Executives around the world are embracing a larger responsibility beyond profitNew research from Deloitte reveals that stakeholder interests, those of consumers, employees, and broader society, increasingly influence business decisions.
DAVOS, Switzerland, Jan. 20, 2020 /PRNewswire/ — The world’s business leaders are increasingly embracing a new form of capitalism, moving from one focused primarily on shareholder value to one focused on serving the broader world, as the Fourth Industrial Revolution (also known as Industry 4.0) rewrites the role of business in society. Released today, Deloitte’s third annual Readiness Report, “The Fourth Industrial Revolution: At the intersection of readiness and responsibility,” identifies an evolving form of capitalism in which business leaders and organizations are starting to prioritize their responsibilities to societal stakeholders alongside profitability.
The survey of more than 2,000 C-suite executives across 19 countries affirms recent statements issued by the Business Roundtable and World Economic Forum, both of which stress that business should serve customers, employees, suppliers, and communities, in addition to shareholders.
The survey found evidence that most businesses are striving to find a balance between purpose and profit; nearly six in 10 executives said increasing their companies’ positive impact on society was among their top-five desired outcomes for Industry 4.0. By comparison, two years ago, just 35 percent of CXOs believed that the leading organizations of the future needed to spend more time preparing for how new solutions will impact society. Executives’ growing attention to purpose may largely be attributed to increased pressure from internal and external stakeholders. After “generate revenue,” the top two reasons executives claim they focus on societal issues are “external stakeholders’ priority” (40 percent) and “employee pressure” (20 percent).
“We’re seeing a significant shift in executive outlook as they accept the realities of Industry 4.0,” said Punit Renjen, Deloitte Global CEO. “We’re in a new era where shifting societal attitudes have made it an imperative for businesses to place societal responsibility at the heart of their strategies. Business readiness now demands leaders understand this expanded responsibility and deliver solutions not just for business growth, but also for societal progression.”
As companies face these new realities, leaders are re-evaluating their approaches to four key areas critical to Industry 4.0: strategy, societal impact, talent, and technology. Below are some of the report’s major findings and insights.
Heightened concern and focus on addressing climate change
In a notable contrast from two years ago, the issues of climate change and environmental sustainability have risen in importance for executives. Almost 90 percent agreed the impacts of climate change will negatively affect their organizations and 59 percent claimed to have internal sustainability initiatives in place—from reducing travel to eliminating plastics, and more. From a broader societal perspective, 48 percent believe tackling climate change is a top responsibility for the current generation of leaders, and 54 percent said they are focused on and/or have external societal programs in place to address it. Two years ago, only 10 percent of executives believed their companies could influence environmental sustainability to a significant degree.
“With an increasing number of catastrophic, climate-related events affecting populations and geographies, we’re seeing business leaders increasing their focus and attention on climate and environmental sustainability,” said Sharon Thorne, Deloitte Global Board Chair. “Executives are beginning to acknowledge the business imperative of climate change. And, they are beginning to act as they feel mounting pressure from stakeholders and threats to their own business.”
Executives double down on training and development
Preparing workers to meet the demands of Industry 4.0 continues to be a fundamental business challenge, and leaders lack confidence in how their organizations are faring. Only 10 percent of executives said they have made a great deal of progress in understanding what skills will be needed in the future, and only one-fifth completely agreed their organizations are ready.
In response, executives are focusing energy and resources on training talent, and they increasingly consider workforce development their responsibility. Two years ago, only 12 percent of respondents said their organizations could influence education, training, and lifelong learning for their employees to a significant degree. Now, three-quarters of leaders said training and employee development are the Industry 4.0 priorities in which they will be investing most. Because digital technologies will accelerate the changing nature of work, more than 80 percent of CXOs said they either have created or are creating a corporate culture of lifelong learning, with another 17 percent planning to do so.
“The companies that will succeed in the era of Industry 4.0 are the ones that understand the importance of creating an agile work environment and a modernized workplace culture in which everyone can thrive, be themselves, and balance successful careers alongside life outside work,” said Michele Parmelee, Deloitte Global Chief People and Purpose Officer. “To attract top talent, including younger workers who are looking for continuous development opportunities, leaders must support a culture of lifelong learning and shift from hiring skill sets to hiring those with nimble and inquisitive mindsets.”
Leaders still struggle to overcome strategic “short termism”
The fast pace of disruption in Industry 4.0 makes it critical for organizations to maintain holistic, integrated strategies and seek long-term growth opportunities. However, the survey suggests leaders have a long way to go. Two-thirds said they have no formal strategy to address Industry 4.0, and only 10 percent overall said they have comprehensive strategies that integrate a focus on Industry 4.0 throughout their organizations.
That may be short-sighted because the survey data suggests that businesses with comprehensive Industry 4.0 strategies believe they are far more successful across multiple dimensions, including measures related to financial performance, societal impact, talent, and technology investment. For example, around 90 percent of those with comprehensive strategies generated 5 percent annual growth in the past year; in comparison, only 72 percent of organizations who had ad-hoc or no strategies, or were just beginning to develop broader strategies, could claim at least 5 percent growth.
Moreover, those with comprehensive strategies are more confident about their current abilities to lead and their workforces’ preparedness for the future. For example, nearly three quarters of CXOs who said they have holistic strategies for integrating Industry 4.0 technologies also said they feel ready to lead their organizations in capitalizing on the opportunities associated with Industry 4.0. Only 27 percent of those with no strategies or ad-hoc approaches expressed the same confidence. These results indicate Industry 4.0 strategies and investments promote both near-term profitability while preparing companies for future uncertainties.
A retreat from disruption highlights importance of innovation
Industry 4.0 technologies are capable of radically altering entire industries, but executives are not fully embracing a disruptive mindset. Only 17 percent of executives said making effective Industry 4.0 technology investments was an organizational priority, ranking lowest among 12 other priorities.
While they often see the value of these technologies—for example, CXOs believe the internet of things and artificial intelligence will have the most profound impacts on their organizations—only 5 percent of leaders have made progress implementing technology in a connected, integrated way across their organizations.
Given organizations’ increased focus on positive societal impact, it might follow that executives would explore how Industry 4.0 technologies could help propel these initiatives forward. However, few executives seem to recognize or embrace the potential of Industry 4.0 technologies to advance societal and environmental initiatives; only one in five leaders said they are prioritizing investing in advanced technologies that have a positive societal impact.
For more information and to view the full results of Deloitte’s 2020 Readiness Report, click here www.deloitte.com/insights/4IR.
The Wall Street Journal and Deloitte will host a breakfast panel on this topic at the World Economic Forum 2020 on Wednesday 22 January, 07:00-07:45 CET.
- WHAT: Dow Jones CEO William Lewis and Deloitte Global CEO Punit Renjen will host a panel discussion focused on the findings from Deloitte’s 2020 Industry 4.0 Readiness Report.
- WHERE: For those on site, the panel will take place at the Journal House in the Hotel Belvedere.
- LIVESTREAM: The panel will also be livestreamed on Facebook (www.facebook.com/deloitte) and Twitter (www.twitter.com/deloitte).