Purposeful growth and the role of General Counsel

By Philip Goodstone and Jan Thornbury

From shareholder to stakeholder value

At the 50^th anniversary of the World Economic Forum in January 2020, founder Klaus Schwab declared, “Finally, stakeholder capitalism has become, or is becoming, mainstream.” The idea that organisations would no longer pursue profit above all else, but instead embrace a wider social purpose was indeed gaining credence. Environmental, social and governance (ESG) matters were climbing steadily up Board agendas, and prominent business figures were advocating for a more inclusive form of capitalism. However, no one could have predicted how these good intentions would collide with harsh reality only weeks after Schwab’s Davos announcement, when COVID-19 raged across the globe, throwing into sharp relief the inequalities in our societies, the essential needs that organisations exist to fulfil, and their responsibilities towards their wider stakeholders. It suddenly became acutely clear that social purpose matters, and we can no longer afford to pay it lip service. The pandemic accelerated the drive for meaningful action and – hopefully – furthered the shift in business leaders’ focus from profit to purposeful growth.

Purposeful growth: an opportunity for the legal team to lead

In the stakeholder capitalist mainstream, the lines between reputational risk and legal risk are blurring. Organisations must do the right thing and be seen to be doing the right thing, and are increasingly being held to account. There has been an explosion of new laws,

and significantly heightened scrutiny from regulators around all aspects of ESG; successful prosecutions have been brought for ‘green washing’, and accusations of ‘purpose washing’ are ever more frequently heard. In January 2021, over 60 global business leaders committed to the International Business Council’s Stakeholder Capitalism Metrics, so standardised reporting is no longer on a distant horizon. This labyrinth of increasingly complex legal and reputational risk must be navigated, and companies must be alert to potential breaches at every link in the value chain. The expertise of the legal team is required as never before and they must engage, challenge and often, take the lead. This thrusts in-house counsel into the spotlight. Lawyers have an essential and strategic role to play in making purposeful growth a reality.

How to become a purpose-led – and purpose-leading – legal team

Historically, organisational purpose was perceived to be the domain of marketing and HR professionals, and somewhat tangential to the legal function’s activities. Now the legal team is critical to ensuring the organisation stays true to its purpose and worthy of stakeholders’ trust. So how can already stretched in-house counsel create the time and space to embrace this opportunity and responsibility? We share below three key steps for becoming a purpose-led, and purpose-leading, legal function.

1. Engage deeply with your organisation’s purpose

The first step is to examine the sentiments and consequences of your company’s purpose from a personal, organisational and legal perspective.

• What does it mean and how do the organisation’s strategy and activities align with it?
• Looking at your organisation’s collateral and communications around purpose and values, what are the implied and actual commitments to different stakeholders?
• How well is the purpose embedded in your organisation? Do people pay attention to purpose and values, and behave accordingly? Is purpose referenced in decision-making?
• Scanning the horizon through your legal lens, what are the implications and risks of the above? What engagement might be needed from your team?
• Perhaps most importantly, do you believe in the purpose yourself? Is it authentic? Will it engage and inspire your team?

The answers to these questions will be important as you influence and advise leadership on risk, strategy, and decision-making. They will also help you to reframe your legal function strategy, align your team around business-critical matters and – if your organisation’s purpose is inspiring and meaningful – attract talent and motivate your team.

2. Define your legal function’s purpose and build it into your vision

Existential questions like ‘why are we here?’ may seem a little like navel gazing, but if you can’t articulate a compelling raison d’être for the legal function, it’s unlikely that C-suite or Board will be able to either. By defining your legal function’s purpose and putting it at the heart of a clear, compelling vision, you will be able to demonstrate the value your in-house legal team brings, show how their work enables the purposeful growth agenda and secure their seat at the table.

To articulate your legal function’s purpose, consider:

• What is the team’s contribution to fulfilling your organisation’s purpose? How does the legal function create and protect stakeholder value?
• Why does your organisation need a legal function at all? Imagine a scenario where it became possible to outsource all legal services to external providers at the same cost. What would your organisation be missing?
• Consider the legal function’s key activities – why do this work? Why is it needed? Keep asking why until you reach the legal function’s fundamental reason for existing.

Then, build a vision for the legal team with purpose at its centre, and use it to engage your team, and key stakeholders outside the function.

3. Use your legal function vision to create a blueprint for change

The third step is to develop a blueprint for the future legal function that aligns with its vision. There must be clear lines of sight from the vision through to the defining elements of the new operating model. Existing assumptions about the legal team, its position in the organisation, its ways of working and delivery model should be challenged and if necessary, redefined. This is an opportunity to reimagine the legal function, and for this exercise to be truly valuable, nothing must be off the table.

Ultimately, the legal team’s focus should be on work that supports purposeful growth. This will deliver higher value to stakeholders and be more fulfilling to the team. You therefore need to be rigorous when determining what work your team does and does not do, and the role of your legal supply chain. You may need to explore technology, outsourcing and insourcing options to free up your team to focus on the work that matters most.

It is also likely that you will need to drive culture and behavioural change. For example:

• If the organisation’s purpose is to engage all its stakeholders in shared and sustained value creation, the legal team may need to reconsider who are its clients. They may need to look beyond the company and its shareholders and embrace a role in protecting the lawful interests of wider stakeholders. For some, this might require a dialling down of adversarial approaches, or a change in mindset and behaviour.
• As an enabler of purposeful growth, your relationships with external stakeholders such as regulators, government, and interest groups may look different. How will you engage, and contribute to the debate?
• Internal relationships and ways of working may need to change to a more integrated model. The legal team must become valued and trusted colleagues to others in the business, collaborating effectively across functions, having a voice and able to challenge where necessary. It may be a long time since the legal function was regarded as ‘the department of no’, but the culture must shift even more towards a more proactive, solutions-oriented, service mentality.
• You may need to make changes to your team, for example: setting up specialist ESG capability or centres of excellence; recruiting and developing a wider skill set; stepping up efforts to be more diverse and inclusive; developing alternative career paths and refreshing the talent proposition.
• Finally, the legal team must be role models of the company purpose and values. They must set out what living up to these principles means for the legal team, giving clear examples, and using these as a focus for behavioural change.

 The role of General Counsel

The increased emphasis on ESG and move to a stakeholder capitalist model comes at a time when we were already seeing the rise of in-house counsel as a strategic business partner. The purposeful growth agenda creates another opportunity for the legal team to demonstrate its value and the business-critical role it can and must play. Yet many General Counsel (GC) report that they still do not have the influence and involvement that they – and the business – need. For example, in EY Law and Harvard Law School’s 2021 law department survey only 44% of UK GCs said their day-to-day work is currently aligned with the corporate strategy, and only half believe their function is effective at adding value to the business. The problem is often rooted in the historic perception that in-house counsel does not naturally belong at the table – that the legal team is there to prevent things from going wrong, rather than influence strategy and contribute to long-term-value. This must change. By setting out a purpose-led legal function vision, and pulling this through to a tangible programme of renewal and change, law department leaders can create a compelling narrative to smash flawed perceptions, connect with strategy, inspire their teams and, with their C-suite colleagues, guide the organisation on the path to purposeful growth.