Energy

Pessimism of last year has changed into a mixed outlook

The 26th CEO Survey found that CEOs were mostly negative regarding their expectations for the economy, with 80 percent of respondents expecting economic decline. The 27th Survey now shows a much more varied picture, although a majority of CEOs still expect a global economic contraction rather than growth. CEOs in the energy sector are comparatively more optimistic than their global peers.

Q: How do you believe economic growth will change, if at all, over the next 12 months in the global economy?

Growth expectations of CEOs regarding their own businesses are also mixed  

The expectations that CEOs have for their own company over the next twelve months also show a fairly mixed picture worldwide. The share of CEOs who are very confident about realising revenue growth is smaller than the group with less confidence. CEOs are in general more optimistic when looking ahead to the next three years and the outcomes in the energy sector are in line with this.

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months / next three years?

Energy sector CEOs feel highly exposed to certain threats 

When we look at the overall global results of the survey, we see that CEOs feel less exposed to the same threats as last year. This is not the case for the energy sector, however, where CEOs actually feel even more exposed to macroeconomic volatility, climate change and cyber risks than a year ago and equally exposed to geopolitical threats.

Q: How exposed do you believe your company will be to the following key threats in the next 12 months? (Only highly / extremely exposed)

The reinvention imperative is still strong

Some 39 percent of respondents in the energy sector doubt that their company’s current trajectory will keep them viable beyond the next decade. This figure is almost the same as twelve months ago.

Q: If your company continues running on its current path, for how long do you think your business will be economically viable?

CEOs expect drivers for change to become stronger in the coming years 

 Another sign that the need to reinvent is rising is a notable increase in the pressure that CEOs expect over the next three years from factors which influence business model change. Technological change, government regulation and changing customer preferences have driven changes in organisations over the last five years and CEOs expect these kinds of factor to become even more important.

Q: Please indicate the extent to which the following factors have driven changes to the way your company creates, delivers and captures value in the last five years? / the next three years (only  to a very large/large extent)

CEOs see major opportunities and threats in GenAI  

GenAI is one of the technological changes that drives changes in business models. CEOs anticipate that generative AI will deliver significant top and bottom-line benefits over the next twelve months, including increased revenues and efficiency. Their concerns are mainly related to growing cybersecurity risks. A considerable number of CEOs expect GenAI to increase the bias towards specific groups of employees or customers and the spread of misinformation. Taken together, these findings underscore the societal responsibility that CEOs have to ensure their companies use AI responsibly.

Q: To what extent will generative AI increase the following in your company in the next 12 months?

Reducing emissions higher on CEO agendas than other climate-related actions

A large majority of energy sector CEOs have efforts underway to improve energy efficiency and work in progress to innovate climate-friendly products and services. A considerable proportion of respondents have no plans for a range of climate actions. Initiatives in nature-based climate solutions (relating to biodiversity and nature positivity) may be a blind spot. 

Q. Which of the following best describes your company’s level of progress on each of these actions?

Accepting a lower ROI on climate-friendly investments?

As noted above, a considerable number of energy sector CEOs expect climate change to be an enormous driver for change within their organisations. This may partly explain why 39 percent say their companies have set lower hurdle rates for climate-friendly investments than for other investments.

Q: In the last 12 months, when evaluating climate-friendly investments, has your company accepted rates of return that were lower than for other investments?