Reimagining the Outcomes That Matter

As environmental, financial and societal pressures converge, today’s leaders must solve a new equation.

As we near the two-year mark of the pandemic, the global economy has rebounded from the depths of mid-2020. The IMF projects global GDP to grow 4.9% in 2022, a downtick from the 5.9% growth expected in 2021, but still formidable. The 4,446 CEOs from 89 countries and territories who responded to our 25th Annual Global CEO Survey display optimism about continued economic resilience.

Yet threats, uncertainties and tensions abound. Just two weeks after our survey closed, news of the Omicron variant reverberated around the world, raising fresh questions about the course of the pandemic and about society’s ability to continue the slow climb to normalcy. 

Our survey findings reflect these and other tensions. For example, just 22% of survey respondents have made net-zero commitments (though the largest companies in our sample are further along). CEOs are most worried about the potential for a cyberattack or macroeconomic shock to undermine the achievement of their company’s financial goals—the same goals that most executive compensation packages are still tied to. And they are less concerned about challenges, like climate change and social inequality, that appear to pose smaller immediate threats to revenue.

But our survey also provides a glimpse of what is possible when we reimagine the status quo. A case in point: the power of trust. We found that highly trusted companies are more likely to have made net-zero commitments and to have tied their CEO’s compensation to non-financial outcomes, such as employee engagement scores and gender diversity in the workforce. Correlation is not causation, and we’ll continue to explore these results. But at first blush, they suggest a relationship between trust and the ability to drive change—a means of moving beyond short-term, “it’s the next leader’s problem” thinking.

It’s an apt finding to spotlight as we commemorate our 25th year documenting CEO sentiment toward and reactions to transformative trends. During the dot-com bubble in 1998, we talked to chief executives about technology, from their personal use of the internet to the future of e-commerce; in 2003, we tracked the rise of corporate governance and enterprise risk management in the wake of financial scandal. We’ve also surveyed CEOs in moments of crisis—in 2008, as the global financial system collapsed, and last year, as we approached the one-year mark of the pandemic—to gauge the impact on strategy and growth.

The challenges facing CEOs today are no less daunting. Increasingly, these leaders need to create sustained outcomes for multiple stakeholders whose interests are not always aligned. Yet the imperative to take decisive action has perhaps never been as strong. “Business as usual” isn’t mitigating the climate crisis or bridging the socioeconomic divide. The results of our 25th Annual Global CEO Survey lay these truths bare—and underscore the need for bold leadership to unite us as global citizens and problem solvers.

Breaking the cycle

The opportunity—and the challenge—is clear: progress on society’s toughest problems will be limited without bold action from CEOs stewarding critical corporate resources. At the same time, this year’s CEO Survey underscores just how full the “inboxes” of CEOs have become. Near-term financial imperatives remain mission-critical, even as broader societal needs demand more mindshare.

Against that backdrop, the following five priorities should help CEOs deliver the diverse range of sustained outcomes that stakeholders are increasingly demanding: 

• Resetting the conversation: Boards should be talking with their CEOs, and CEOs with their top teams, about their collective “inbox” problem. Enthusiasm about ESG won’t make near-term financial demands go away. Indeed, in a world of scarce time, attention and corporate resources, framing trade-offs realistically may be the only way to bring investors along and create a prudent strategic agenda, as opposed to a wish list.
• Recalibrating skills: Our survey results point to capability-building priorities related to cybersecurity, the cultivation of trust and the measurement and management of decarbonisation. In addition, the “inbox” problem holds implications for skill-building and role modelling among top management and boards. When leaders are stretching to reimagine their organisation’s place in the world and juggling an ever-broader array of competing priorities, those who have a growth mindset and who demonstrate empathy and a willingness to embrace debate and dissent become more important than ever. 
  
• Reappraising succession: The leadership needed to master today’s tenuous trade-offs is likely to come in all shapes and sizes, with external hires and emerging leaders from diverse talent pools critical to rounding out skill sets and resetting the conversation. Succession planning is an area where leaders and boards can challenge themselves immediately to start creating the future to which they aspire. 
  
• Rethinking incentives: The strong association between incentives, net-zero commitments and other nonfinancial outcomes suggests it’s time for boards and management teams to take a hard look at the fit between the priorities they want their people to drive, the performance management systems they have in place and how they report their progress. 
• Reimagining collaboration: Tackling society’s most urgent challenges won’t be an individual sport. It calls for an unprecedented level of cooperation among business leaders, government officials, policymakers, investors and non-governmental organisations (NGOs). Each brings critical tools to the table and can support and enhance one another’s capabilities. Edelman’s pre-Glasgow Trust Barometer found that no single type of institution is trusted when it comes to climate change action, but together they can create powerful momentum—in the form of regulation driving businesses to take aggressive action, NGOs boosting new government policies and so on. 

Trust runs through many of these priorities, just as it runs through our survey results. To the extent that highly trusted companies are thinking and acting differently, and that those actions could help bridge the gap between society’s expectations and the system in which CEOs are operating, trust may be a meaningful enabler of change. And it’s only through change—bold, innovative and unbounded—that we can secure our collective future.

Excerpt from article originally published by PWC.