17% Indian CEOs claim businesses are facing pressure to become sustainable: EY report

After dealing with the COVID-19 pandemic-induced disruptions, businesses are now grappling with increasing geopolitical issues, rising inflation and higher commodity prices which are impacting their profitability. For chief executive officers (CEOs) in India, this disruption has triggered a shift towards sustainability and digital transformation reflecting the change in businesses’ capital strategy, reveals the consulting firm EY’s CEO Survey 2022.

The survey also highlights that the ongoing geopolitical tensions are triggering the Indian CEOs to take proactive measures to readjust their supply chains, with 80 per cent of them adjusting their supply chain to manage geopolitical risks, and reduce logistic costs and uncertainty. The survey also highlights that almost 78 per cent CEOs identify environmental, social, and governance (ESG) factors at par with revenue growth and extremely important to strategic decision making.

Rajiv Memani, Chairman, EY India, said, “There is no doubt that Indian CEOs are leading from the front to combat the challenges emanating from the pandemic and geopolitical tensions. More than ever, CEOs are looking at how these interconnected issues may impact their growth agendas and are building agility and the ability to pivot quickly as circumstances demand into their overall corporate strategy. They are increasingly looking at M&As as a lever for accelerating business transformation and long-term value creation.”

The necessity to innovate

As companies witness the continuous rise in input prices, automation and technology offer the CEOs to drive transformation in their organisation and pivot employees to higher-value activities. In addition to this, a severe push towards digitisation has also led companies to upskill their existing workforce.

According to the survey, almost 50 per cent of the respondents expect to improve business profit margins through digital and technological interventions. It shows that 43 per cent are using data to develop new products and services along with developing delivery systems and channels for interacting with customers.

Sustainability is the present and the future

With climate change becoming a big challenge and its consequences starting to show not only in terms of natural calamities but also in the customers’ preference, 17 per cent of CEOs claim that their businesses are facing increasing pressure to become sustainable.

As per the survey, 96 per cent of respondents are actively considering sustainability as a driving factor for their mergers and acquisitions (M&A) agenda, and are creating key performance indicators for long-term value creation, acquiring talent and technology.

Almost 90 per cent of CEOs also consider sustainability as the primary driver for their businesses’ long-term strategic growth and competitive advantage.

Mergers and acquisitions key to business transformation

Nearly 22 per cent of CEOs in India claim that they will undertake M&A for the acquisition of technology, talent, new production capabilities or innovative start-ups. On the other hand, only 14 per cent of their global counterparts consider the same strategy.

The survey also highlights that 22 per cent of the respondents have planned bolt-on acquisitions/consolidations shortly to increase market share and 11 per cent of CEOs plan to utilise their M&A strategy to improve their sustainable footprint due to the changing customer behaviour.

Methodology

EY claims that this survey gathered data from a panel of more than 2,000 CEOs in 53 countries and across 14 sectors — financial services, telecoms, consumer products and retail, technology, media and entertainment, life sciences, hospital and health care providers, automotive and transportation, oil and gas, power and utilities, mining and metals, advanced manufacturing, and real estate, hospitality, and construction.