German CEOs are increasingly pessimistic about their companies' growth prospects - but AI & ESG promise growth & returns in the medium term

• CEOs are increasingly downgrading their own company's growth expectations, but there are no plans to cut jobs
• Generative AI is seen as the most important growth driver, but implementation hurdles remain
• Generative AI is seen as the most important growth driver, ESG remains an important focus for CEOs, executives expect a return on investment in this area in the medium term
• Significantly more CEOs want to turn their backs on working from home: 88 per cent expect to return to the office in the next three years (previous year: 64 per cent)but implementation hurdles remain

The mood among CEOs of German companies regarding the economic situation remains tense: Only a good three out of four (77 per cent) company leaders still have confidence in their company's growth prospects over the next three years - compared to 80 per cent in 2023 and even 90 per cent in 2022. 74 per cent are feeling increasing pressure to secure the long-term growth of their companies.

Despite this outlook, the majority of companies are not planning any job cuts. On the contrary: almost all top managers expect the number of employees at their company to increase over the next three years (93 per cent compared to 84 per cent in the previous year). In the opinion of the vast majority of CEOs, the increased use of generative AI will not change this. Only 1 per cent believe that the technology will cost more jobs than it will create, 23 per cent even expect AI to create more jobs and 76 per cent do not expect any major changes.

These are the findings of this year's "KPMG CEO Outlook", in which over 1,300 CEOs worldwide and over 120 CEOs of German companies took part.

54 per cent of German CEOs see keeping pace with technology as the biggest challenge - ahead of the uncertain economic environment (52 per cent) and dealing with geopolitical complexity (39 per cent).

(39 per cent). This year's "KPMG CEO Outlook" shows that CEOs of German companies are primarily focussing on generative AI and by no means expect the AI boom to come to an end. Company leaders consider the successful implementation of generative AI to be the most important driver of growth (16%), followed by further digitalisation of the business (15%). 58 per cent consequently prioritise generative AI as a top investment, even in a difficult environment. This is accompanied by expected returns: For example, 26 per cent of CEOs hope for a corresponding return on investment in one to three years, 58 per cent in three to five years.

However, top managers also see hurdles to implementation. Only 39% state that their company already has the necessary database, while only 38% have the right skills within the organisation. 66 per cent of them point to the ethically correct use of AI as one of the biggest challenges, and 61 per cent of CEOs worldwide see it that way.

The topic of ESG also remains in the focus of German CEOs. 75 per cent state that they have already fully integrated ESG into their business in order to create additional value. Although the majority do not expect a short-term return on investment, 76 per cent assume that their ESG investments will pay off in the medium to long term - in three to seven years. A third of CEOs see the greatest impact of their ESG strategy on their customer relationships and reputation, around a fifth on their talent acquisition and 13 per cent on their financial performance.

When it comes to sustainability reporting, most managers in Germany consider themselves to be well equipped: 80 per cent of CEOs state that they have the necessary skills and capacities to meet standards and absorb the additional workload.

Another finding of the "CEO Outlook": German top executives in particular are unimpressed by arguments in favour of working from home or a hybrid model. At 88 per cent, the vast majority expect their employees to return to the office completely in the next three years. This expectation has therefore risen significantly compared to the previous year (68 per cent) and is also higher than the global figure of 83 per cent of CEOs surveyed. German top managers can imagine incentivising employees to return to the office: 92% want to reward employees with attractive tasks, salary increases or promotions.

For the "KPMG CEO Outlook 2024", 1,325 CEOs of large companies were interviewed worldwide and across all industries between 25 July and 29 August 2024. The participants come from the markets of Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the UK and the USA. The companies of all CEOs surveyed have annual revenues of more than USD 500 million and are part of eleven key industries (asset management, automotive, banking, insurance, consumer and retail, energy, infrastructure, life sciences, manufacturing, technology and telecommunications).

The 2024 edition is the tenth edition of the "KPMG CEO Outlook".

Clemens Reisbeck

Deputy Head Corporate Communications
KPMG AG Wirtschaftsprüfungsgesellschaft

T +49 89 9282 1722
creisbeck@kpmg.com