Despite geopolitical tensions mounting, nearly half of companies across the world are more optimistic about their growth compared to a year ago, with firms also recognising the role of global trade as a “force for good” and feeling the pinch to act sustainably, finds new extensive global research from HSBC.
The Navigator survey, which was carried out over August and September, quizzed more than 9,000 firms across 35 territories to find out where businesses see themselves today and in the years to come.
Exporters are currently facing a raft of challenges, from conflicts in the Middle East to the US-China trade war and Brexit, as well as growing pressure from consumers around sustainability amid the so-called ‘Greta effect’. However, the Navigator report from HSBC shows that, far from being downtrodden, nearly half (47%) of companies surveyed are in fact more optimistic about growth than a year ago and about a fifth (22%) – the high-growth firms – are extremely positive, expecting growth in excess of 15% in the next 12 months.
That isn’t to say that companies aren’t feeling the impact of geopolitical risks. The survey found that overall, 64% of global firms are affected, with this figure rising sharply in certain regions, up to 76% in North America and 77% in Mena.
“The biggest surprise to me is just the overwhelming optimism,” Stuart Nivison, global head of client network banking at HSBC, tells GTR. “We didn’t expect to find firstly the level of optimism and secondly that almost half the companies were more optimistic than they were a year ago.”
Nearly eight out of ten (79%) respondents say they expect an increase in sales in the next year, with 81% feeling positive about their international trade possibilities. The main reasons for this, Nivison says, are twofold: new markets, and investment in technology and digitising processes. The 12% of companies that expect their businesses to shrink are under pressure from external rather than internal factors, with the single biggest threat an uncertain political environment followed by increasing competition and inability to secure financing.
Reasons for trade optimism (%agree)
For Nivison, some countries in Asia are notably upbeat. “I spent most of my career in Asia. There are themes that come across in Asia which echo what I hear when I talk to companies. You have got several countries which are benefiting from changes in supply chain structure and they are overwhelmingly positive about growth. A very high proportion of firms in countries like Vietnam, India, Indonesia and Bangladesh say they will see an increase in growth over the coming year. Some of the large multinationals are rebalancing parts of their supply chains and those are the countries that are frequently mentioned.”
Optimism around technology investment, meanwhile, is coming as an increasing number of companies which have previously sold their goods locally respond to demands from buyers to become more digital. As Nivison points out: “They start getting more online orders from regions like France and Vietnam, places they never thought of selling. New markets and technology complement each other.”
Sustainability: “no longer a PR exercise”
While having a sustainable supply chain benefits the environment and society, it also makes a strong business case by improving firms’ bottom lines. The Navigator report reveals the top motivations for implementing sustainable practices, which include improving operational efficiency, meeting standards set by regulators, gaining a competitive edge and increasing sales.
Top 10 motivations for sustainable practices
“Businesses are not viewing sustainability as they might have done 10 years ago as a PR exercise, where sustainability often sat in the public relations department. Now, the whole supply chain strategy and sustainability strategy are C-suite discussions,” he says.
Businesses are feeling the squeeze to become more sustainable from competitors (36%), customers (34%) and governments (32%), and nearly two-thirds of companies believe they have a role to play in delivering the United Nations’ (UN) sustainable development goals (SDGs).
While sustainability has become a priority, it remains far from a nailed down process for supply chains, companies and banks. Nivison says: “The message we got was not really anything to do with SDG-linked loans or deals; it was more that the UN is not going to be able to do this on its own. Supply chains and companies are saying, ‘the UN can set whatever goals it wants to, but it has got to have something that helps to drive them’.” He says that businesses need to look at the whole ESG impact of their supply chains, and this is what will have a “snowball” effect on firms rolling out legitimate sustainable initiatives, and not just have single companies “looking at how many paper cups they use.”
Nivison says the biggest test now is inertia and companies not adapting to a rapidly evolving world when they desperately need to. But he adds: “I think the encouraging things for me are that businesses are optimistic, not pessimistic, and they are thinking about very positive things like new markets and about digital investment and innovation.”
“We asked companies if trade is a good or a bad thing. We could easily have got responses that said ‘trade is terrible for me. I’m going to just source domestically or I’m going to sell domestically’, but that wasn’t the case. Trade is being seen as a force for good by the vast majority of companies because it encourages regional development and drives innovation,” he concludes.