Grant Thorton LLP’s CFO survey for the first quarter of 2023 reveals mixed sentiments among financial professionals, though the tone remains largely positive.
Overall, 53% of financial leaders are optimistic about the 2023 economy, with rising numbers of leaders who expect profit increases in the coming year. Here are the highlights of the latest report.
Expectations of Rising Profits
For clarity, the latest survey reflects data gathered just before the Silicon Valley Bank collapse, so the following data may not capture the impact of this event on the financial industry as a whole. That said, there’s still cause for both celebration and caution among today’s financial professionals.
The number of financial professionals who expect profits to increase has risen. In the final quarter of 2022, only around 60% of respondents expected an increase, compared to nearly 70% in the first quarter of 2023.
Supply Chain Pressures Easing
Since the pandemic, CFOs have ranked the global supply chain crisis as one of their biggest challenges.
However, the 2023 survey reveals that for the first time since the second quarter of 2022, CFOs aren’t ranking the supply chain as their biggest concern. And 55% of respondents report being confident that they can manage any residual supply chain disruptions.
Declining Confidence in Ability to Control Costs
Cost optimization remains a critical area of focus. But while 59% of respondents felt confident in their ability to control costs in the last quarter, only 50% now express the same sentiment.
Lisa Heacock, Partner of Finance Transformation for Grant Thornton, suggests that it’s because “the economy is up and down, and people are probably trying to hedge a bit to make sure that they’re not going to overspend.”
Vendor and supply costs were the chief concern, though other companies expressed concern about material costs or the cost of technology. The broad trend is for CFOs to help companies scale back on the “nice-to-have” expenses, ensuring that they have the capital to cover their necessary expenses and maintain a strong profit margin.
Some companies have also cut costs by laying off employees, though the survey data reveals that this has led to some mixed results, even adding to the talent crisis faced by select industries.
Companies Still Struggling with Labor Shortages
On the one hand, the labor crisis has become much more manageable for most companies. According to the survey results, only 7% lack confidence in their ability to meet labor needs — an all-time low.
On the other hand, many companies are regretting their knee-jerk reaction to reduce headcount or benefits as a cost-saving measure. The exact impact depends on the position and industry, but some companies are discovering the need to backfill positions lost through layoffs.
So while there’s reason for optimism, it isn’t being felt evenly across all industries and organizations.
ESG Strategy and Reporting
Arguably the greatest area of focus is found in ESG strategy and reporting.
Nearly three-quarters of respondents (73%) give “moderate” consideration to ESG criteria in their decision-making process. Over half indicated that they have “clearly defined” ESG goals and report ESG data and progress. Only 9% don’t consider ESG criteria at all.
The Value of Reputation
Companies are recognizing that ESG criteria are boosting their public reputations. Over half (56%) of respondents identify a boost in reputation as a benefit of adopting ESG criteria.
John Friedman, Managing Director of ESG & Sustainability Services for Grant Thornton, says, “There’s clear research that shows the value of reputation for a publicly-traded company is more than its financials and physical assets combined… that’s a flip since the 1970s. Now, it’s understood just how much your reputation affects your valuation.”
Rising concerns over reputation stem from stakeholder expectations, including their customers. In 2021, only 28% of financial leaders included their customers among the stakeholder groups driving the adoption of ESG programs. In 2023, that number has risen to 39%.
Customers aren’t the only ones driving the adoption of ESG programs. Nearly identical percentages of executive management (44%) and employees (43%) are influencing CFOs to adopt ESG programs and reporting metrics.
This shows that ESG programs can satisfy the expectations of multiple stakeholder groups, especially those from similar generational cohorts.
Per Jessica Feeley, Director of ESG & Sustainability for Grant Thornton, “If something is important to employees, it’s probably important to some degree to customers and the board too. If you focus on quality and you’re able to move the needle even on one ESG initiative, you can have an impact across all those different groups at once.”
The Evolving Role of CFOs
What does the present survey indicate about the future for financial leaders? CFOs will continue to play an important role in managing internal costs. But it’s in the adoption of ESG programs where CFOs can help executive leadership chart their own path and adapt their own strategies.
Overall, CFOs recognize the challenges ahead but remain confident about their ability to navigate the future.
Learn more in our 2023 Controller/CFO Sentiment Study. What will Controllers and CFOs do differently in 2023? This inaugural study seeks to understand how current business and economic environments are impacting corporate financial planning, strategy, priorities, and outlooks.