CEOs Committed to ESG Despite Economic Headwinds

Over 1,300 executives from some of the biggest companies in the world participated in a thorough survey by KPMG that shed light on the rising risks that businesses face as a result of political unrest and climate-related issues.

Despite mounting concerns arising from current economic and geopolitical uncertainties, the majority of CEOs at the helm of these global giants remain unwavering in their commitment to prioritise Environmental, Social, and Governance (ESG) issues.

KPMG's extensive global survey targeted CEOs of companies with annual revenues exceeding $500 million, with a third of respondents boasting revenues exceeding $10 billion. The objective was to gauge their perspectives on the primary risks and opportunities expected to impact their businesses over the next three years.

In a surprising shift, the survey revealed that this year, geopolitical instability and political uncertainty topped the list of concerns as the most significant threats to growth. Remarkably, these issues failed to make the top five concerns in the same survey conducted in 2022. This underscores the growing preference among corporate leaders for stable investment environments worldwide.

KPMG attributed this shift to the ongoing volatility in global politics, trade dynamics, and international relations, exemplified by Russia's conflict in Ukraine and tensions between Western nations and China. These factors have compelled CEOs to reevaluate their strategic priorities and place a stronger emphasis on enhancing business resilience.

The survey also highlighted that 77 per cent of CEOs are apprehensive about the potential impact of rising interest rates, tighter monetary policies, and cost-of-living pressures, which could exacerbate the risk of a global recession in the next three years.

Despite these challenges, over 70 per cent of CEOs expressed confidence in the global economic outlook for the next three years, a sentiment largely consistent with last year's survey.

Moreover, the findings underscored the unwavering commitment of most CEOs to integrating ESG practices into their businesses, even amidst a polarised discourse on these issues, which has triggered resistance to sustainable investment and governance practices among certain right-wing policymakers in the United States.

John McCalla-Leacy, KPMG's Head of Global ESG, remarked, "Despite mounting economic and political uncertainties, the survey results reflect a growing determination and focus among CEOs regarding ESG issues." He emphasised that CEOs are willing to make tough ethical decisions to contribute positively to the transition to more sustainable operations.

Nearly 70 per cent of surveyed CEOs confirmed the full integration of ESG strategies into their businesses. Approximately half anticipated a return on their ESG investments within three to five years, with short-term benefits mainly tied to improved customer relationships, enhanced brand reputation, and M&A strategies.

Meeting ESG commitments has become a paramount concern for CEOs, driven by mounting pressure from both investors and customers. More than two-thirds of respondents expressed concerns that their progress on ESG may not withstand stakeholder scrutiny, while 64 per cent believed that public expectations related to ESG issues are on the rise as trust in government continues to decline.

There's evidence of shifting awareness and dialogue around ESG issues, with 35 per cent of CEOs reporting that their companies have altered the language they use to discuss ESG, signalling a trend towards specificity and a focus on areas where they can make the most significant impact.

McCalla-Leacy concluded, "Despite impending financial and geopolitical pressures, the data overwhelmingly shows that senior executives are fully aligned in recognising that E, S, and G are no longer optional extras for successful, sustainable businesses."

These findings come as numerous business leaders express frustration over the uncertainty surrounding the UK's climate and net-zero efforts, especially in the wake of recent reversals of key green policies announced by Prime Minister Rishi Sunak over the past few weeks.

Last month, Tesco CEO Ken Murphy called on political leaders across the UK's political spectrum to uphold their net-zero commitments and provide a stable policy framework conducive to green investments and technological advancements.

This week, Murphy reiterated his call for more ambitious climate policies following the Conservative Party Conference, emphasising the need for government support to help businesses achieve their sustainability goals.

According to The Times, he stated, "I would say two things to the government: first, the affordability of sustainability is a challenge; second, helping industry invest in innovation is really important; and third, getting regulation right is really important."

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Source: Business Green