The majority of analysts are anticipating a recession, and ESG is one of the top focus areas which CEOs plan to use to mitigate risk and shape progress over the next three years.
The KPMG 2022 CEO Outlook South African edition, which was released in November 2022, reveals that CEOs recognise the importance of ESG initiatives globally, as demand for more robust ESG reporting and transparency grows amongst investors and customers – although ESG has still fallen down the boardroom agenda as a top operational priority for nearly 70% of global executives (58% in 2021).
The latest edition notes that the biggest challenge in delivering ESG strategy over the next three years will be on identifying and measuring agreed metrics. However, 10% of local CEOs have also stated that stakeholder skepticism around greenwashing is their top challenge in communicating ESG performance to stakeholders (compared to 17% globally and up 11% since 2021) and more than one-third of CEOs say ESG performance reporting within their organisation doesn’t have the rigour of financial reporting.
Ignatius Sehoole, CEO at KPMG SA, says, “The importance of ESG initiatives on businesses, especially with regards to improving financial performance, driving growth, and meeting stakeholder expectations cannot be stressed enough.”
He added, “While we know there is a lack of an accepted global framework for measuring and disclosing ESG performance, the KPMG survey revealed that 65% of stakeholders (institutional investors and employees) are demanding greater ESG transparency and reporting, and 60% of CEOs noted that 10% of their revenue would be allocated to invest in programmes to enable organisations to be more sustainable.”
Myriad new investment
Business Leadership South Africa (BLSA) CEO Busisiwe Mavuso added that “there is a myriad of new investment opportunities available in South Africa, such as renewable energy generation and the transmission sector, and of course, electric vehicle manufacturing sector and the generation of green hydrogen is seeing increased interest and growth locally,”
The outlook noted that six out of 10 local executives believe the most important growth objectives over the next three years are organic growth (i.e. innovation, research and development (R&D), capital investments, new products, and recruitment) as well as strategic alliances with third parties.
In addition, 72% of local executives have already taken steps to boost productivity in preparation for anticipated recession, indicating CEOs are cautiously focused on future opportunities during such uncertainty.
Busisiwe added, “There is a myriad of new investment opportunities available in South Africa such as those in the renewable energy generation and transmission sectors as well as in the electric vehicle manufacturing sector and the generation of green hydrogen.”
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