Leaning in to ESG

The pandemic has created a career-defining economic challenge for a large number of CEOs. Many were worried chief executives would be forced to relegate the importance of environment, social and governance (ESG) programs. However, our research shows  CEOs are still very much engaged with this issue. Close to two-thirds said their response to the pandemic has caused their focus to shift to the social component of their ESG program.

That is not to say that CEOs are being distracted from the environmental aspect. The pandemic has presented a unique opportunity in the battle against climate change, and 71% of global CEOs want to lock in the sustainability and climate change gains made as a result of the crisis. In fact, close to twothirds felt it was likely that managing climate-related risks will be a key factor in them keeping their job over the next five years.

Sandro Salsano's quote

For James Babb, Head of Clients & Markets, KPMG Lower Gulf, the shift in focus to the ‘social’ aspect of ESG is telling of how CEOs are responding to a decidedly human crisis. “Many CEOs have been personally impacted by the pandemic, so it is a very human reaction to focus more on the ‘social’ dimensions of an ESG program,” he says. “The pandemic has shone a light on concerns like how to enhance labor practices, optimize employee well-being and safety, and combat income inequality. Organizations around the world have rallied to help manage the human cost of the crisis; for example, Google donated USD 800 million donation to the World Health Organization; LVMH began manufacturing hand sanitizer; and Toyota used its resources to supply protective visors to healthcare workers . It is heartening to see that leaders see this moment as an opportunity to advance their ESG agendas.”.

Future of work

Covid-19 has effectively forced many CEOs to rapidly implement remote working operations. The longevity of the pandemic being uncertain, organizations are prepared for remote work to continue for the foreseeable future. Over three-quarters (77%) of global CEOs say they will continue to build on their current use of digital collaboration and communications tools.

Customer-centric supply chain

Supply chains have been hard hit by pandemic-related disruptions: 67% of global CEOs say they had to rethink their global supply chain. However, many are using this opportunity to ask how their supply chain can become a competitive advantage in the new reality.  When we asked CEOs to say what was driving this supply chain re-evaluation, the top-ranked reason was ‘to become more agile in response to changing customer needs’, followed by becoming ‘more robust in the event of a natural world disaster’ (for example, a pandemic).

Aqeel Al Lawati, Partner, Corporate Services at KPMG Oman, says, “In our interactions with private and public clients here, we’re finding many are reexamining their procurement and logistics strategy, and reviewing contracts, inventory planning and materials management. They’re also looking at efficiencies in the context of leading local and international practice.”


Reflections for the new reality

Leaders should ensure we do not slip back from climate gains made as a result of the pandemic and instead build the foundations of a sustainable, green economy into the future.

Companies can learn from how resilient (or not) their operating models proved to be during the crisis, to understand areas that need strengthening to withstand environmental or climate challenges. With consumers increasingly focused on purpose-driven brands and sustainable products and services, many companies are adapting their product and service portfolios in an effort to exceed those needs.

Organizations that are building robust ESG reporting programs – along with resilient and flexible supply chains and a talent strategy that focuses on the people and skills needed for a more agile and virtual future – should be well positioned.

Unless otherwise indicated, throughout this report, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating under the KPMG name and affiliated with KPMG International or to one or more of these firms or to KPMG International.

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