CEOs of the world’s largest businesses are increasingly optimistic about the outlook for their own business and despite the Delta variant slowing down the ‘return to normal’, their confidence in the global economy has returned to levels not seen since the start of the pandemic. The KPMG 2021 CEO Outlook, which asked more than 1,300 global CEOs about their strategies and outlook over a 3-year horizon, finds that 60 percent of leaders are confident about the global economy’s growth prospects over the next 3 years (up from 42 percent in the January/February’s pulse survey).
“In line with the global trends detailed in this study, I can say from interacting with business leaders in Romania that most have reacted very efficiently during the pandemic, showing resilience as they dealt with notable change, uncertainty and disruption. I have also seen during 2021 successful examples businesses that reopened and/or transformed in industries directly impacted by the effects of the pandemic. Resilience relies on a team of motivated and engaged employees, determined and energized behind the company’s purpose, mission and values, to manage risks and opportunities as well as coping with ongoing digital disruption. A digital-first culture empowers people to naturally integrate technology into their wor. Moreover, it is paving the way to a highly skilled digital workforce which operates with speed and agility,” says Ramona Jurubiță, Country Managing Partner, KPMG in Romania.
The prospect of a stronger global economy is leading CEOs to invest in expansion and business transformation, with 69 percent of senior executives identifying inorganic methods (e.g. joint ventures, M&A and strategic alliances) as their organization’s main strategy for growth. A majority (87 percent) of global leaders stated that they are looking to make acquisitions in the next 3 years to help grow and transform their businesses.
The survey found that 30 percent of CEOs plan to invest more than 10 percent of their revenues toward sustainability measures and programs over the next 3 years.
“Despite the continued uncertainty around the pandemic, CEOs are increasingly confident that the global economy is coming back strong. This confidence has put leadership in an aggressive growth stance. While inorganic growth strategies are a priority, CEOs are also looking to expand organically and continue to assess the future of work to ensure they can attract top talent. If there is a positive to come out of the past 18 months, it is that CEOs are increasingly putting ESG at the heart of their recovery and long-term growth strategies. The unfolding climate and societal crises have made it clear that we need to change our ways and work together”, says Bill Thomas, Global Chairman & CEO, KPMG.
Reaching net zero with government support
Among the many socio-economic, social and environmental challenges facing the world, stakeholders are putting immense pressure on businesses to tackle climate change and leave a positive impact on society. As a result, over a quarter (27 percent) of business leaders are concerned that failing to meet climate change expectations will result in the public markets not investing in their business. Over half (58 percent) of CEOs said that they face increased demands from stakeholders (e.g. investors, regulators and customers) for more reporting on ESG issues.
Three out of four (77 percent) of global executives believe that government stimulus will be required if all businesses are to reach net zero. Furthermore, three-quarters (75 percent) of global CEOs have identified COP26 as a pivotal moment to inject urgency into the climate change agenda.
The research found that corporate purpose, what the company stands for and its impact on communities as well as the planet, is driving 74 percent of CEOs to act in addressing the needs of their stakeholders (customers, employees, investors and communities). There has also been a 10-point increase since the beginning of 2020 in the number of CEOs who say their principal objective is to embed purpose into the decisions they make to create long-term value for their stakeholders (64 percent). More than eight out of ten (86 percent) global leaders state that their corporate purpose will shape capital allocation and inorganic growth strategies.
Shifting focus toward operational and environmental risks
When looking at risks for growth over 3 years, senior executives identified three areas they see as top risks: supply chain, cyber security and climate change. Fifty-six percent of global CEOs say that their business’ supply chain has been under increased stress during the pandemic.
Table 1: Biggest risks to growth over the next 3 years
|2021 CEO Outlook
|2020 CEO Outlook pulse
|Risk to growth||Rank||Risk to growth||Rank|
|Cyber security risk||#1||Talent risk||#1|
|Environmental/climate change risk||#1||Supply chain risk||#2|
|Supply chain risk||#1||Return to territorialism risk||#3|
|Emerging/disruptive technology risk||#2||Environmental/climate change risk||#4|
|Regulatory risk||#2||Cyber security risk||#5|
|Operational risk||#2||Emerging/disruptive technology risk||#6|
Changing sentiment on the future of work
Just 21 percent of CEOs now say they are planning to downsize, or have already downsized, their organization’s physical footprint, a dramatic shift from August 2020, with the first wave of the pandemic at its peak, when 69 percent of global leaders said that they planned to downsize their space. CEOs are focused instead on providing increased flexibility for their workforce with 51 percent (up from 14 percent in the January/February’s pulse survey) looking to invest in shared office spaces. Furthermore, 37 percent of global executives have implemented a hybrid model of working for their staff, where most employees work remotely 2–3 days a week.
Unprecedented international tax reforms a significant focus for CEOs
Three out of four (75 percent) CEOs believe that the pressure put on public finances by the pandemic response has increased the urgency for multilateral cooperation on the global tax system. At the same time, 77 percent of senior executives agree that the proposed global minimum tax regime is of “significant concern” to their organization’s goals on growth. Meanwhile, they are more worried about regulatory and tax risks than they were prior to the pandemic (reference table 1 above).
The research found that 74 percent of CEOs recognize the strong link between the public’s trust in their businesses and how their tax approach aligns with their organizational values. As businesses aim to build back better, a majority (69 percent) of CEOs are feeling increased pressure to report their tax contributions publicly as part of their broader ESG commitments.
About KPMG’s CEO Outlook
The KPMG 2021 CEO Outlook was conducted between June 29 – August 6 an included the perception of 1,325 CEOs from among the world’s most influential companies on the economic and business landscape, as well the impact that the on-going COVID-19 pandemic will have on their organizations’ future. All respondents have annual revenue over US$500M and a third of the companies surveyed have more than US$10B in annual revenue.