Economic Outlook, Talent Retention, and ESG Efforts Among Top CFO Concerns

CFOs have a lot on their minds.

From pandemic-related issues such as supply-chain disruptions, labor shortages, and the growth of remote work, to geopolitical instability, environmental, social, and governance (ESG) concerns, and rising inflation and interest rates, finance leaders are juggling various competing factors likely to affect their organizations. Now, they’re also increasingly concerned about the global economic outlook for the coming year.

In its most recent CFO Signals survey, Deloitte found declining optimism among CFOs in the second quarter of 2022: Only 18% of respondents said they expect the North American economy to improve over the next 12 months, down from 36% in the previous quarter. For Europe and China, those figures drop to 7% and 19%, respectively.

In response to survey questions around internal risks, CFOs identified talent, retention, and strategy execution among their top concerns. Looking outward, respondents cited inflation, broader economic concerns, and geopolitics as the topics they’re most concerned about.

Finally, finance leaders are also taking on significant roles in ESG efforts, particularly sustainability. Executives reported extensive involvement in their organizations’ decarbonization efforts—across the “Four Faces of the CFO”—as a strategist, catalyst, and steward.

Keeping an Eye on Macroeconomic Trends

One of the most marked shifts in CFOs’ outlook is around regional economies, with the proportion of finance leaders expressing positive sentiments at the lowest point since the third quarter of 2019. 

Yet their assessments of the current economic climate, as well as what they expect in the coming year, vary by geography.

• North America: About half (52%) of CFOs rate the current economy as good or very good, down from 64% in the first quarter of 2022. On the downside, 18% expect conditions to improve in a year, down from 64% in the previous quarter.

• Europe: Just 9% of CFOs rate the economy as good or very good, down from 31% in the first quarter. Only 7% anticipate improvement in the coming year, plummeting from 26% in the previous quarter.

• China: Only 12% of CFOs view the economy as good or very good, down from 29% in the first quarter. The percentage of finance leaders who anticipate better conditions in the coming year (16%) was fewer than in the first quarter (33%), with the same figures for the rest of Asia, exclusive of China.

• Asia: Excluding China, the region’s economy is good or very good, 20% of CFOs said, down from 39% in the previous quarter.

• South America: Slightly fewer CFOs (11%) rate the economy as good or very good than in the first quarter (14%). For the coming year, 10% anticipate a stronger economy, down from 16% in the previous quarter.

When it came to their own organizations, CFOs registered significantly less optimism in the second quarter of 2022. Those responding they’re somewhat or significantly more optimistic about their own companies’ financial prospects clocked in at 27%, down from 38% in the previous quarter.

CFOs of companies in the energy and resources sectors expressed the most optimism, while those leading the finance function at telecom, media, and entertainment companies were the least optimistic.

Internal Concerns, Inflation, and Interest Rates

With the “Great Resignation” continuing to exert pressure on organizations of all sizes, CFOs expressed an ongoing focus on recruiting and retaining top talent to build future-ready finance teams. Top-of-mind challenges include wage inflation, return-to-work challenges, employee morale, and work culture.

CFOs worry whether their organizations can provide sufficient flexibility for workers who require it, while also trying to provide a high level of customer service with lower staffing levels. Employee burnout and fatigue also ranked among their concerns.

Finance leaders also thought about getting the right talent to move technology investments forward, especially as the need for specialized roles increases, highlighting a recurring organizational theme of workforce skills. 

Over the next 12 months, CFOs expect domestic wages and salaries to inch up to 5.3% from 5.1% in the first quarter. Growth expectations for domestic hiring remained unchanged from the first quarter, at 5.3%.

Other high-priority topics for CFOs include strategy execution, financial performance, transformation, supply chain issues, operational challenges, and increased costs. 

“During the survey open period, inflation rose to its highest level in 40 years, and the Federal Reserve implemented the largest increase in interest rates in some 20 years, and CFOs are acutely feeling the impact of both,” the report notes.

Perhaps not surprisingly, CFOs are nearly as risk averse as they were at the start of the COVID-19 pandemic. More than one-third (35%) said now is a good time to take greater risks, down from 47% in the previous quarter. The latest figure is significantly lower than the two-year average of 53% and slightly higher than the low point of 27% in the secord quarter of 2020, as the pandemic reached global proportions.

Leadership’s Focus on ESG

Noting that ESG factors were a topic of interest at the World Economic Forum annual meeting in Davos, Switzerland, the survey found CFOs to be “highly engaged” in the role of steward, strategist, and catalyst. 

• Nearly three-quarters (73%) of CFOs reported being very involved or involved to some extent as a strategist in their organizations’ decarbonization efforts.

• Slightly fewer CFOs (71%) said they are very involved or involved as a catalyst in their organizations’ decarbonization efforts.

• Fewer than half (48%) reported being very involved or involved in an operator role in their organizations’ decarbonization efforts.

• As stewards, 83% of CFOs indicated they are very involved or involved in their organizations’ decarbonization efforts.

Survey respondents said they expect to spend an average of 10 hours a month on ESG efforts over the coming year, while their finance organizations are expected to spend more than 109 hours per month on average on matters related to decarbonization. 

CFOs also identified their finance teams’ top two needs to meet their organizations’ decarbonization goals: clarity on methodologies and reporting standards (69%) and relevant data (62%). More than three-quarters of CFOs expect increased operating and capital expenditures, along with transformation within their business model and value chain, to be the most significant costs they incur to achieve those goals. 

Technology and data-capture abilities were identified as the top challenges for finance teams when it comes to decarbonization efforts. 

As far as achieving net-zero carbon emissions, more than one-quarter (27%) of CFOs predicted their organizations would reach their goal by 2030. More than one-third (34%) said they would get there by 2050, and 3% noted it would be later than 2050. On the far ends of the spectrum, 2% of CFOs said their organizations had already reached their goal, while one-third (33%) reported they don’t have a plan.

The survey, conducted from May 2-16, 2022, reflects the views of 97 CFOs from the United States, Canada, and Mexico, with 72% from public companies and 28% from privately held companies. 

Explore the Deloitte CFO Signals survey for the second quarter of 2022.