As the business landscape shifts and evolves, a sense of impending doom looms over the heads of global CEOs. A recent survey by PwC reveals that a staggering 40% of these leaders believe that if their organisations continue on their current trajectory, they will become economically untenable within the next decade.
This data highlights the duality of the challenges facing CEOs today; the need to not only weather near-term hurdles such as a decline in global economic growth, but also to proactively reinvent their businesses for the future.
The survey found that most CEOs are well aware of the potential for disruption ahead, with a majority citing factors such as shifting customer preferences, regulatory changes, skills shortages, technological disruptions, the transition to new energy sources, supply chain disruptions, and potential new entrants from adjacent industries as the factors that will have the most impact on their industry's profitability in the next ten years.
Furthermore, nearly 75% of surveyed CEOs believe that the global economy will experience a decline in growth in the coming year.
Company’s climate clock
A majority of global CEOs expect some degree of impact from climate change in the next 12 months—primarily in their cost profiles (where approximately 50% expect a moderate, large or very large impact) and their supply chains (42%). The survey also revealed that CEOs who feel the most exposed to climate change are more likely to take action to address it.
However, many CEOs have yet to take action, with over half of all surveyed CEOs (including 38% of those at the biggest companies and 70% of those at US companies) stating that their company has no plans to apply an internal carbon price to decision-making, even though doing so could help them account for considerations such as taxes and incentives and clarify strategic trade-offs.
Another challenge for companies is measuring and communicating progress to key stakeholders. A separate PwC survey found that 87% of global investors believe corporate reporting contains unsubstantiated sustainability claims, often referred to as "greenwashing."
CEOs are most concerned about financial risks from inflation, economic volatility and geopolitical risk in the short-term. In the medium-term, they anticipate risks from cyber threats and climate change to join the list of top risks. The survey also found that CEOs are extremely pessimistic about global economic growth for the year ahead, which is a drastic shift from last year's optimistic outlook.
Resilience and workforce strategies
In response to economic challenges, CEOs are cutting costs and increasing revenue growth without reducing their workforce or delaying strategic deals. According to PwC's CEO survey, 52% of CEOs have already begun cutting costs, but only 19% are implementing hiring freezes and 16% are reducing their workforce. This is likely due to the recent high rates of employee attrition, also known as "the great resignation."
To keep employees happy and engaged in this competitive job market, CEOs are focusing on providing flexibility, fair pay, fulfilling work, and allowing for authenticity in the workplace.
The survey also suggests that to effectively reinvent their businesses, CEOs need to create a culture of open communication, tolerance for failure, and independent decision-making within their organisation.