The Chief Legal Officer (CLO) plays a critical role in a company’s leadership. CLOs dedicate on average more than one-third of their time at work to strategy development, advising executives on non-legal issues, and handling board and governance matters, thus providing value to the business far beyond their legal expertise. The role of CLOs has gone through many changes over the past few years. It has been adapting and evolving to cover a variety of more complex and topical issues and to take on more responsibilities.
The Association of Corporate Counsel (ACC), in partnership with Exterro, has recently released its 2022 Chief Legal Officers survey. This year’s results confirm a rapidly evolving and dynamic corporate legal environment where legal officers and departments have started to play an even greater role in shaping and influencing broader business. The COVID-19 pandemic, diversity and equity issues, and the socio-political environment worldwide have intensified many challenges faced by CLOs while also shining a spotlight on the immense value they can bring to the businesses they serve.
Out of the 861 CLOs surveyed across 20 industries and 38 countries, ACC was able to determine that 80% of CLOs now oversee compliance, practically half oversee ethics and privacy, and four in ten handle business risk. Out of 21 different business functions, more CLOs have direct oversight over 18 of these functions than they had in 2020. With the largest notable rise in responsibility for ESG and CSR issues.
The role of CLOs when it comes to sustainability
CLOs are taking on far more responsibility and oversight when it comes to Environmental, Social, and Governance (ESG) issues. ESG issues are part of a growing list of functions that have become common in a CLO’s portfolio of responsibilities, with nearly a quarter of all CLOs reporting significant control over their company’s ESG-related policies, up nine points from 2020. This is an important insight as ESG issues are continuing to gain relevance and are becoming major drivers behind business strategy, meaning that CLOs now have an even greater opportunity to be a driving force behind policy within their company.
With this added influence comes added pressure as one in six respondents in public organizations reported having received pressure from investors for either taking a stand or refraining from taking a stand on social and political issues. These pressures are also coming from customers: A 2021 Deloitte report claims that nearly one in three customers have said that they stopped purchasing from brands that are not ethically or sustainably sound. As a result of these pressures, four in ten CLOs indicated that ESG issues are forcing companies to improve their compliance efforts to adapt to new environmental regulations and satisfy the growing number of investors and customers that are emphasizing ESG and CSR.
In-house counsel and CLOs are often the ones who can link business objectives and ESG commitments by playing a critical role in identifying and standardizing how this data is collected and reported. It is imperative that as CLO involvement in these issues expands, in-house counsel play a more direct role in mapping out the road ahead to ensure future resilience and compliance with ESG issues within their company.
Cybersecurity, compliance, and data privacy remain the key issues CLOs face
The top three issues that CLOs rank as most important to the business that they oversee are Cybersecurity, compliance, and data protection. All three of these issues reached averages of around eight points on an importance scale ranging from one to ten. All three areas scored slightly higher than last year.
The risk of cyberattacks and breaches is at an all-time high, with four in ten businesses and a quarter of charities in the UK reporting on having been victims of cyber security breaches or attacks in 2022 according to a 2021 study carried out by the UK government. Due to the high number of attacks, CLOs expect industry-specific regulations and data protection privacy rules to most likely pose the biggest legal challenges to businesses in 2022. Sixty-six percent of CLOs anticipate that industry regulations will cause the biggest legal challenges this year and 55 percent list data protection rules as a cause for legal concern. CLOs remain moderately confident that their organization can consistently defend and respond to cybersecurity incidents and breaches, however. 41 percent of CLOs expect to send more work to law firms this year to compensate for the added workload, the highest percentage observed since 2019.
Sixty percent of CLOs expect to see an increase in the volume of privacy regulatory enforcement in 2022, with CLOs in the insurance, information, accommodation, and food service industries overwhelmingly anticipating higher pressure from regulators. The General Data Protection Regulation (GDPR) states that to be compliant, companies should implement ‘data protection by design and default measures, meaning that to properly comply companies must now integrate data protection into business practices from the start. Two-thirds of CLOs expect this regulatory environment to require organizations to improve their compliance efforts, resulting in an increase in compliance-related expenses and spending in 2022.
It is clear that for legal departments and their organizations to remain competitive, the ability of a CLO to adapt, reprioritize, and act decisively is more important than ever. CLOs should take advantage of their growing scope of responsibility and use their extensive legal knowledge to make real and concrete changes for the better within their organizations. Please click here to download the full report.
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Two-thirds of CLOs expect that the regulatory environment will require organizations to improve their compliance efforts, and most anticipate compliance-related expenses to increase this year. Tap into the wisdom of the crowd when tackling corporate ethics and compliance issues.
Cybersecurity, regulation and compliance, and data privacy remain the top three issues CLOs rank as most important for the overall business, and will likely pose the biggest legal challenges to businesses. Check out the ACC Data Steward Program, a data security standard specifically adapted for the legal industry.