Reimagining the outcomes that matter

25th Annual Global CEO Survey - Malaysia

January 2022

Introduction

As we enter year three of the pandemic, the global economy has rebounded from the depths of mid-2020. While recovery has been met with optimism, new, highly transmissible variants such as the Omicron, associated supply chain disruptions and uneven vaccination rollouts continue to present challenges.

Against this backdrop, 4,446 CEOs worldwide, including 1,618 CEOs in Asia Pacific, shared their insights for our flagship 25th Annual Global CEO Survey. Local respondents include those from government-linked companies, public-listed companies and growing private businesses.

Conducted in October and November 2021, the survey opened a unique window for CEOs to share their thoughts on their growth prospects and emerging issues such as decarbonisation. During this time, different parts of Malaysia had entered either Phase 3 or 4 of the National Recovery Plan, a 4-phase exit strategy from the COVID-19 crisis. This was marked by a full opening of all sectors of the economy, and a gradual resumption of social activities.

Near-term optimism

CEOs in Malaysia are very optimistic about their near-term economic prospects

Within the Asia Pacific region, 76% of chief executives said they expect global economic growth to improve during the year ahead, the highest figure on record since 2012.

While relative levels of optimism vary across Asia Pacific territories, Malaysia CEOs are among the most positive in the region, with 92% (vs 71% last year) showing confidence in global economic growth potential. Malaysia comes in closely after India (94%), with Singapore just behind Malaysia (91%).

This relatively positive outlook reflects events both locally and globally that underwrite and ‘buffer’ some COVID-19 impacts — surging global demand for Asian manufacturing and exports from Europe and the US — as well as the momentum around vaccination rollout in many countries and territories. In Malaysia, vaccination levels reached >90% of the adult population in mid-October, after an intensive vaccination programme.

Malaysia CEOs are also seeing increased opportunities in Singapore this year. This view is reciprocated by Singapore CEOs who have also found an increased importance in Malaysia, ranking fourth in their top 5 list of priority economies (up from sixth place last year).

Q. How do you believe global economic growth (i.e., gross domestic product) will change, if at all, over the next 12 months?

^{Source: PwC 25th Annual Global CEO Survey}

Threats to the top line

Malaysia CEOs rank macroeconomic volatility as the top threat to growth, with health risks and cyber risks close behind.

Compared to Asia Pacific CEOs who feel health risks are the top threat impacting the top line (58% saying they are ‘very concerned’ or ‘extremely concerned), Malaysia CEOs are keeping a close eye on macroeconomic factors that may impede growth. While Malaysia has demonstrated a proactive response to containing the pandemic, fears over the impact of emerging variants, low government revenue ratio to GDP, and adjustments in monetary policy in major economies could be contributing factors to their concerns.

Overall, Malaysia CEOs are primarily concerned about the potential for these threats to disrupt revenue growth. They also appear to worry that health risks and social inequality could be a factor in attracting and retaining talent, while cyber threats could inhibit innovation.

Q. How concerned are you about the following global threats negatively impacting your company over the next 12 months? (Showing only ‘very concerned’ and ‘extremely concerned’ responses)

Q. How do you anticipate your company could be impacted by this threat over the next 12 months? (Showing only responses from CEOs who were ‘moderately’, ‘very concerned’ and ‘extremely concerned’ about each threat)

^{Malaysia data is based on a survey of 49 CEOs

Source: PwC 25th Annual Global CEO Survey}

The diverse paths to net zero

18% of Malaysia companies have made net-zero commitments; a third have made no commitments at all

Asia Pacific’s vast population, economies and communities are extremely vulnerable to climate change, but the region is far below the required 12.9% per year decarbonisation rate needed to reach the 1.5°Celsius target in the Paris Agreement to avoid the worst impact of climate change.

While Asia Pacific companies are outpacing their global peers in the scale and depth of their climate commitments (26% having made net-zero commitments vs 22% globally), Malaysia companies are making modest progress at 18%. However, nearly 50% say they are working towards solidifying their commitments.

Of those companies that have made net-zero commitments, only 38% of the commitments are or will be science-aligned (limiting global warming to 1.5° Celsius or well below 2° Celsius), trailing far behind Asia Pacific (71%). Nearly a third of Malaysia companies say they either have not/will not be aligned to a science-based target or are unsure of their alignment.

What gets measured, gets done. Where science-based targets have been set, companies’ approach to reducing greenhouse gas emissions are independently assessed and validated. As the regulatory landscape evolves and stakeholder demand grows, companies’ overall ESG data and strategy needs to be able to withstand closer scrutiny to inspire confidence and build trust.

Q. Has your company made a net-zero commitment or carbon-neutral commitment?

^{Notes:

Net-zero commitments are Achieved when a company reduces its greenhouse gas (GHG) emissions to near zero and removes its remaining unavoidable emissions

Carbon-neutral commitments are Achieved when a company offsets its greenhouse gas (GHG) emissions to zero (e.g., by purchasing voluntary carbon credits)

Source: PwC 25th Annual Global CEO Survey}

Living up to expectations

The primary influential factor behind carbon-neutral and net-zero commitments is to meet stakeholder expectations.

It’s clear that Malaysia companies are highly driven by meeting market demand, particularly that of customers (66%), closely followed by government and/or intergovernmental targets (63%) and investor demands (62%). ‘Mitigating climate change risks’ rank in fourth place.

The near-term value creation pressures that are driving Malaysia CEOs’ concerns, including their ability to sell products and services, seem even more significant when we look at the outcomes they are working toward—as articulated in their corporate strategies, and made personal in their compensation packages.

Q. How influential are the following factors behind your company’s net-zero commitment / net-zero commitment your company is developing? (Showing only ‘very influential’ and ‘extremely influential’ responses)

^{Source: PwC 25th Annual Global CEO Survey}

Stakeholder and non-financial outcomes increasingly matter

Despite rising interest in ESG, strategy is still primarily driven by business metrics, however this is becoming less oriented around financial outcomes.

Malaysia CEOs indicate that they have extended their formal goals/KPIs in their long term strategy to include customer satisfaction, employee engagement, and automation or digitisation. These non-financial outcomes are intertwined with day-to-day business performance. Much less well-represented in strategies and compensation, are targets related to GHG emissions and gender representation or racial and ethnic diversity: 20% or fewer of Malaysia CEOs have such targets in their personal annual bonus or long-term incentive plan, and 20% say these targets are not part of their compensation packages.

Q. Are the following non-financial-related outcomes included in your:
a) company’s long-term corporate strategy?
b) personal annual bonus or long-term incentive plan?

^{Source: PwC 25th Annual Global CEO Survey}

Priorities for the CEO

The opportunity—and the challenge—is clear: progress on society’s toughest problems will be limited without bold action from CEOs stewarding critical corporate resources. At the same time, this year’s CEO survey underscores just how many priorities CEOs have on their plates, a continuing theme from our previous findings. Strong leadership and collective effort through significant policy interventions and public-private sector partnerships, will play a key role in addressing the urgent needs facing Malaysia and Asia Pacific CEOs, as society and governments increasingly look to businesses and their leaders to support sustained recovery.

Against that backdrop, CEOs may consider the following six priorities:

Redefining balance of short and long term profitable growth: align costs towards value to enable investments in adjacent growth markets, products, services and talent
Recalibrating skills: focus on building capability and capacity locally, with a shift in leadership skills to include empathy and a willingness to embrace debate along with growth
Resetting the conversation: ESG should be reframed into a series of realistic trade-offs to short term financial goals to bring investors and stakeholders along the journey
Reappraising succession: explore diverse talent pools for differentiating leadership capabilities - particularly prevalent with generational wealth transfers in Asia Pacific
Rethinking incentives: comprehensively review the combination of financial/non-financial outcomes, performance management measures and reporting structures in place
Reimagining collaboration: proactively explore and enable cooperation with government/policymakers, other business leaders, investors and NGOs to collectively drive outcomes and build trust