As artificial intelligence (AI) and climate change increasingly disrupt industries around the world, businesses face a period of “colossal transformation”, according to Dr Ruggero Gramatica, honorary research associate at the University of Oxford’s Institute for New Economic Thinking and CEO of Macrocosm.
Gramatica was speaking to Verdict following PwC’s release of its 27th Annual Global CEO Survey, which found that 45% of CEOs believe that, without reinvention, their businesses will be unviable within a decade, citing AI and climate change as the most disruptive trends.
Maria Opre, senior analyst at business, technology and lifestyle research publication EarthWeb, told Verdict: “This moment presents both peril and promise.”
She continued: “While disruptive, AI has the potential to transform how we work in ways that boost productivity and create new jobs and industries. However, its rollout must be carefully managed to reskill workers, ensure fair access, and address issues like bias and privacy. Similarly, the climate crisis demands business action but opens doors to green tech and sustainable solutions.”
The AI trend could be a hurdle or a springboard
PwC noted generative AI as a trend making CEO confidence “fragile”, but also considered that the theme would be a “catalyst for reinvention”. It found that 70% of respondents believed AI would significantly change how companies create value, a figure in line with the findings of GlobalData’s Tech Sentiment Polls Q4 2023, which found that 92% of respondents believe AI is either already disrupting industries or will do so within the next decade.
Speaking to Verdict about how AI would be disruptive, Mike Smith, founder of the Business Expert advisory website, commented: “The threat of job displacement due to AI-driven automation is real, particularly in sectors that rely heavily on routine tasks. Data privacy concerns are heightened given AI’s dependency on large data sets. Another critical aspect is the accountability of AI decisions, which becomes murky as systems grow more autonomous.”
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Smith’s concerns around job losses were echoed in PwC’s survey, which included questions about anticipated job losses. The survey found that 25% of respondents anticipated reducing headcount by 5% or more in 2024, due to generative AI. The figure was higher among media and entertainment CEOs, where 32% anticipated reducing headcount by at least 5%, and in banking and capital markets and insurance, where 28% anticipated this reduction.
However, the survey also revealed that more CEOs are looking to increase their headcount than to decrease, as 39% of CEOs expect their company’s headcount to increase by 5% or more in the coming 12 months. It suggests that generative AI offers new opportunities for efficiency, a point acknowledged by Smith.
“AI offers businesses unprecedented opportunities for growth and innovation. It can dramatically increase efficiency and productivity, leading to cost savings and enhanced competitiveness,” he said. “AI's potential to drive innovation opens new markets and services, especially in personalised products and solutions.”
Climate change concerns need innovation and investment
The opportunity for innovation is evident in the climate change sector, which brings both opportunities and obstacles. Businesses are already capitalising on some of the potential offered. The PwC survey revealed that 58% of respondents reported having made steps towards innovating new, climate-friendly products, services or technologies.
Gramatica commented: “The colossal transformation that is already unfolding, especially in the energy industry, will trickle down to many business sectors and activities of human life. The financial implications of this means massive investment will be required.
“But with challenges come opportunities. Those which focus on the opportunities are set to thrive, especially given a record $495bn was invested in renewables globally in 2022. This disruption creates the space for innovation in new markets.”
However, the PwC found that there were two areas which required better prioritisation from CEOs: upskilling and investment in climate-based solutions. Ensuring a workforce prepared for the move to net zero will be crucial if businesses are to be prepared for the future, yet 30% of CEOs reported having no plans to upskill or reskill employees, whilst a further 23% reported that they had plans but had not started.
Ensuring a future with a healthy ecosystem will also be pivotal to minimising climate change’s impact on supply chains and general services. PwC estimates 55% of global GDP (around $58trn) is “moderately or highly dependent on nature.”
The survey found that 51% of responding CEOs considered lower economic returns for climate-friendly investments as one of biggest barriers to decarbonisation. However, there is evidence that this is changing, with 40% reporting that they have accepted lower hurdle rates on these investments.
However, Opre warned that “accepting lower returns on emissions-cutting investments shows leadership but will mean little without climate adaptation plans to bolster resilience against physical threats.”
Commenting on the results of the survey, Bob Moritz, Global Chair, PwC said: “As business leaders are becoming less concerned about macroeconomic challenges, they are becoming more focused on disruptive forces within their industries.
“Despite rising optimism about the global economy, they are actually less optimistic than last year about their own revenue prospects, and more acutely aware of the need for fundamental reinvention of their business. Whether it is accelerating the roll-out of generative AI or building their business to address the challenges and opportunities of the climate transition, this is a year of transformation.”