Each year, KPMG takes the pulse of CEOs across the globe to understand their top priorities and areas of focus. While governments are not included in the survey, it contains valuable insights to inform government policy and service delivery. The KPMG 2021 CEO Outlook survey is no exception, with 1,325 chief executives across 11 major markets emphasizing common areas where governments should act. The three most prominent themes are recovery from the pandemic, the growing importance of ‘purpose’ in private enterprise and the need for digital agility.
Road to renewal
In welcome news, the significant interventions from many governments to soften the economic blow of COVID-19 appear to be bearing fruit. For the first time since the beginning of the pandemic, more than half (60 percent) of CEOs are confident about the growth prospects of the global economy over the next three years. Given that 88 percent of respondents plan to increase head count over the next three years (32 percent saying they will do so by more than 6 percent), the likelihood of improved prosperity and job security is growing.
However, governments should also take note of the potential risks and blockers that the CEOs have identified. Supply chain risks have risen 10 percentage points as a concern from 2020, highlighting the impact of trade and logistical disruptions during the pandemic. In response, many governments are now broadening their conceptions of ‘critical infrastructure’ to include vital components of supply chains and considerations for supporting domestic capability-building. This is a nuanced area of policy, requiring careful balancing of the benefits from in-sourcing supply chains with the potential risks of retaliatory trade action and increased costs.
Tax policy is another area of growing concern for CEOs, with an eight percent rise in their priority list from 2020. Respondents observed the pressure on public finances caused by the pandemic response, with 75 percent of the view that it has increased the urgency for multilateral cooperation on global tax arrangements. The proposed global minimum tax regime is of significant concern to 77 percent of respondents, emphasizing the need for governments to engage with businesses closely on the changing regulatory environment. Despite their concerns, CEOs are willing to move on the issue. Seventy-four percent recognize the strong link between public trust in their business and the alignment of their tax approach with organizational values.
The KPMG 2021 CEO Outlook survey provides clear evidence of a transition from traditional business models to multi-stakeholder capitalism. Eighty-seven percent of respondents said that purpose is central to building their brand, while 64 percent named it as the defining objective of their business compared with only 13 percent nominating management of shareholder value. This shift aligns business more closely with the priorities of the public, creating greater scope for alignment with government.
Reflecting the global challenge of public trust in government, 68 percent of CEOs agreed that ‘as confidence in governments decline, the public is looking to businesses to fill the void on societal challenges such as gender equality or climate change.’ However, the entry of business into this domain also provides opportunities. Seventy-four percent of CEOs recognize that ‘large corporations have the resources – both financial and people – to help governments find solutions to pressing global challenges.’ Collaboration on this shared agenda between business and government could lead to step changes that were not previously possible.
Environment, Social and Governance (ESG) issues are a particularly high priority, with 81 percent of CEOs agreeing that the pandemic has caused an increased shift towards this agenda. Governments have significant roles to play in creating the right supporting conditions, including:
- Ambition and policy-setter: Setting Net Zero targets and international agreements on climate change. Seventy-five percent of respondents said that ‘world leaders at COP26 must inject the necessary urgency in the climate change agenda.’
- Regulator: For example, implementing emissions reduction targets to give business confidence and de-risk investment.
- Service provider: Acting as a major economic participant to pioneer social inclusion policies with the government workforce and reform operations to be more sustainable.
- Instigator and capacity-builder: Working collaboratively with businesses to build nascent markets in areas such as renewable energy, educating the workforce for new ESG-related jobs, and acting as a market leader in purchasing ESG-compliant products and services. This is backed by 77 percent of CEOs, who say that government stimulus is required to turbocharge climate-related business investments.
City planners should take note that ‘the death of the CBD’ (central business district) may have been prematurely declared at the beginning of the pandemic. Only 21 percent of respondents plan to downsize (or have already downsized) their physical office space, compared with 69 percent in the 2020 survey. Thirty-seven percent said their organization will have most employees working remotely at least two or more days per week, while 42 percent are looking to hire talent working predominantly remotely. Despite the more limited scope, these changes will still require adjustments to the footprints of housing, infrastructure and public transport, but potentially less than originally thought.
Even with the less radical scenario now envisaged by CEOs, remote work and cloud technology will still play a much larger role in business operations. With this comes increased concern around cyber security, not only for individual businesses but their entire supply chain as well. Three-quarters of respondents see a strong cyber strategy as key to engendering trust with stakeholders, and 79 percent believe that protection of their partner ecosystem is just as important as their own cyber defences. Governments can play an important role in building cyber resilience across the economy. Agencies such as the Australian Cyber Security Centre and Canadian Centre for Cyber Security examples of mechanisms to engage with industry. They must also focus on increased security for cloud-delivered government services, given the rapid shift to online delivery during the pandemic.
What does this mean for government?
Through their responses to the CEO Outlook survey, CEOs have illustrated a vital role for government in supporting the world’s transition out of the pandemic. Now is the time for policymakers to engage on these issues and ensure they are proactively addressed as we move beyond pandemic responses and recovery, to a new reality.
Specifically, governments should prioritize:
- Dialogue with industry to establish a nuanced approach to supply chain resilience. Some critical elements may require support to establish local production capacity, while others can be addressed by more robust planning and capability improvement when working with international vendors.
- Clear communication with industry about plans to implement the recent global tax agreements. Businesses will need a clear understanding of implementation timelines, regulatory details and reporting requirements in order to prepare for the changes.
- Engagement with industry on innovative ways to jointly achieve ESG goals, including through government policy, regulation and demand generation to shift the market.
- An iterative approach to infrastructure planning, closely liaising with businesses as their new structure of remote and office working develop.
- Review of current assistance provided to businesses and individuals to help increase their cyber security resilience.
To view the full report on the KPMG 2021 CEO Outlook survey results, visit: home.kpmg/CEOoutlook