Global professional services firm KPMG announced today the release of its 2021 CEO Outlook study, providing insight into business leaders’ outlook and strategies over the next three years. Among the findings of the study are indications of significant plans for sustainability-related investment, an increased focus on climate risk, and growing pressure on companies to provide ESG disclosure.
KPMG gathered data from over 1,300 CEOs from the world’s most influential companies, across 11 countries and 11 key industry sectors for the study. One of the most significant findings of the survey is the return of CEO expectations for growth, with 60% reporting confidence about the growth prospects of the global economy over the next 3 years, nearly doubling the 32% who answered similarly last year.
The survey also found that the COVID-19 pandemic has heightened demand from consumers and stakeholders for businesses to ‘build back better,’ and to raise their sustainability profiles, with 58% of CEOs seeing increased demand from as investors, regulators and customers for increased reporting and transparency on ESG issues.
Jane Lawrie, Global Head of Corporate Affairs, KPMG said:
“CEOs are under increasing pressure from stakeholders to deliver on ESG goals and to actively address societal issues. With COVID-19 magnifying the importance of a sustainable recovery and COP26 convening in November, companies’ societal roles are under greater scrutiny than ever before. It’s crucial in today’s landscape that businesses and their leadership teams show real-world examples of their dedication to building back better.”
As confidence returns, and sustainability comes increasingly into focus, investments in ESG are poised to grow. According to the KPMG study, 30% of senior executives are looking to invest more than 10% of company revenues on ESG initiatives over the next 3 years, and 74% reporting that corporate purpose is driving action to address the needs of stakeholders.
In terms of determining key areas of investment, the survey found indications of a string connection between ESG and digital transformation initiatives, with 75% of CEOs reporting that their digital and ESG investments are inextricably linked.
Larry Bradley, Global Head of Audit, KPMG, said:
“CEOs are under increasing pressure to describe how climate change is impacting their business strategies and their financial reporting. Furthermore, the rapidly evolving ESG reporting and standards landscape can certainly be challenging to navigate. Accessing the right talent, building processes and related controls, harnessing data extraction technology, and developing governance structures to properly capture and disclose ESG data is where they can both build trust and gain a competitive edge.”
The KPMG study also found that climate change has increased significantly as a key risk in the eyes of the CEOs, rising to the top risk to growth over the next three years, from fourth place last year, along with other top risks including cyber security risk and supply chain. Moreover, 33% of CEOs said that not reaching climate goals will reduce competitive advantage and impact their bottom line.
In terms of addressing climate change, the business leaders are looking for government support, with 77% of CEOs reporting that they believe that government stimulus will be required to “turbocharge” their goals to reach net zero, and 75% viewing COP26 as a pivotal moment for world leaders to inject urgency into the climate agenda.
Bill Thomas, Global Chairman & CEO, KPMG, said:
“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. I’m encouraged about what the future holds because business leaders are acknowledging that they need to be the drivers of positive change, supporting measures to tackle environmental dangers, as well as societal challenges — from gender and race, to equity and social mobility.”
Click here to see results of the KPMG study.