KPMG 2024 CEO Outlook

The economic landscape has evolved significantly over the past decade. In 2021, supply chain disruptions, largely driven by the COVID-19 pandemic, were viewed as a major threat to business growth. Remarkably, three years later, supply chain challenges remain at the forefront of CEOs’ concerns. This year's CEO Outlook survey shows a shift in perceived threats to growth, with supply chain challenges and operational issues now coming in above cybersecurity and even last year’s top concern—geopolitics and political uncertainty.

Despite these evolving challenges, nearly three-quarters (72 percent) of CEOs remain confident in the economy’s growth prospects over the next three years. This optimism is reflected in future hiring plans, with 92 percent of CEOs intending to increase employee headcount—the highest level recorded since 2020.

Data over the past decade highlights how CEOs are investing for the future of their businesses. Key focus areas include advancing digitization and connectivity (18 percent), enhancing their employee value proposition (EVP) to attract and retain talent (15 percent), understanding and implementing generative AI across the business and upskilling their workforce (13 percent), and execution of ESG initiatives (13 percent). This strategic approach ensures the long-term growth of their organizations, underscoring CEOs’ commitment to fostering growth and adaptability in an ever-changing business environment.

CEOs see AI as a critical driver of growth, with 63% expecting returns on their AI investments within the next three to five years. With technology, most notably generative AI, becoming increasingly integrated into businesses, it is imperative for CEOs not only to understand the technology but also to navigate its pitfalls, such as ethical considerations and skill shortages.

Despite public concern around the risk of redundancies, CEOs remain confident that it will not have a detrimental impact on the workforce, with over three quarters (76 percent) of CEOs anticipating AI will not fundamentally reduce the number of jobs within their organizations over the next three years.

However, they are aware of the risks tied to its rapid adoption. Over half (61%) of CEOs cite ethical concerns as a significant hurdle, while 50% are concerned with the lack of regulation and 48% on the availability of technical capabilities within their organizations. Furthermore, only 38% of CEOs believe their workforce currently possesses the necessary skills to fully leverage AI’s benefits, prompting many to rethink talent strategies.

The COVID-19 pandemic, which began in 2020, mandated work-from-home initiatives, reshaping how organizations operate. While it accelerated the shift to remote and hybrid working policies, this year’s survey found that CEOs are reconsidering pre-pandemic work models. More than four-fifths (83 percent) expect a full return to the office within the next three years, compared to 64 percent in 2023. Furthermore, 87 percent of CEOs stated they are likely to reward employees who make the effort to come into the office with more favorable assignments, pay rises or promotions.

Almost a third (31 percent) are concerned about labor market shifts, particularly the number of impending retirements and the shortage of skilled workers to replace them. In response to this perceived talent shortage, 80 percent of CEOs agree that organizations should invest in skills development and lifelong learning within local communities to secure future talent.

This year’s survey has revealed a significant progress in the business community’s ESG and sustainability efforts over the past decade. In 2015, CEOs ranked environmental risk as their least concerning priority risk; fast-forward to 2024 and nearly a quarter (24 percent) now recognize that the principal downside of failing to meet ESG expectations would be giving their competitors an edge.

It’s clear that leaders are willing to take action when it comes to ESG, with three quarters (76 percent) of CEOs indicate a willingness to divest profitable segments of their business if they are seen as damaging to the company's reputation. Moreover, a majority (68 percent) indicate that they would take a stance on a politically or socially contentious issue, even if the Board raised concerns with them doing so.

Generational differences are also emerging, with 43 percent of younger leaders (aged 40 to 49) feeling confident about handling ESG scrutiny, compared to only 30 percent of those aged 60 to 69. In response to growing stakeholder and external pressures, CEOs are adapting how they communicate their ESG efforts. While 69 percent have retained the same climate-related strategies over the last 12 months, they have adjusted their language and terminology to meet evolving stakeholder expectations.

Finally, 30 percent of leaders cite the complexity of decarbonizing their supply chains as the greatest barrier to achieving their climate goals, a challenge further complicated by geopolitical tensions and disruptions to major global trade routes. As we head into 2025, it will be interesting to see how this impacts opinions and organizations overall, as ESG reporting begins to take hold across the globe.