EY Survey: Are CEOs Making Sustainability their Priority?

CEOs are pushing sustainability and net zero up their list of priorities for the coming three years, according to EY’s latest CEO Outlook Pulse report.

The survey of 1,200 global executives and 300 institutional investors, which provides insights on boardroom agenda priorities, says the number of CEOs targeting net zero efforts has risen year-on-year.

But the same cannot be said for institutional investors, with 35% saying sustainability is a lower priority for their portfolios than it was 12 months ago.

It is still mainly about the money

The report finds that CEOs are “feeling more hopeful about their immediate prospects and the actions they need to take now to create capital for investment in future growth”.

Sixty percent of the CEOs surveyed say they are more optimistic about their companies’ revenue growth, with 65% feeling more positive about their business’s profitability.

But in a challenging market, it says there remains a focus on short-term returns.

Respondents say that longer-term ambitions around decarbonisation and the creation of new revenue streams could be attained faster by engaging more effectively with institutional investors and government.

What about sustainability?

The report says that, looking ahead to the next three years, CEOs are “increasingly prioritising decarbonising their business models and operations to achieve net zero goals”.

Delivering on broader societal demand to accelerate their sustainability journey is a priority for more than three-quarters (77%) surveyed.

At the same time, 54% see sustainability issues as a higher priority than 12 months ago.

But 23% of CEOs are relegating sustainability, with 18% of those reporting they are deprioritising due to the financial circumstances associated with achieving net zero goals.

What does it mean?

Andrea Guerzoni, EY Global Vice Chair – Strategy and Transactions, explains that the misalignment in priorities between short-term financial returns at the expense of achieving sustainability targets more swiftly may be “shortsighted”.

He says: “Although it’s reassuring to see that CEOs remain positive about their business outlook with many remaining committed to accelerating or delivering on their decarbonisation targets, the fact that nearly one in four CEOs are moving sustainability down their business agenda is disappointing for those who look to companies to set the tone of this topic.

“Achieving sustainability targets can be challenging, particularly in a difficult, cost-focused market, but the thrust toward a sustainable future is not just a financial and business imperative but a shared commitment across the corporate world.”

Technology and AI are top strategic priorities

Investing in technology, including AI, to improve growth and productivity, is a top priority for nearly half (47%) of CEOs over the next 12 months.

Enhancing data management and cybersecurity (45%) and managing end-to-end costs in every aspect of their business (38%) also remain as important strategic priorities.

Andrea says: “Increased investment in emerging technologies is hardly surprising given the rapid growth of AI among many industries, combined with heightened cyber risk concerns and an uncertain economic landscape.

“CEOs are balancing taking defensive action on short-term pressures with longer-term imperatives.

He adds: “By far the most compelling immediate actions are around technology to improve growth and productivity, as well as boosting data management and cybersecurity to protect themselves from cyber threats.

“There remains a keen focus on managing end-to-end business costs, which has become a critical focus of investors, even as economic conditions, including inflation and input costs have tempered.”

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