Sustainable supply chains drive international success, GC summit hears

Geopolitical pressures are on the rise for international businesses and require an increasingly active approach to risk management, building supply chains and horizon scanning – in this environment, general counsels (GCs) need to view sustainability as crucial for a competitive, modern business and ensure a human-machine balance in any uptake of artificial intelligence (AI).

Those were among the headline messages from panel sessions for more than 700 senior in-house counsel – many of whom were GCs – attending the Economist Impact GC Summit in London. Five broad approaches and crucial steps emerged for GCs to take to benefit their international operations, build sustainable supply chains and strategies, and address business transformation.

Manage geopolitical risk

Companies need an active approach to managing geopolitical risk. Geopolitics is increasingly a factor that affects business decisions. Nation states that are allies are increasingly moving to "friend shoring" when it comes to supply chain choices – and businesses are following.

Trade protectionism is on the rise and the space for political neutrality is narrowing, so companies need to assess the operating environments of their supplier arrangements as these may change. Expect more trade protectionism. There will be a higher new normal for interest rates in the longer run, due to structurally higher inflation – affected by supply chain costs, climate change and tight labour markets.

Build sustainable supply chains

GCs need to take proactive steps to build sustainable supply chains. New European laws, reporting standards and ambitious corporate sustainability goals are also forcing companies to reassess their supply chains – and to understand them in far more depth.

Companies should "get on top" of these changes by taking practical steps. Mapping out supply chains, reviewing and updating contractual terms, asking for details about who "supplies the supplier" and reviewing supplier manuals should be a top priority for all businesses.

Many businesses will need to be explaining and justifying how their supply chain is managed to satisfy deforestation due-diligence statements to customers, corporate reporting, modern-slavery statements, substantiation for green claims or to respond to requests from regulators.

Horizon scan

Horizon scanning is essential as GCs have wider exposure to more frequent crises. GCs should be clear about what actually might "sink" the business or grow it; then build muscle around those elements through organisation design and processes, as well as crisis management planning.

Crises present opportunities for GCs to show themselves as authentic leaders – and to be someone who positions oneself to remove "blockers" and enable experts to do their job. A significant part of a GC's preparation for crisis management is building and managing relationships in "peacetime" so they know the key people when the crisis comes.

Collaborate on sustainability

Sustainability is part of being competitive in a modern business. GCs are increasingly taking a lead on sustainability in a world that is becoming more complex. GCs need to be proactive in creating a robust sustainability strategy and the best framework in which to make decisions. The GC's goal should be to set up the sustainability portfolio for success, drive transition within the organisation and then embed it in the right place in the business.

GCs need to tell the story and to be prepared to use "head, heart and wallet" to appeal to different audiences. Although not easy, cross-industry collaboration to tackle sustainability collectively is worth trying. They need to work with the regulator, keep talking and shape a roadmap together.

AI human-machine balance

Success in AI adoption will require GCs to get the human and machine balance right. Artificial intelligence (AI) will change the legal industry existentially. The GC has a role to build a positive AI culture, encouraging their teams to experiment and learn.

Discourse on AI within the business should focus first on the opportunities it presents and not on risks. When should legal decide to use AI? Always start with the problem, then ask if this can be solved by technology. AI is part of the mix of capabilities to solve problems, so GCs will need to be hard-nosed in their judgment. Currently, most GenAI usage is in the middle and back office, solving low-hanging fruit and time-based issues; for example, data extraction and productivity enhancements.

Osborne Clarke comment

The ongoing "more with less" environment will require all of us to be more transformative and ask: how do we change the way we work?

A team from Osborne Clarke attended the Economist Impact 21st annual General Counsel Summit event on 5 November and hosted a breakfast briefing on sustainable supply chains. If you are interested in hearing more, please get in touch.