Feeling optimistic about 2022? Most business leaders are
By Douglas Broom
World Economic Forum.
Global business prospects are looking up. Despite the pandemic and the threat from climate change, corporate leaders are optimistic that economic recovery will continue in 2022, according to a new survey.
However, only about a fifth of the almost 4,500 executives who took part in the 25th annual global CEO survey by PricewaterhouseCoopers (PwC) say their company is committed to net zero, and more of them are worried about cyberattacks than climate change.
The study, which covers 89 countries and territories, shows that more than three-quarters of CEOs around the world expect economic growth to improve in the year ahead, although levels of optimism vary between countries.
The IMF forecasts that global growth will hit 4.9% in 2022, but not all CEOs think growth rates will increase. Business leaders in Brazil, China, Germany and the United States are the least optimistic, while those in India, Japan and the UK are more optimistic than they were in 2021.
CEOs of private-equity and technology firms were the most confident about the prospects for their companies, while the least positive were leaders in the automotive, leisure and hospitality industries.
Cybersecurity and the pandemic top the list of worries, followed by economic uncertainty, inflation and unemployment. Climate change is seen as a risk by only a third of those surveyed, while geopolitical conflict and social inequality trouble fewer than one in five.
Asked how these risks might impact their businesses, the majority say the main effect would be on revenues. However, in the case of COVID-19 and social inequality, the biggest concern is that they could make it harder to hire and retain people with the right skills.
Climate change is seen as the biggest business risk for firms with annual revenue above $10 billion. But smaller companies are less likely to have made a net-zero commitment – nearly two-thirds of those taking in over $25 billion have done so, compared with 10% of those posting revenues below $100 million.
And companies listed on stock markets are twice as likely to be committed to becoming net-zero than those held privately, the study finds. The top reason for not committing to such a goal is the belief that the firm does not create significant emissions.
Targets tied to pay
So what motivates CEOs around the world? Most are driven by short-term earnings-related targets around customer satisfaction and revenues, according to the report. Their longer-term objectives include employee engagement, automation and digitalization.
Only one in eight CEOs say they have a target to reduce emissions. And just over one in 10 say their annual bonus depends on increasing gender equality in their company, with only 8% having a target to increase diversity.
Climate change features somewhat higher in the bonus targets at power and utility companies, where the earnings of almost one in three CEOs is linked to curbing greenhouse gas emissions. Just over a quarter of energy company bosses have similar targets.
“Very few CEOs are avoiding commitments out of a belief that their stakeholders (internal and external) don’t care about climate change, or because they couldn’t afford to do it,” says the report, noting that stakeholder pressure is likely to drive them to take action.
However, eight out of 10 global investors say they are not willing to take a hit on their returns of more than one percentage point as a result of companies pursuing environmental, social and governance goals, according to a recent survey by PwC.
A question of trust
This year, the PwC team has created a trust index for the companies they surveyed based on their engagement with customers. They found that the CEOs of the most trusted companies are much more likely to have their pay tied to non-financial targets.
Bosses at the most trusted firms are almost one-and-a-half times more likely to have their salaries linked to achieving gender diversity targets than CEOs of less-trusted companies.
Businesses emerged as the most trusted part of civil society in the Edelman Trust Barometer 2022, outscoring government, the media and non-governmental organizations. The PwC report says businesses must collaborate with the rest of civil society to address the challenges ahead.
“Leaders need to create sustained outcomes for multiple stakeholders whose interests are not always aligned,” says the report. “Yet the imperative to take decisive action has perhaps never been as strong.
“Business as usual isn’t mitigating the climate crisis or bridging the socioeconomic divide. The results of our … survey lay these truths bare – and underscore the need for bold leadership to unite us as global citizens and problem-solvers.”
The World Economic Forum’s Global Risks Report 2022, which lists climate action failure as the third most pressing risk facing the world, also says collaboration between business and stakeholders is critical not just to deliver recovery, but also to create a more resilient world. – World Economic Forum.