Davos 2023: Indian CEOs Not Focused Enough On Climate, Says PwC Chairman

Bob Moritz: The headline this year is not pessimism. That pessimism has been slowly building and that pessimism was already embedded in last year’s surveys where CEOs were too optimistic because some of those hen woods were already rising.

The big headline this year is 40% of the CEOs globally believe their business is not going to be financially sound in the next 10 years unless there is radical change, and we see that theme coming across all sectors. There is not a lot of variability depending on the sector, but we are seeing significant differences country to country around the world for various reasons.

Whatever may happen in China, they are actually at the higher-end of this concern about transformation. Why, because their energy supply is going to change radically in the next 10 years. If you look at Brazil, they are at the lower end, which is, are they acknowledging the change.

So, the one thing I would walk away with is, it's important to focus on not only the 40% that acknowledged the issue, what is equally as interesting, the 60% that don't say that.

Bob Moritz: In the boardroom, supply chain has become much more important, and CEOs are spending much more time thinking about it strategically. They are looking for more optionality and moving away from the dependency of China. It doesn't mean I am going to go China plus one, it means I am going to go China maybe, and plus a lot of others, including maybe nearshoring, or bringing it back home.

But in order to do that, they will look at options that have the following characteristics. It's economically sound, so the cost is very important, so you have got to be effective, efficient. It's got to be resilient, and able to scale up and scale down at a moment's notice. It's got to have security in terms of dependency to be there when I need it and it's got to be greener than ever before because those corporates are going to have to report on their green and their climate initiatives.

So, the suppliers of the supply chain have to do the same and they are going to look for, and this is where I think, an opportunity for India is the labour force to be equally focused and adaptive to the changing needs to be evolving and changing over the next decade or two.

Sanjeev Krishan: If you look at it, 67% of Indian CEOs are already saying that they are refocusing on supply chains. I mean, to the point that Bob made about greener supply chains, now if I made a commitment that I will be carbon neutral whenever, 2030-2035, I cannot be carbon neutral unless my entire supply chain is carbon neutral and if that supply chain, once I think about it being carbon neutral, there may be cost implications that may be there.

So, both the points that Bob said are actually in some ways intertwined and then to me, the good news is that 67% of Indian CEOs are saying that they are focusing on relooking at their supply chain. Yes, there is also a certain element of security, there's no question about it, that's one of the things on their mind, but also the fact that when we talk about transformation, we talk about transformation, which is sustainable transformation today and to me, I think supply chains is a key component of sustainable transformation that people wish to do.

Sanjeev Krishan: Well, I think we definitely have an opportunity, as Bob said, we shouldn’t say whether it's China plus one or Europe plus one, I think there's an opportunity, no question about it.

I think what the government of the day is trying to do in terms of incentivising businesses, both domestic and overseas to come and set shop in India, by way of giving a bunch of incentives, subsidies, etc., is a case in point.

I mean look at semiconductor itself where there has been a policy now to sort of say, that there is subsidy available. I mean, in some ways, we have seen the horrors of the past, whether it was people couldn't get laptops, automobiles and so on. So, in some ways that's very evident.

Now, if it enables me to get a certain amount of import substitution done, and then also make India a producer to some parts of the world, if not the entire world that's absolutely fine. So, I think the government is focusing on both at this point in time, to my mind.

Bob Moritz: I think India has the opportunity; it has the chance. It already checks the box, generally speaking on the economics, it's going to have to continue to reinvent itself in that regard. It checks the box with a great labour source in terms of the talent necessary, and it is bringing technology more and more to that supply chain. It is much more seen as stable, relevant to other parts of the world.

Where the Indian opportunity really is, is the fact that the CEOs are not focused on climate at the level it needs to be right now and getting it greener. Our own CEO survey would say the amount of CEOs that are really focused on it, lesser compared to them, the rest of the world, that's where government and business now both at the larger countrywide level with Prime Minister Modi and at the state level. If we can get focused, accelerate that, I think that's where the big opportunity is for them to be a potential supplier in the world of that supply chain.

Bob Moritz: I think personally that the Indian opportunity is great and can achieve the growth that they are looking to achieve in lieu of the global economy slowing down.

It is a grab for market share right now and it is an opportunity for business both goods and services to do things differently emanating out of India for the benefit of the world and be an asset to the world to tap into. But that's equally as important on the manufacturing side relevant to supply chain as it is on services being centralised in India right now.

So, there's an opportunity to gain market share. There is an opportunity to ride any curve of growth and I do think if India actually tries to address its main issue, which is how do I make it easier to do business in India, and they are doing that already, you are seeing the rise in some of the ratings but continue that at an accelerated pace and coordinate better at the federal and the state level. I think that's a big opportunity for the country and yes, they can overcome the concern about a slowing economy.

Sanjeev Krishan: See, most certainly they see progress. Yes, I mean you would expect that certain areas like Bob said, I mean, contract enforcement, that's something which is there, anything which gets stuck in legislative procedures takes a while.

So, in a way, it's a story of two halves. The one half, you have somebody who's been in India long enough, who knows how to deal with the Indian ecosystem. I won't name businesses, but they have, they are actually investing in a big way, very big way. Many of them say that, are foreigners taking to the PLI. They are, some of these people who have been in India, they are actually embracing the PLI.

But I think crossing the hump is still a bit of a challenge and which is where Bob said, is very relevant that we need to continue to work on ease of doing business in India, making ourselves more desirable. I think that's a work in progress.

I am glad that there are half a dozen Indian lounges here and hopefully, they will now go back home and say that, okay, we have got everything done, we have sewed everything up, but we need to make it easier for them to come and do business in India.

Bob Moritz: Three things I would focus on, Sanjeev has already hit one, which is making sure that the contractual obligations and the legal system around that have more certainty to it.

Second is the green aspect, which we have already talked about and third is continuing to enhance infrastructure more broadly and that goes to transportation, it goes to ease of doing business, willingness to travel, etc. Do more in those three areas. I think there's a lot of opportunity to rise in the relative rankings.

Bob Moritz: The biggest thing I think we want to look towards, as maybe inflection points, is going to be the resiliency of the U.S. economy and its impact on the world and how quickly China can flip its economy back to where it was previously and that's on the positive side.

On the other side is, managing through continued geopolitical conflict and that one in particular when you look around the world, it's Middle East relevant to the energy issues. It is resolution, if possible, relevant to the Russia-Ukraine thing, if not just containment and continued containment of that and the last thing I would say is, making sure the EU operates effectively and efficiently. You are starting to see a little bit of fragmentation come through that and that's something to watch as we go into 2023.