likely to see government policy as a significant obstacle than those at companies experiencing low or no growth.

At the same time, evolving guidance around new territory (AI, ESG) makes it difficult to determine appropriate courses of action. Uncertainty about disclosure and reporting requirements emerged as one of the top three barriers to achieving board priorities, and 36% of executives admitted that complying with regulation is an area in which their board needs more support from the senior in-house legal team.

"The general counsel is the important link between all the regulatory areas – old and new – to provide boards with a full picture and guide them towards a strategic response. They can add real value by advising about strategic reporting to minimise duplication of efforts, and by knowing their business at both HQ and at ground-level to understand the differences from an implementation perspective.”

Duncan Reed
Partner, TLT

All of this goes to highlight the ongoing value of general counsel and in-house legal expertise, and their ability to uncover commercial opportunities. Increasingly, the role of legal teams is evolving from pure risk management to business enablement, as they are expected to deliver a competitive advantage by navigating regulations, easing complexity, and predicting future risks.

"Legislation doesn’t have to be a barrier to business. General counsel are in an excellent position to help boards proactively manage legislation strategy and enable forward-looking approaches.”

Gareth Oldale
Partner, Head of Data Privacy and Cybersecurity, TLT

Board executives consider the talent shortage a significant factor in shaping the approach and direction of organisations today, and the second most significant barrier to boards achieving their priorities (with only cost pressures ranked higher).

Fifty-seven percent of executives recognise leadership as being one of the top enablers in helping to achieve board priorities. This is reflected in current board agendas to some extent, but the focus is very much on the workforce of today – not the one of tomorrow. Employee wellbeing and mental health is a top concern for boards but recruiting/retaining talent and reskilling/upskilling for their current employees falls lower down the list of priorities.

People are the keystone of building for the future: their creativity, capacity for innovation, sense of purpose, and collaboration are central to an organisation’s unique advantage. A business that deprioritises talent acquisition and retention runs the risk of losing one of its most valuable resources to a competitor – by which time it’s too late to act.

High-performing organisations are keenly aware of this and are both more likely to consider recruiting and retaining talent among their most significant board priorities. They are also more likely to recognise the need for board support from in-house legal teams when it comes to recruiting and retention. This appeared as another key area for general counsel to step in: 46% of executives say their board needs senior in-house legal support when it comes to strategy around recruiting and retaining talent.

"Adapting to a more technology-oriented lifestyle will mean that every single person has to have digital skills. The acceleration of tech is inevitable, the security challenge is immense. Boards should be asking themselves now: ‘How many people in our workforce have the ability to code?’ The role of the technologist is about to become front and centre of any business strategy.”

Helen Hodgkinson
Chief People Officer, TLT