The agenda for the new reality
The KPMG 2020 CEO Outlook COVID-19 Special Edition finds the world’s chief executives using this unparalleled moment in history to lead with increased purpose and impact, both societal and economic. They are protecting their people, building trusted relationships with customers and communities, and defining a new future of growth and success for their organizations.
The 2020 CEO Outlook offers a unique lens on evolving attitudes as the pandemic has unfolded. KPMG initially surveyed 1,300 CEOs in January and February, before many key markets were beginning to feel the full impact of lockdowns. Then, in July and early August, we conducted a follow-up ‘pulse’ survey of 315 CEOs to understand how thinking has evolved.
The pulse survey finds CEOs focused on finding opportunity in adversity.
"The significant change in CEOs' priorities over the past six months is a clear indication that businesses have had to pivot at breakneck speed to deal with the challenges of the pandemic. Business leaders the world over are seeking to manage uncertainty with decisiveness. This crisis has accelerated strategies that were already in place around digital transformation and social responsibility. However, in other areas planning for the future is a lot harder, particularly thinking about future ways of working and problem solving. So it’s perhaps no surprise that CEOs are focused on the importance of talent to sustain and grow any future business."
Bill Thomas
Global Chairman and CEO
KPMG
Three key themes emerged from this year’s survey, which we characterize as Purpose, Priorities and Prosperity.
Purpose
At the beginning of the year, we found that most CEOs saw the primary objective of their organization shift from purely profit to also consider their purpose in society. Less than a quarter (23 percent) saw the organization’s overall objective in narrow ‘managing for shareholder value’ terms, with 54 percent taking a broader, purpose-driven approach focused on multiple stakeholders. And around one in five (22 percent) going as far as to say that their primary objective is to improve society.
Today, purpose helps CEOs understand what needs to be done to meet the needs of stakeholders such as employees and communities, 79 percent say they feel a stronger emotional connection to their corporate purpose since the crisis began. At the same time, however, the massive disruptive impact of the pandemic has caused many CEOs to question whether their current purpose really meets the needs of stakeholders: 79 percent say they have had to re-evaluate their purpose as a result of COVID-19.
This increasingly personal and emotional connection to purpose during the pandemic reflects the fact that CEOs face the same health and family challenges as their people and communities when it comes to COVID-19. In fact, well over a third of chief executives (39 percent) have had their health, or the health of one of their family, affected by COVID-19, and 55 percent changed their strategic response to the pandemic as a result.
At the beginning of the year, we also found that CEOs were increasingly prepared to personally lead the way in tackling society’s major challenges. Around two-thirds (65 percent) said that ‘as confidence and trust in governments decline, the public are looking to businesses to fill the void on societal challenges’. At the same time, 76 percent said they had a personal responsibility to be a ‘leader for change on societal issues’. This resolve faced a significant test this year with the tragic death of George Floyd at the end of May and the resulting protests around the world. Most CEOs have been quick to take action that will make a difference: today, 81 percent have either introduced new anti-black racism measures or plan to do so.
Priorities
COVID-19 is clearly not the only threat we face that has profound economic and humanitarian consequences: climate change also offers a significant threat over the coming decades. CEOs recognize this, and are not being deflected from their Environmental, Social and Governance (ESG) goals as they look to rebuild their organizations in a way that supports a new and sustainable economy. The seriousness with which CEOs take the issue of climate change is reflected in the fact that 65 percent say that managing climate-related risks will play a part in whether they keep their jobs or not over the next 5 years. To move forward, they are looking to double-down on the structural shifts that have emerged during the crisis, such as less business travel: 71 percent say they want to lock-in climate change gains made as a result of the pandemic.
CEOs are also not taking their eye off the future of work. COVID-19 has effectively forced many organizations to experiment radically with how work is done. For many organizations, for example, virtual working kicked in literally overnight. With the pandemic transforming the world of work, 77 percent say they will continue to build on their current use of digital collaboration and communication tools, and 73 percent believe that remote working has actually widened their available talent pool.
As they look to accelerate digital innovation, CEOs are also acutely aware of the people who have to deliver – their employees. Many employees are grappling with significant anxiety – or even fear – about today’s situation and what the future holds, and have also had to embrace very different ways of working. While ‘talent risk’ was the threat that CEOs ranked behind 11 other risks at the beginning of the year, it has now risen to be the number one threat to long-term growth, with CEOs recognizing the need to keep their people feeling safe but also connected, engaged and productive.
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.
In terms of the future operating model, supply chains have also been hard hit: 67 percent say they have had to rethink their global supply chain approach given the disruptive impact of the pandemic. However, CEOs are using this opportunity to ask how their supply chain can become a competitive advantage in the new reality that emerges. When we asked CEOs to say what was driving this supply chain rethink, the top-ranked reason was to ‘become more agile in response to changing customer needs’. In contrast, ‘pressure from governments to bring production closer to home’ was second-from-bottom.
Prosperity
Confidence in global economic growth has plummeted since the beginning of the year due to the pandemic. Thirty-two percent of CEOs are less confident in global economic growth than they were at the start of the year. CEOs, however, are more optimistic about their own country’s growth prospects (45 percent confident), and more confident in the resilience of their own business over the coming 3 years. A key growth lever is digital acceleration. With commerce increasingly taking place online because of factors such as social distancing, companies are having to rethink what customers want and how to deliver: 75 percent say the pandemic has accelerated the creation of a seamless digital customer experience and 64 percent say it has also accelerated the creation of new digital business models and revenue streams. The challenge now is to focus efforts and investment on the areas that generate most value and to maintain cyber security resilience.
Conclusions
CEOs recognize that recovery from the pandemic does not mean a return to ‘normal’. Instead, there is an opportunity to define a new future, and three actions areas will be critical: sustainability, digital and trust. First, leaders need to ensure that we do not slip back from climate gains made as a result of the pandemic and instead build the foundations of a sustainable, green economy. Second, with digital acceleration shaping the future of industries, organizations will need a deep understanding of how customer behavior will shift and how to meet these emerging demands. Finally, while the pandemic has given companies the opportunity to demonstrate how they can make a real difference to society, scrutiny of corporate actions has also never been stronger. To maintain the trust of employees, customers and communities, CEOs must demonstrate that they live and breathe their organization’s purpose. Our survey shows that chief executives are more than willing to lead by example in these most challenging of times.
Stay tuned as we plan to unveil more key findings from the survey as well as in-depth perspectives from numerous CEOs across various sectors and geographies
Methodology
The KPMG 2020 CEO Outlook provides an in-depth three-year outlook from thousands of global executives on enterprise and economic growth. The survey offers a unique perspective on the mindset shift of Global CEOs since the lockdown.
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. In July/August (between 6 July to 5 August 2020), KPMG conducted a follow-up survey of 315 chief executives across the globe to understand how CEO thinking has evolved during the crisis. In both instances, all respondents have annual revenue over US$500M and a third of the companies surveyed have more than US$10B in annual revenue, with no responses from companies under US$500M.
The January/February survey included leaders from 11 key markets (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, UK and US) and 11 key industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications). The recently conducted pulse survey included CEOs across the industries mentioned above and from eight key markets (Australia, Canada, China, France, Italy, Japan, UK and US). NOTE: some figures may not add up to 100 percent due to rounding.
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