Climate change remains key risk as the ‘S’ in ESG and corporate purpose grow in prominence
A year and counting into the COVID-19 pandemic, the CEOs of some of this country's biggest publicly traded companies are far more confident in Canada's economic growth prospects than they were six months ago, finds KPMG's recent Global CEO Outlook pulse survey.
Their level of confidence in the three-year growth prospects for the Canadian economy has risen to 81 per cent, up sharply from 48 per cent only six months ago when companies were still adapting to public health and safety lockdown restrictions, coping with workplace challenges and supply chain interruptions, and rapidly deploying digital tools to better connect with their employees and customers.
"We have seen tremendous resiliency and ingenuity in the business community throughout this crisis," says Elio Luongo, President and Senior Partner, KPMG in Canada. "While the economy is not yet back where we need it to be, recent reports on job and GDP growth indicate a full rebound may come earlier than expected. This would especially be good news for the small- and medium-sized enterprise business owners who have been hit the hardest."
While confidence is Canada has grown, many more have their doubts about the global economy, something they share with their global peers. The prospects for the global economy are nearly 20 points lower than at any point since 2017 (42 per cent versus 68 per cent in January 2020).
As for corporate earnings, 86 per cent of Canadian CEOs remain confident in the three-year growth prospects, predicting per annum earnings growth of 2.5 per cent. That's up slightly from 84 per cent six months ago.
A KPMG in Canada poll of over 4,000 Canadians earlier this year revealed that nine in 10 Canadians want the country to adopt a 'Canada-first' mindset to get the economy moving again, including creating incentives to 'buy Canadian' and corporate Canada allocating a share of all their contracts to small- and medium-sized Canadian businesses.
Two in five (43 per cent) CEOs in Canada say the pandemic "forever changed" their business (22 per cent globally). Certainly, many are reconsidering their organization's physical footprint, nearly half embracing flexible workplace options, and nearly two-thirds continuing to build on their use of digital collaboration and communication tools.
What's keeping CEOs up at night?
Climate change is still top of mind for Canadian CEOs, who identified this as the "greatest threat" to their company's growth prospects over the next three years. Nearly half (48 per cent) of the global CEOs and over two in five Canadian business leaders said that the U.S. re-entering the Paris Accord would cause their company to implement more stringent ESG practices.
That said, the majority of CEOs globally (89 per cent) and in Canada (90 per cent) are looking to lock in the sustainability and climate change gains made during the pandemic.
While Canadian CEOs moved cybersecurity risks up one notch to fourth, their global peers listed it as the No. 1 threat to growth prospects.
With the risk of territorialism and the potential loss of talent during the pandemic subsiding, Canadian CEOs said the other major threats to growth include emerging technologies and supply chain disruptions, according to the survey.
Greatest Threats to Business Growth
|Environmental / climate risk||1||1||5|
|Emerging / disruptive technology risk||2||3||6|
|Supply chain risk||3||5||3|
|Interest Rate risk||4||--||6|
|Return to territorialism||--||1||7|
The findings also revealed that the pandemic shifted a full 100 per cent of Canadian CEOs to focus on the 'social' aspect of their company's environmental, social, and governance (ESG) practices and attributed their organization 'purpose' for guiding their pandemic response with stakeholders. Six months earlier, less than two thirds (64 per cent) focused on the 'S' in ESG and only 60 per cent looked to their corporate purpose to dictate their pandemic response with employees, customers, suppliers, investors and the public at large.
This dramatic rise mirrors the global trend, with 96 per cent of the 500 CEOs surveyed focusing on the 'S' in ESG and guided by corporate purpose in their pandemic response, up from 63 per cent and 65 per cent, respectively, six months ago.
About KPMG's Global CEO Outlook Pulse Survey
KPMG International surveyed 500 CEOs of the most-influential companies in 11 countries, including Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the U.K., and the U.S. The vast majority (78 per cent) are publicly traded companies, primarily from the following industries: banking, consumer and retail, manufacturing, insurance, technology and telecommunications. CEOs from asset management, automotive, life sciences, energy, and infrastructure were also represented.
Fourteen, or 67 per cent, of the 21 CEOs surveyed in Canada helm companies with annual revenues of over US$10 billion. All Canadian respondents lead publicly traded companies.
For six consecutive years, KPMG has sought the perspectives of Canadian CEOs as part of its annual survey of the senior executives who run many of the largest publicly traded and privately held companies around the world. In 2020, KPMG surveyed nearly 1,300 international CEOs in January and February and followed up in July and August with a pulse survey of 315 chief executives, to understand how CEO thinking had evolved during the COVID-19 crisis. For more information, click here.
About KPMG in Canada
KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs nearly 8,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.
The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see home.kpmg/ca
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