Top CEOs are backing their businesses to prosper in the face of declining confidence in the global economy, a KPMG survey of more than 1,300 corporate leaders from across the world finds.
The research reveals that 92% of CEOs plan to boost employee headcount over the next three years, the highest proportion since 2020. This hiring optimism persists despite 72% of CEOs feeling increased pressure to ensure their businesses’ long-term prosperity.
Dermot Dempsey (pictured), Territory Lead Partner at KPMG in the Crown Dependencies said: “Over the last ten years, CEOs have sought to create confidence in a number of ways, notably increasing investment in innovation and tech, placing people at the heart of growth strategies, and renewing their commitment to ESG and sustainability as a source of value creation.
“Top threats to growth have shifted, with CEO’s citing supply chain challenges and operational issues ahead of cyber security and last year’s number one threat – geopolitics and political uncertainty.”
Investing in innovation: AI front and centre as the urgency around adoption accelerates
Behind economic uncertainty (53 percent), the race to embrace artificial intelligence (50 percent) is the issue most top of mind for CEOs today. It is clear that most leaders are reaffirming their commitment to increase investment in innovation and technology, including AI, as a driver of growth.
Indeed, 64 percent identified AI as their top investment priority in 2024 – though most are looking at it as an investment that will pay off in the medium term, with 63 percent expecting to see a return on their investments within the next three to five years.
Marco Vassallo, Partner, Digital Solutions, KPMG Islands Group said: “AI is poised to revolutionise island communities by addressing their unique challenges and unlocking new opportunities.
“AI-powered predictive analytics can help island businesses optimise their operations, such as supply chain management and inventory control. Additionally, AI-driven personalisation can enhance customer experiences, leading to increased satisfaction and loyalty.
“By leveraging AI, island communities can improve their economic competitiveness, attract investment, and create a more sustainable future. AI-driven training and upskilling programmes can equip the workforce with the necessary skills to thrive in the digital age, addressing skill shortages and future-proofing jobs.
“This is crucial for addressing the unique challenges faced by island-based operators with limited local markets and resources, enabling them to tap into global markets and compete effectively by increasing efficiency and productivity through automation and optimisation.
“To fully realise the benefits of AI, it is essential for island communities to conduct thorough AI readiness assessments. These assessments will evaluate the maturity of the organisation or sector with respect to AI, identify potential challenges, and develop a roadmap for successful AI adoption. By taking a proactive approach to AI readiness, island communities can ensure that they are well-positioned to harness the power of AI and drive sustainable growth.”
Despite this, CEOs remain aware of the risks that the rapid push to implement new technology presents.
Well over half (61 percent) of CEOs cited ethical challenges as some of the most difficult to address when implementing AI within their business, while a lack of regulation (50 percent) and technical skills and capabilities (48 percent) were other areas of concern.
Finally, while 76 percent of CEOs believe that AI will not fundamentally impact the number of jobs in their organisation, only 38 percent felt that their employees have the right skills to fully leverage the benefits of AI. 58 percent agree that the integration of generative AI has made them rethink the skills required for entry-level roles.
Committing to ESG: navigating increasing politicisation in some countries
The past decade has also seen CEOs renewing their commitment to ESG and sustainability as a source of value creation.
In 2015, CEOs ranked environmental risk as their least concerning priority risk; fast forward to 2024 and almost a quarter (24 percent) acknowledged that failing to meet ESG expectations could give their competitors an edge.
Arnaud van Dijk, Head of ESG, KPMG Islands Group commented: “In our islands, we have recently seen firsthand the encouraging shift of many CEOs prioritising sustainability, with most planning to formalise their ESG strategies within the next two years.
“At the same time, many corporates in our region indicate that they are grappling with meeting the sustainability reporting requirements. Reporting in a meaningful way to stakeholders is taking up significant resources.
“The exciting opportunity now is unlocking the full potential of ESG – turning these strategies into real value that drives both meaningful impact and long-term business success.”
Despite the increasing politicisation of the ESG agenda in some countries, leaders are particularly sensitive to the impact ESG issues can have on trust and the reputation of their organisation.
Three quarters (76 percent) of CEOs said they would be willing to divest a profitable part of the business that was damaging reputation, while 68 percent of CEOs say they would take a stance on a politically or socially contentious issue, even if the Board raised concerns with them doing so.
In response to growing stakeholder and external pressures, CEOs also appear to be shifting in how they communicate their ESG efforts. In this year’s global survey, 69 percent of CEOs revealed that while they’ve retained the same climate related strategies over the last 12 months, they’ve adapted the language and terminology they use to meet changing stakeholder needs.
Tellingly, as we head into 2025, 30 percent say the greatest barrier to achieving their climate ambitions is the complexity presented by the decarbonisation of their supply chain – an issue further compounded by current geopolitical tensions around the world and activities impacting major global trade routes.
