CEOs of the world’s largest businesses are increasingly optimistic about the outlook for their own business and, despite COVID-19 variants slowing down the ‘return-to-normal’, their confidence in the global economy has returned to levels not seen since the start of the pandemic.

The KPMG 2021 CEO Outlook, which interviewed 1,325 global CEOs from 11 major markets, found that 60 per cent of leaders are confident about the global economy’s growth prospects over the next 3 years (up from 42 per cent in the January/February’s pulse survey).

The prospect of a stronger global economy is leading CEOs to invest in expansion and business transformation, with 69 per cent of senior executives identifying inorganic methods (e.g. joint ventures, M&A, and strategic alliances) as their organisation’s main strategy for growth. A majority (87 per cent) of global leaders stated that they are looking to make acquisitions in the next 3 years to help grow and transform their businesses.

The survey found that 30 per cent of CEOs plan to invest more than 10 per cent of their revenues toward sustainability measures and programs over the next 3 years.

Kenneth Macfarlane, Office Managing Partner – Oman, KPMG Lower Gulf, said: “Well managed by government leadership, Oman has handled the pandemic effectively and is turning a crisis into an opportunity for growth. This stability creates a foundation for CEOs to project a positive, optimistic environment and encourage employee productivity and creativity.

“To tackle the potential environmental challenges, CEOs would do well to invest in digitalisation and disruptive technology. CEOs are also pushing investment in ESG strategies up the business agenda to deliver expected returns and help build a more equitable and sustainable future.”

Reaching net-zero with government support

Among the many socio-economic, social and environmental challenges facing the world, stakeholders are putting immense pressure on businesses to tackle climate change and leave a positive impact on society. Over half (58 per cent) of CEOs said that they face increased demands from stakeholders (e.g. investors, regulators and customers) for more reporting on ESG issues.

Three out of four (77 per cent) global executives believe that government stimulus will be required if all businesses are to reach net zero. Furthermore, three-quarters (75 per cent) of global CEOs have identified COP26 as a pivotal moment to inject urgency into the climate change agenda.

More than eight out of ten (86 per cent) global leaders state that their corporate purpose will shape capital allocation and inorganic growth strategies.

The research found that corporate purpose, what the company stands for and its impact on communities as well as the planet, is driving 74 per cent of CEOs to act in addressing the needs of their stakeholders (customers, employees, investors, governments and communities).

There has also been a 10-point increase since the beginning of 2020 in the number of CEOs who say their principal objective is to embed purpose into the decisions they make to create long-term value for their stakeholders (64 per cent).

When looking at risks for growth over 3 years, senior executives identified three areas they see as top risks: supply chain, cyber security and climate change. Further, about 56 per cent of global CEOs mention an increase in stress on business’ supply chain during the pandemic. 79 per cent respondents mentioned a rising need for cyber defenses, while 75 per cent stressed the need for a strong cyber strategy to continue building stakeholder trust.

CEOs are focused on providing increased flexibility for their workforce with 51 per cent looking to invest in shared office spaces. Furthermore, 37 per cent of global executives have implemented a hybrid model of working for their staff, where most employees work remotely 2–3 days a week.

Commenting on the findings of the report, Nader Haffar, Chairman, KPMG Middle East and South Asia, Chairman and CEO, KPMG Lower Gulf, stated: “CEOs are emerging stronger and more confident about the economy and their own organisations’ prospects for the future.

“They are also adopting a forward-thinking strategy towards shifting their resources to disruptive technology and increasingly pushing ESG issues up the business agenda. To thrive in a post-Covid landscape, CEO’s have to be plugged-in, people-first and purpose-led to drive profitability and long-term growth while also recognizing the positive impact on the planet and society.”

 Key findings

Rebounding growth

Sixty (61) per cent of CEOs are confident about growth prospects for the global economy (up from 42 per cent in March of this year). Overall, CEO confidence has returned to pre-pandemic levels of early 2020, despite Covid-19 variants slowing down the return to normal.

Putting people first to drive societal return
Seventy-one (71) per cent said that CEOs will be increasingly held personally responsible for driving progress in addressing social issues. And 56 per cent stated that with public, investor and government expectations of diversity, equity and inclusion rising so fast, they may struggle to meet expectations.

Building a flexible future of work

CEOs need to decide on an operating model for the future that works for both employers and employees, with only 37 per cent saying that they will have most employees working remotely at least two or more days a week, but 51 per cent investing in shared office spaces.