CEOs shift focus to sustainability and digital transformation: EY survey

For chief executives of companies in India, the disruption caused by the Covid-19 pandemic has triggered a focus shift towards sustainability and digital transformation, shows a new survey by consulting firm EY.

As many as 50 per cent of respondents said that the pandemic had caused short-term disruption to their industry, while a sizeable 25 per cent admitted that Covid-19 had fundamentally reshaped their industry for the worse, according to the EY CEO Survey 2022.

As businesses continue to grapple with a tumultuous period marked by increased geopolitical issues, rising inflation, and the ensuing impact on profitability, the EY survey reflects the change in capital strategy of businesses in India.

To get back on track, roughly 49 per cent of CEOs plan to use technology and automation to improve scalability and replace higher-cost labour roles, as well as digital platforms to increase customer interactions.

The CEOs also recognise that data and innovation are critical for unlocking new paths to growth. Nearly 20 per cent, or one in five CEOs, expects to use data more effectively to innovate new products and services.

“Businesses are betting big on cloud, artificial intelligence, analytics, et al to accelerate growth. To keep pace with market disruption and generate long-term value, CEOs must therefore commit their organisations to prioritising high-value investments in tech,” said Mahesh Makhija, technology consulting leader at EY India.

The survey also shows that environmental, social and governance (ESG) factors will increasingly impact decision-making.

More than three-quarters (78 per cent) of CEOs identify ESG factors as extremely or more important when it comes to strategic decision-making. At an individual level, 36 per cent cite improving environmental impacts on their company’s activities as their top objective in the year ahead.

Business leaders have also been forced to realign their approach to cater to customers, which makes mergers and acquisitions (M&A) a key strategy element for business transformation.

“Whether it’s fast-tracking digital transformation across an organisation, especially to enhance the customer interface and experience, or strengthening a company’s ESG performance, M&A continues to be a fundamental tool for driving strategic growth objectives,” said Ajay Arora, EY India mergers and acquisitions leader.

At least 22 per cent of Indian CEOs said they will opt for M&A to acquire technology, talent, new production capabilities or innovative start-ups — significantly higher than their global counterparts at 14 per cent.

Meanwhile, 11 per cent of the respondents plan to utilise their M&A strategy to improve their sustainable footprint because of changing customer behaviour.

“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,” said Rajiv Memani, chairman, EY India.