European regulation of data-driven business models provides GCs with a unique opportunity to help drive innovation within their businesses

• Findings of a new European survey come ahead of a huge expansion of EU data regulation 
• 89% of companies now offer, or plan to offer, data driven products or services
• But 63% say the legal and regulatory framework around data is too complex
• Compliance risks may be triggered so data strategy is needed, dovetailed with ESG policies

The European Company Lawyers Association (ECLA) has surveyed over 400 General Counsel across the continent to find out whether they are prepared for the major changes in data and digital regulation and the new opportunities they present, both for the success of their business and for their own role in fostering innovation.  

The new report – 'Data-Driven Business Models – the role of legal teams in delivering success' – questioned GCs across the seven major business sectors of energy & utilities, retail & consumer, financial services, life sciences & healthcare, real estate & infrastructure, technology, media & communications, and transport & automotive. The report was commissioned by international law firm Osborne Clarke which was closely involved in shaping the concept and content.  The report provides analysis on each sector as well as market insights, case studies and horizon scanning analysis.

We see a growing awareness by legal teams of the need for data-related skill-sets that go beyond data privacy – and of the gathering storm of new data legislation.  These can be blind-spots for a company's board, and in-house legal teams may need to work hard to explain their concerns and demonstrate the need for action.  However businesses that empower their legal teams to take a leadership role in planning and rolling out data-driven business models will reap clear rewards: legal teams are uniquely well-placed to see the bigger picture, and to help drive the changes necessary for new data initiatives to achieve their potential.

Nick Johnson, head of digitalisation, Osborne Clarke, comments

The disruptive nature of digitalisation across sectors has transformed the role that in-house counsel have in their respective companies, requiring them to establish a legal culture that is both ethical and efficient for the business in a growing regulatory environment. With data collection and utilisation becoming an increasing priority, legal departments have become responsible for devising processes that enable businesses to leverage insights from data, while respecting consumer laws and norms. Now, more than ever, a well-functioning legal department has become a cornerstone for ensuring long-term corporate viability.

Jonathan Marsh, President of ECLA, comments

Summary of key findings

The transformation of businesses and markets through digital innovation (in part accelerated by the global covid-19 pandemic) has placed in-house legal teams at the heart of their organisations as enablers of growth and of change.  But the increasing complexity and scope of data and digital regulation mean they will need new skills. And while the survey shows that there is the ambition to embrace new data-driven models, significant obstacles to progress remain.

67% of surveyed company lawyers across Europe say that the legal and regulatory framework around data is the biggest obstacle to implementing data-driven business models within their organisation.  63% say it is too confusing for purpose with only 11% saying it is well-structured.

Current provision of data-driven business models 

• 61% of European businesses offer data-driven products/services 
• 64% of European businesses are using existing internal data, which was initially not intended for the new purpose
• 82% of European businesses are using customer-provided data sets
• 42.5% of European businesses are (or are planning to) develop data-driven products/services jointly with commercial third parties.

Obstacles

The most commonly cited obstacles to implementing data-driven business models were:

• Legal and regulatory challenges, cited by 67% of companies
• 68% of participating lawyers consider the European legal/regulatory framework to be too complex (even before the coming reforms to data and digital regulation) and 63% find it confusing
• Only 11% of companies considered that their business is well prepared for the legal challenges of data-driven business models, and only 26% reported board-level expertise around such models
• Cybersecurity was an obstacle for 38% of companies.  This reflects the greater use of data flows including the growth of digital supply chains.

Data strategy

As data becomes an increasingly valuable asset for a business and starts to underpin significant proportions of its activity, decision-making, products and services, so a data strategy becomes all the more important.

• Only 36% of responding companies have a data strategy in place
• Only 47% think about the ethical and reputational angles of their use of data
• Although 40% of surveyed companies have provisions in contracts that go beyond data protection compliance, only 16% believed that the legal team had implemented the data strategy (where it existed)

Data strategy and data governance are areas where a legal department can add significant value to an organisation by bringing together the various relevant stakeholders to develop these policies to sit across the whole business, rather than being considered an issue for the IT team.  

With the emergence of Environmental, Social and Governance (ESG) policies, data strategy needs to be dovetailed with net-zero strategy and the greening of tech procurement processes, while new green-focused laws on the design and provision of technology need to be monitored.  All of these present GCs with an opportunity to add significant value to their business as both a manager of risk and identifier of business efficiencies and market opportunities.