Over the past year we have seen a marked increase in CEOs taking active positions on long standing social issues which came into sharp relief during pandemic tensions. The results of our latest KPMG CEO Outlook Pulse suggest there will be a continued focus on these social issues along with the broader ESG (Environmental, Social and Governance) themes. But will companies sustain this momentum as the crisis subsides, as they balance ‘back to business’ pressures with commitments to a broader base of stakeholders with raised expectations?
ESG focus continues to rise:
Based on the survey responses of 500 CEOs in 11 key markets in the Americas, Asia and Europe, we see that business leaders want to preserve and build upon their organizations’ sustainability and ESG accomplishments during the crisis:
- 89 percent of CEOs want to ‘lock in’ their sustainability and climate change gains.
- 96 percent say their response to the pandemic has shifted their focus to the social component of ESG, an increase from 63 percent in August 2020.
- 83 percent state that they re-evaluated their purpose as a result of COVID-19 to better address stakeholder needs, up from 79 percent in August.
- And, 99 percent of CEOs say they have a stronger emotional connection to company purpose since the crisis began, up from 79 percent in August.
This growing focus on an organization’s purpose is important. We’ve seen much evidence that companies have successfully used their purpose and values as a ‘north star’ to guide their decision-making through uncertainty. CEOs are also recognizing the importance of making their purpose inclusive of other voices, such as employee and society perspectives, to be relevant and impactful.
This approach certainly helped KPMG navigate the previous 12 months, as we managed the business through the lenses of protecting our people, enabling clients, helping ensure business continuity and helping strengthen society. Our actions in support of these priorities were consistently checked against our purpose and values.
Walking the talk to sustain impact:
While a solid purpose helped many organizations manage in the storm – and it will be top-of mind as the world slowly resets from the pandemic impacts – CEOs now have to figure out how to continue this principled and inclusive approach when the world refocuses on a growth agenda.
Doing so will likely mean being very deliberate about taking value led decisions that can benefit a broader range of stakeholders for the long term while not compromising the short-term viability of a business. In truth, the two should not be at odds - particularly if a business is looking for long-term sustainable growth - but inevitably it won’t always be easy or immediately clear. Most of the ESG issues can’t be solved simply, in the short-term, or even single handedly. Whether it’s finding ways to decarbonize business travel or achieve meaningful progress on workplace diversity levels, we need innovation, determination and collaboration.
One important step in meeting these tough expectations will be identifying, collecting and sharing data, so that companies can set meaningful targets and measure progress collectively. A common set of measurements not only means we are held accountable, it also creates a level playing field by which we can assess what actions or interventions are really making a difference. We can then replicate those actions, come together and make a more quantifiable impact. This year when we launched Our Impact Plan we chose to report against the Stakeholder Capitalism Metrics. We were far from complete on the data we could share, but even the act of gathering the data and identifying our gaps has already provided a focus and catalyst for the organization to improve our actions and commitments against this broad ESG agenda. Transparent communication about our plans and their cumulative impacts are essential – internally and externally.
We know that actions are more important than words so–companies must take tangible actions that build upon words spoken in pandemic times. Put simply, any company that pledged change will see the outside world quickly becoming impatient if there is a gap between what a company says and what it does.
As we all begin to think about the future and ask ourselves, ‘What now?’ it’s clear that CEOs have gained a deep appreciation of purpose-driven leadership and the principles of ESG. Now, we must consider how to channel that determination to work together to drive effective change to benefit all stakeholders who have come to the table.