Swiss companies at the intersection of digital readiness and corporate responsibility
By Adam Stanford, Consulting Leader Deloitte Switzerland
The time of companies striving for profits above all else is over; automation and digitalisation have the potential to offer businesses a broader perspective and lead them towards greater responsibility. More and more Swiss companies are intensifying their efforts in these areas. The results of the new Deloitte Global Readiness Report and research from Deloitte Switzerland help us setting milestones in this transformational journey.
Building on the corporate social responsibility movement, a form of responsible capitalism seems to be emerging, one that considers a broader group of stakeholders and measures social impact alongside financial performance. In August 2019, the CEOs of nearly 200 multinational corporations signed a statement issued by the Business Roundtable, publicly pledging to lead their companies for the benefit of customers, employees, suppliers and communities in addition to shareholders.
In Switzerland, companies seem to be lagging behind somewhat. They are also being challenged by the widely popular Responsible Business Initiative that seeks to compel corporations to assess the impact of their activities and those of their subsidiaries on human rights and the environment. The popular vote on the initiative this year will certainly provoke heated discussions in the public sphere and put the topic on the agenda of corporate Switzerland.
In Deloitte’s third annual global Readiness Report of more than 2,000 C-suite executives, we examined the intersection of readiness and responsibility to see how leaders are balancing the transition to Industry 4.0. We looked at how they are capitalising on advanced technologies to help propel their businesses forward while acting in a more socially responsible way, particularly in the area of environmental stewardship.
When strategy leads, success follows
Swiss-specific research from Deloitte showed that the companies in our country still have significant room for improvement when it comes to digital readiness. On a global level, short-termism and the struggle to develop effective, holistic strategies that take advantage of Industry 4.0 technologies continues: two-thirds of CXOs surveyed for the Readiness Report said their companies either have no formal strategies or are taking ad-hoc approaches. Conversely, only 10 percent of CXOs said they have longer-range strategies to leverage new technologies that reach across their organisations.
That is unfortunate, because the survey data suggests businesses with comprehensive Industry 4.0 strategies are far more successful across the board. They are innovating and growing faster, successfully integrating Industry 4.0 technologies, and doing a better job of attracting and training the people they’ll need in the future. Their leadership is also more confident about leading in the Industry 4.0 era.
Recognition of business’ responsibility
There is ample evidence that most businesses are beginning to try to find balance between profit and purpose, thanks largely to increased pressure from customers, employees and other stakeholders. In fact, nearly four in ten survey respondents said they focus on social issues because it is a priority of external stakeholders.
Almost 70 percent of those who have integrated Industry 4.0 into their strategies said they have made a great deal of progress towards their goal of making a profit while positively contributing to society versus 10 percent who do not have strategies.
It is telling that nearly all business leaders we surveyed fear that the effects of climate change could negatively affect their organisations, and half cite tackling climate change as their generation’s top priority. Business leaders accept a responsibility to act, and many are rolling out programmes addressing resource scarcity and environmental sustainability. More than 90 percent of respondents say their companies have sustainability initiatives in place or on the drawing board.
Our Swiss-specific CFO survey shows a different picture: climate change is an issue on the agenda for the executive boards of Swiss companies, but it does not seem to be a cause of major concern at present. The CFOs say they are currently more focused on short-term challenges. If they want to stay in business long-term and be successful, they should focus on climate change and its opportunities, but also play an active role in slowing global warming.
Commitment to training and development
Organisations continue to struggle to ensure their workforces possess the skills needed to succeed in an Industry 4.0 environment. Only a fifth of executives completely agree that their organisations are currently ready, and just 10 percent said they are making a great deal of progress identifying, attracting and retaining the right talent.
Interestingly, though, the responsibility for developing skills seems to have shifted. A growing number of leaders accept responsibility for developing their workforce, with fewer executives than last year putting the onus on the individual worker. More than 80 percent of respondents said they either have created or are creating a corporate culture of lifelong learning. Another 17 percent report that they are planning to do so and that training has become a top investment priority.
Millennials are also demanding more training from their employers. We asked 300 Swiss Millennials about who has the most responsibility for preparing them for Industry 4.0 and 34 percent expect businesses and employers to act first; only 18 percent see themselves in the driver seat. Furthermore, the Deloitte Switzerland Workforce Study showed that workers are insufficiently trained and lifelong learning needs to become an integral part of corporate culture.
Part of the challenge on a corporate level according to the Readiness Survey is that executives still don’t fully understand the skills necessary to succeed in the ever-changing Industry 4.0 world. Six in ten reported investing significantly to understand what skills will be needed to succeed.
Disrupting competitors no option
Given organisations’ increased focus on positive social impact, executives should explore how Industry 4.0 technologies might help propel these initiatives forward. Executives, however, have yet to recognise or embrace the potential of Industry 4.0 technologies to advance social and environmental initiatives. Only one in five leaders say they are prioritising investing in advanced technologies that have a positive social impact.
Since executives aren't fully using technology to transform their own organisations, it's not surprising that they also aren't using it to disrupt competitors. When presented with 10 possible outcomes that executives aim to achieve with their future Industry 4.0 investments, only 3 percent mentioned disrupting competitors as a top-five outcome.
Technology can boost initiatives
This year’s Readiness Survey shines a light on how traditional business objectives, transformational technologies, evolving skills and growing obligations to the greater good are intersecting. Some responses, such as those showing support for employee development and social concerns, indicate progress. Others, like the persistence of short-termism and the reluctance to fully embrace Industry 4.0 technologies, feel like missed opportunities.
Although many companies were recently publicly criticised for not doing enough to address the climate change, in my opinion, companies are substantially increasing their focus on corporate responsibility — globally and in Switzerland.
While, as usual, it’s the wrongdoings that tend to make the headlines, it’s fair to say that many social and environmental programmes and initiatives are underway at a corporate level and these are ever more on the tables of leaders and board members. Having said that, further and sharper focus on strategy along with a broader adoption of transformational technologies with both a business and social impact are necessary to ensure companies reach a truly sustainable balance between profit and purpose in the short-term.