Redefining Business Success in a Changing World

Are you familiar with the phrase "business as usual"? A quick online search would likely provide explanations describing a normal or ordinary approach to conducting business operations. Interestingly, this phrase typically implies a continuation of established practices and strategies, even when faced with unexpected circumstances or emerging challenges.

Given the rapidly evolving world that businesses now operate in, it would be interesting to understand what is considered to be the new ‘normal’ or ‘ordinary’, as the traditional ways of doing business are no longer sufficient to ensure the success and sustainability of companies.

Among the key stakeholders playing a crucial role in businesses' growth and success are investors. Therefore, for the third consecutive year, the PwC Global Investor Survey was conducted in 2023, surveying investors and analysts across various geographies. The survey aimed to gain insights into the factors they believe most significantly impact the companies they invest in. Three main themes were identified –  prioritizing new and emerging technologies, embedding sustainability to drive value and addressing the reporting trust deficit.

Investors communicated that they want clearer and more consistent information on the material issues facing companies. What were some of these key issues that investors think South African companies are exposed to and should be focusing on? Last year's survey revealed that investors considered inflation, macroeconomic volatility, geopolitical conflicts, health risks, and social inequality as the top five threats exposing companies to potential risks. A year later, investors' perspectives on these critical issues have remained largely unchanged, indicating a sustained concern about the impact of these threats on the companies they invest in.

The January 2024 PwC SA Economic Outlook explained that there are a number of South Africans without access to universal health coverage, and was estimated to have increased by more than a million since 2017. South Africans believe that employers are not doing enough to support access to healthcare. It is therefore no surprise that investors continue to view health risks and social inequality as a key risk facing companies (see graph below).

There is, however, a new threat that has edged its way into the top 5 based on this year’s survey results. Yes, you’ve probably guessed it. The threat is climate change. Given the heightened focus on the climate crisis as well as the accelerated pace at which the sustainability reporting space has been evolving, it is no surprise that climate-related matters are also on the minds of investors both in South Africa and globally. 

Question: In the next 12 months, how exposed do you believe the companies you invest in or cover, in general, will be to the following key threats?

A vast  84% of investors believe that climate change is one of the factors that can drive value for the companies that they invest in over the next 3 years.

Question: To what extent will the following factors drive changes to the way that the companies you invest in or cover create, deliver and capture value in the next three years?

Investors are eager to understand how companies embed climate change into their strategic decision-making. This has a direct link to how investors make their investment decisions, as three-quarters of respondents said that how companies manage sustainability-related risks and opportunities is an important factor in their investment decision-making. 

Question: In thinking about the companies you invest in or cover, please indicate how much you agree or disagree with the following statements

While the survey results offer valuable insights from an investor's perspective, a pertinent question arises: Do the views and concerns of the C-suite executives align with the sentiments expressed by the South African investor community? It is crucial to explore whether corporate leaders share the same priorities and assessments of the key threats and material issues impacting their companies as perceived by investors. PwC’s 26th Annual Global CEO Survey has indicated that companies across Sub-Saharan Africa are taking action on climate and social risk issues. The survey revealed that climate change is one of the top 2 items that CEO’s expect pressure from over the next 3 years. As CEOs establish priorities, many are seeing climate change as an industry disruptor containing distinct opportunities in addition to risks. Nearly one-third expect climate change to alter the way they create, deliver and capture value over the next 3 years. The other focus area for CEOs which is compelling them to adapt is technological disruption.  

It is evident that the increasing prominence of environmental, social, and technological matters is helping companies realize that value and success can no longer be defined solely by financial metrics. With sustainability initiatives, artificial intelligence, and emerging technologies becoming areas of prime investor interest and considered critical to long-term value creation, it becomes apparent that there is no longer anything "usual" about conducting "business as usual."

Companies that fail to adapt and incorporate these crucial factors into their strategies and operations risk falling behind in an ever-evolving business landscape shaped by pressing global challenges. Embracing innovation, sustainable practices, and a forward-looking mindset is no longer an option but a necessity for businesses to thrive and remain competitive in the face of these transformative forces.

Investors and stakeholders are increasingly demanding transparency, accountability, and tangible actions from companies to address material issues that extend beyond traditional financial considerations. The survey results highlight investors' growing concerns about the potential impacts of macroeconomic volatility, geopolitical conflicts, health risks, and social inequality on the companies they invest in, underscoring the need for businesses to proactively manage and mitigate these risks.

As the global landscape continues to evolve at an unprecedented pace, companies must be agile, adaptable, and willing to challenge conventional thinking to redefine what constitutes "business as usual." Those that successfully integrate environmental, social, and technological imperatives into their core strategies and operations will be better positioned to create long-term value, maintain investor confidence, and navigate the complexities of a rapidly changing world.