The COVID crisis has cost CEOs a lot of sleep, as multiple unprecedented challenges have emerged, and continue to emerge, threatening the viability of their brands and businesses. New research from professional services network KPMG—based on two surveys, one done at the onset of the pandemic in January and another in July/August—reveals that chief execs at some of the world’s most influential companies are examining their wider societal contributions and company purpose.
“This [research] provides a truly comprehensive understanding of the impact COVID-19 has had on executive leadership at the world’s most influential companies,” said Honson To, chairman of KPMG China and Asia Pacific, in a news release. “Against a backdrop of extraordinary challenges, we explore how their strategies have shifted, how their concerns have changed, and we gauge their outlook for the global economy. It’s a monumental study that should provide all of us with important conversation starters for our clients and insights into how they are handling the pandemic.”
The newly released 2020 KPMG CEO Outlook finds that the agenda of leaders has radically shifted since the beginning of the year, as existing trends like ESG (Environmental, Social and Governance) factors, flexible working and digital transformation have accelerated. When reflecting on prospects for growth over the next three years, 32 percent of CEOs are less confident now than they were at the start of the year in the global economy. CEOs, however, are more optimistic about their own country’s growth prospects (45 percent confident), and more confident again in the resilience of their own business over the coming three years.
Key findings from the research:
Talent risk rises eleven places, named the largest threat to businesses
In January, CEOs ranked talent risk behind 11 other risks to growth. However, since the start of the pandemic, talent has risen to be named as the most significant threat to their businesses ahead of supply chain and environmental risk.
Personal impact of COVID-19 on CEOs
Four in ten respondents (39 percent) have had their health or the health of one of their family affected by the virus and 55 percent changed their strategic response to the pandemic as a result. Global executives have also been impacted financially, with nearly two-thirds (63 percent) citing that they’ve made changes to their compensation as a result of the COVID-19 crisis.
Digital transformation key to improving operational resilience
CEOs have invested heavily in technology during the lockdown period and they are betting on major dimensions of digital transformation to make their companies more operationally resilient, agile and customer-focused. A majority (80 percent) of leaders have seen the digital transformation of their businesses accelerating during the pandemic. The biggest advancements have been in the digital transformation of operations, where 30 percent say that progress has put them years ahead of where they would have expected to be right now. Two-thirds (67 percent) of CEOs are likely to put more capital investment into technology than they are people, a figure that hasn’t changed at all since the initial survey.
Increased focus on purpose and ESG
Earlier this year, CEOs said their organizations have a larger role to play in society. Two-thirds (65 percent) of CEOs said that the public are looking to businesses to fill the void on societal challenges and three-quarters (76 percent) agreed that as leaders they are personally responsible for change on societal issues.
The pandemic has accelerated global executives focus on their roles in society and added further scrutiny on business practices. CEOs feel that the recent developments have made them question if their company purpose meets the standard expected from their stakeholders, with 79 percent saying that they have had to re-evaluate their organization’s purpose as a result of the COVID-19 crisis and that same majority (79 percent) saying they feel a stronger emotional connection to their organization’s purpose since the crisis began.
This development has put ESG near the top of the agenda for CEOs and nearly two-thirds (63 percent) of leaders have shifted the focus towards the social component of ESG during this period of global uncertainty. Despite the increased emphasis towards societal issues, many sectors are at risk from climate change. A large group of CEOs (65 percent) recognize that managing this risk will be key to determining their success, specifically whether they can keep their jobs over the next five years.
“The COVID-19 crisis is redefining what good business leadership looks like. It is making demands of CEOs that few people could have imagined just months ago,” said Bill Thomas, global chairman and CEO of KPMG, in the release. “Environmental considerations remain important, but societal impact is now much higher on the agenda. CEOs are more connected to their organization’s Purpose, their reason for being, and are using it to guide their business decisions through continuing unpredictable times.”
The study included qualitative interviews with CEOs of: Hellenic Petroleum, Kyocera, NatWest (formerly RBS), Thomson Reuters, Salsano Group, Verizon and Zurich Insurance.
KPMG initially surveyed 1,300 CEOs in January and February, before many key markets were beginning to feel the full impact of the pandemic crisis. KPMG conducted a follow-up survey of 315 chief executives 6 July – 5 August to understand how CEO thinking has evolved during the crisis. In both instances, all respondents have annual revenue over $500M and a third of the companies surveyed have more than $10B in annual revenue.