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No turning back: UK CEOs are approaching a purpose tipping point

25th Annual CEO Survey

Commitments to purpose and ESG are on the rise as CEOs make stronger connections to business strategy and growth. But there is still work to do.

PwC’s 25th Annual CEO Survey reveals a growing trend towards more purposeful business practices, including a greater focus on trust, transparency and personal accountability from CEOs on issues such as climate change and inequality.

It is early days for some, and there are challenges to overcome, but there is also confidence among leading CEOs that momentum will grow as more business leaders align environmental, social and governance (ESG) commitments with business strategy, spurred on by the progress of their peers and growing expectations from investors, customers, employees and suppliers.

The importance of purpose

The 25th Annual CEO Survey shows UK CEOs are recognising the growing importance of connecting purpose to business strategy, and having demonstrable ESG credentials to attract the talent, customers and investment they need for growth.

This year’s survey reveals a significant number of CEOs plan to grow their workforce. But many acknowledge the importance of a clear commitment to purpose - showing greater care for their people, their customers, their communities and the environment - if they are to attract the recruits they need. And as the competition for talent heats up, around areas such as technology and digital skills, CEOs recognise they need to be able to offer in-demand talent more than just a well-paid job.

“You can’t have any conversation now without talking about ESG, net zero and equality. I get interviewed about it by new recruits. People expect this. They want to work for companies that are kind, that are giving back, that are sustainable.”

Elona Mortimer-Zhika, CEO of IRIS Software Group

Roland Diggelmann, CEO of Smith+Nephew, adds: “People choose our industry because they want to make a difference. Many have skills that could go into any industry, such as software engineers, but they join us because they believe in making a difference to patients’ lives.”

Similarly, CEOs are confident about economic growth, but are increasingly aware they need to align with the values of more ethically-minded customers, and investors to capitalise on opportunities.

For example, among UKs CEOs who have made a commitment to net zero, 43% cited investor demands and 72% cited customer expectations as being very, or extremely influential, in their decision.

Sarah Moore, Head of Purpose at PwC UK, says: “These trends are only heading in one direction. A clear purpose, backed up with authentic action, makes an organisation more investable, more productive and more attractive to talent and customers. For those organisations already making purposeful commitments, there will be no turning back and others will follow.”

“We are approaching a tipping point. At present, purposeful commitments are an area of differentiation but they are becoming an area of expectation.”

Marco Amitrano, Head of Clients and Markets at PwC UK, discusses key themes from the CEO Survey.

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1:11

Marco Amitrano, Head of Clients and Markets at PwC UK

“We are approaching a tipping point. At present, purposeful commitments are an area of differentiation but they are becoming an area of expectation.”

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Accountability on the rise

The expectation that organisations should be held accountable - on a broader range of issues, to a broader range of stakeholders - is a point emphasised by UK CEOs.

Michael Ryan, CEO of Dalmore Capital, says: “The purpose of a business used to be to generate profits for its shareholders, almost full stop. And if you dared suggest objectives that were not consistent with dividends and profits, you’d be shouted down. But the world has changed. The general view now is that CEOs are accountable to the public.”

Steve Gray, CEO of Nuffield Health, adds: “CEOs have to have 360-degree responsibility, not just to the board, the shareholders and the City analysts. CEOs have a responsibility to everyone and everything that goes on within an organisation. We are just at the start with this trend. It’s going to grow faster and faster.” 

A trend towards greater accountability currently manifests most notably in the number of organisations writing metrics into their corporate strategy on issues such as climate change and equality. However, a vanguard of CEOs are including such metrics in their own bonus and incentive plans, and more are expected to follow.

How UK businesses and CEOs hold themselves accountable

Employee engagement

Included in corporate strategy

69
%
34
%

Linked to CEO bonus and incentive plan

Customer satisfaction

Included in corporate strategy

71
%
31
%

Linked to CEO bonus and incentive plan

Greenhouse gas emissions

Included in corporate strategy

47
%
19
%

Linked to CEO bonus and incentive plan

Gender representation

Included in corporate strategy

51
%
13
%

Linked to CEO bonus and incentive plan

Race and ethnicity representation

Included in corporate strategy

40
%
10
%

Linked to CEO bonus and incentive plan

UK data is based on a survey of 177 UK CEOs conducted 6 October - 12 November 2021.

The overall number of UK CEOs signing up to such personal accountability is low, especially on issues such as workplace inequality and climate change. But as influential stakeholders such as investors seek out such accountability, the trend is likely to gather pace.

Amanda Blanc, CEO of Aviva: says: “Investors expect this kind of accountability. They are asking how our remuneration is tied to ESG targets, the same as they have always asked how our remuneration is tied to profitability.”

Phillippa O’Connor, National Leader, Reward and Employment Practice at PwC UK, agrees this trend will develop quickly, and says larger organisations are already setting the pace.

“Until recently, executive bonuses and incentives tended to be linked solely to financial and strategic performance,” says O’Connor. “But among large and listed companies we’ve seen the connection to ESG targets becoming far more common.”

This is supported by the global survey data which shows large organisations leading the way.

Global CEOs committing to ESG targets in their bonus and incentive plan, by company size

Greenhouse gas emissions

CEOs of the largest organisations by revenue (>$25bn)

33
%
5
%

CEOs of the smallest organisations by revenue (<$100m)

Gender representation

CEOs of the largest organisations by revenue (>$25bn)

28
%
5
%

CEOs of the smallest organisations by revenue (<$100m)

Race and ethnicity representation

CEOs of the largest organisations by revenue (>$25bn)

22
%
4
%

CEOs of the smallest organisations by revenue (<$100m)

Global data is based on a survey of 4,446 CEOs conducted 6 October - 12 November 2021.

This gives O’Connor confidence the trend will gather momentum as more business leaders follow the example of their peers at larger organisations.

“What we’re seeing now, and what will get these numbers moving very quickly upwards, is a wave of CEOs at smaller organisations taking note and following suit,” she says. “CEOs are putting their money where their mouth is on ESG.”

“Organisations must apply rigour to calibrating and setting these targets to ensure year-on-year progress towards greater long-term goals.”

Phillippa O’Connor, National Leader, Reward and Employment at PwC UK, on setting targets for greater accountability.

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1:06

Phillippa O’Connor, National Leader, Reward and Employment

“Organisations must apply rigour to calibrating and setting these targets to ensure year-on-year progress towards greater long-term goals.”

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The journey to net zero

A critical component of any organisation’s purpose and ESG commitments will be the course it sets to net zero, and how it measures and reports its progress.

Keith Anderson, CEO of ScottishPower, says being able to clearly and credibly report on the progress being made is vital.

“We've been very focused on showing what we're doing, how we're doing it, and by when. We've had the Carbon Trust come in to do a massive review of everything we do, from the way we procure goods, to the way we travel, to the way we run our buildings. And we're now looking at measuring our performance in terms of how we decarbonise our supply chain.” 

That ability of businesses to effect change, not only within their own organisation but within their wider sphere of influence, can add significant momentum.

Amanda Blanc, CEO of Aviva, says: “At the beginning of last year we spoke to the top 30 carbon emitters in our equity portfolio and said to them ‘you have three years to sort yourself out and come up with a transition plan, otherwise we will be disinvesting.”

However, despite environmental and business imperatives, UK CEOs are split into three fairly even groups when it comes to net zero commitments.

CEO commitments to net zero

UK
34

have made a commitment

33

are working towards a commitment

31

have not made a commitment

Global
22

have made a commitment

29

are working towards a commitment

44

have not made a commitment

It should be noted that not all commitments are created equally. Among UK CEOs who have made, or are working towards, a commitment on net zero, just over a third (37%) report their commitment is, or will be, aligned to the science-based target of reducing global warming by 1.5°C. While UK CEOs lead their global counterparts when it comes to having a net zero commitment, they lag behind in ensuring the commitments are independently assessed and validated (47% in the UK versus 66% globally, among those with a net zero commitment).

Zubin Randeria, ESG Lead at PwC UK, says: “We all need to work together to fill in any knowledge gaps and ensure all organisations can make credible net zero commitments that are meaningful and measurable. They need to be targets that account for the acceleration in climate tech and energy transition, and targets the CEO today can pass on to future CEOs, knowing it is ambitious but achievable.

“CEOs setting these targets may ultimately not be held accountable, but they have a responsibility to ensure their organisation can report on a clear set of milestones leading up to their net zero target. That’s why we all need to play a role in creating a business culture that encourages openness and collaboration, to ensure we can all see the progress and positive change we need, not just in 2030 or 2050, but every year until then."

“Every decision we make is through the prism of net zero 2050. That is our purpose in life. It filters through the entire company. Everybody understands their part in delivering against that objective.”

Keith Anderson, CEO of ScottishPower

The evolution of trust

Three quarters of CEOs expect to grow their workforce this year, with 29% expecting growth of at least 10%. The need for talent sees CEOs increasingly sensitive to issues which may harm recruitment and retention.

Among UK CEOs who have made a carbon neutral, or net zero commitment, 71% say the decision was significantly influenced by the need to attract and retain talent.

The survey also reveals a significant focus among UK CEOs on building trust and improving communication with their workforce.

David Allen, CEO of Wates Group, says: “The way you shape and attend to the development of your culture is the most powerful thing you can do to improve the performance of your organisation.”

UK CEOs plan to grow workforce numbers - and build trust

75

expect to grow their workforce this year

75

are focused on building greater trust with employees this year

55

say they need to improve transparency on direction and performance

Fiona Camenzuli, New World, New Skills Lead at PwC UK, says: “Trust between employer and employee is more multifaceted and complex than ever. It’s no longer just about honouring contractual obligations on pay and conditions. It’s about whether employees trust a company's efforts around equality, fairness and sustainability. Do employees trust in the culture and values of the organisation? Do they trust changes introduced in response to the pandemic? Do they trust in the strategy and direction of the business?

“CEOs need to lead the way in creating an organisation that listens and responds to the needs of its people and that keeps them engaged and informed through clear, honest and open communication about direction and performance, against both business targets and purposeful commitments.”

Elona Mortimer-Zhika, CEO of IRIS Software Group, agrees that “constant listening and communication matters”.

“Gone are the days of surveying your people once a year. Sometimes it can be pretty ruthless, but if so, then that’s what you need. You want to know the truth. This is the best intelligence you can obtain to run your business as successfully as you can.” 

“We have around 15 million customers in the UK. You cannot have an organisation that doesn’t reflect the diversity of those customers.”

Amanda Blanc, CEO of Aviva

Responsible growth gains momentum

Trust is also critical when it comes to attracting customers and building loyalty.

UK CEOs are showing confidence in the global and UK economies. But to make the most of the opportunities before them, CEOs are aware their business must meet the heightened expectations of customers, not just in terms of product and price but in terms of whether they align with customers’ values.

Growth plans, then, must not be about growth at all costs, but a more careful balancing act focused on responsible growth.

UK CEOs are confident about the economic outlook…

82

believe the global economy will improve over the next year

73

believe the UK economy will improve over the next year

66

are very, or extremely confident about their own revenue growth (next year), compared to 56% globally

…but increasingly believe building trust with customers will help drive growth

89

are focused on building trust with customers/clients over the next year

63

believe customers at least occasionally choose their products because of their company’s values

11

believe customers usually, or almost always, choose them because of their values

Cat McCusker, Responsible Growth Lead at PwC UK, says: “Trust has always been critical but now under pressure on so many fronts. CEOs must think about how everything from their organisation’s environmental impact to its innovation pipeline, workforce practices, pricing, procurement, marketing, sales and service can all affect their reputation. Is the organisation living up to the promises it makes? Is it delivering great experiences, on time, at a fair price? Is it using data responsibly? And are all these elements of trust consistent with each other?”

“This trend of judging organisations against a broader set of standards will only increase, fuelled by customer expectations and more progressive organisations seeing the opportunities presented by responsible growth.”

“Trust is everything. Trust with your customers, your staff, your suppliers and your bankers is key. Unless they trust you, nothing can happen.”

Lord Zameer Choudrey, CEO of Bestway

Challenges to overcome

Standing between CEOs and their goals and opportunities remain some perennial obstacles, and questions about their own agility.

Concern about cyber risk remains high, no doubt heightened by the reliance on digital channels, accelerated by the pandemic. Nearly two thirds (64%) of CEOs who express significant concern believe cyber threats could harm their ability to sell products and services.

For UK CEOs, there is greater concern about macroeconomic volatility impacting their ability to recruit and retain the talent they need. This concern is felt more greatly than their global peers (56% in the UK, versus 45% globally among those expressing significant concern).

UK CEOs concerned about threats to their business

48

are very/extremely concerned about cyber security risk

40

are very/extremely concerned about health risks (48% globally)

41

are very/extremely concerned about macroeconomic volatility

34

are very/extremely concerned about the impact of climate change

22

are very/extremely concerned about geopolitical conflict

Why UK CEOs are concerned about threats

64

of those very/extremely concerned about cyber risks believe they could impact their ability to sell products and services

69

of those very/extremely concerned about health risks fear they will inhibit their ability to recruit and retain talent

56

of those very/extremely concerned about macroeconomic volatility believe it could inhibit their ability to recruit and retain key skills

30

of those very/extremely concerned about climate change believe it will impact their ability to sell products and services (54% globally)

36

of those very/extremely concerned about geopolitical conflict believe it could impact their ability to raise capital

Mohammad Khan, General Insurance Leader at PwC UK, says: “Risk is everywhere and there is currently enhanced uncertainty, around cyber threats, and threats to our health and environment, as well as economic and workforce uncertainty. But just because risk surrounds us, it doesn’t have to limit us.”

“Successful CEOs are still growing and transforming their businesses, by ensuring they have in place the understanding, tools and skills to predict, prepare and respond to the growth opportunities that risks present. By mitigating risks where possible, and anticipating and embracing the remaining risks, CEOs can create lasting value for their organisations."

Dame Carolyn McCall, CEO of ITV, says access to tech talent, exacerbated by issues such as Brexit and an industry-wide skills shortage, is an issue her organisation has had to factor into its digital transformation strategy, mitigating issues through a combination of recruitment and partnership.

“Having sat on the Prime Minister’s Business Council, the digital skills issue was the thing that kept recurring. We talked about it with David Cameron, Theresa May and Boris Johnson. We’ve not cracked it properly yet as a country.”

Dame Carolyn McCall, CEO of ITV

A need for focus and agility

The ability to act swiftly and decisively is more important than ever as CEOs seek to overcome risks, make ESG a strategic priority, deliver transformations and capitalise on opportunity. During a period of such constant change it is also critical to keep people engaged and maintaining a sharp, strategic focus.

We asked CEOs how quickly their organisations can approve and implement initiatives and the number of strategic objectives they commit to, as well as their ability to assess, recognise and make timely changes to projects or businesses and their approach to deals and investments.

UK CEO views on focus and agility

icon

60% say their company has three, or fewer, overarching strategic objectives. 22% say their company has five or more

icon

25% say their company formally assesses major initiatives at least quarterly. 53% do so once a year or less frequently

icon

53% say it takes up to three months to get a major initiative from proposal to approval. 45% say it takes more than four months

icon

53% update the workforce at least quarterly on major initiatives. 17% update the workforce once a year or less frequently

The need to take bolder steps - and even some “leaps of faith” - is highlighted by Steve Gray, CEO of Nuffield Health, who believes there is a clear crossover with purpose-led organisations being more progressive and visionary and better-disposed to making significant changes.

“You’ve got two types of business leader out there,” he says. “Those who lead a business by looking at the future and those who lead a business by looking at the past. You’ve got progressive organisations, and you’ve got incremental organisations. Incremental organisations just keep doing what they’re doing, bound by in-year profitability and seeking incremental growth. And then you’ve got organisations that are really progressive, willing to take bolder steps and a leap of faith. They are usually purpose-led organisations, looking at how the world is changing, what they do and where they make their investments.”

What UK CEOs are choosing to stop, start, or continue

81

report stopping low-potential or nonaligned projects at least once per year

49

say they scale up a high-performing business at least once per year

28

invest in new projects on at least a quarterly basis

28

acquire a business at least once per year

14

divest a business at least once per year

Ken Walsh, Deals Partner at PwC, says: “In order to be as attractive as possible to investors, customers and employees, it’s vital that every part of any business is able to deliver long-term value consistent with the purpose, culture and strategy of the organisation. Short-term gains and quick wins will always attract some speculative investors, but more and more we are working with organisations to help them establish long-term, sustained outcomes. That means backing projects and investing in businesses that are consistent with where the organisation sees itself in the years to come, while divesting businesses, exiting markets, or shuttering projects that are inconsistent with that vision.”

“We are all living through a period of history that has focused minds on our people, our communities and the environment. CEOs now need to lead the way and show how that focus can be applied to create greater value for business and society.”

Kevin Ellis, Chairman and Senior Partner at PwC UK, on how CEOs can build on ESG trends to deliver sustained outcomes.

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1:20

Kevin Ellis, Chairman and Senior Partner at PwC UK

“We are all living through a period of history that has focused minds on our people, our communities and the environment. CEOs now need to lead the way and show how that focus can be applied to create greater value for business and society.”

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Better solved together: How CEOs can find inspiration in unexpected places

As CEOs address the issues raised in this year’s survey, we’ve explored the lessons they can learn from the worlds of entertainment, sport and even space exploration. Watch our video series to find out more.

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Marco Amitrano

Marco Amitrano

Head of Clients and Markets, PwC United Kingdom

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