European companies are strengthening their focus on business resilience to deliver recovery and growth in 2021.
The latest HSBC Navigator report, which surveyed more than 10,000 business in 39 markets, shows business leaders are steering their organisations towards greater business resilience. Tougher supply chain scrutiny, a stronger focus on sustainability, and product and service diversification are all playing important roles, as businesses look towards the growth opportunities of 2021 and beyond.
Europe made up the second largest regional contribution to the report, with 13 markets represented. In line with the rest of the world, about three fifths of European businesses are adapting to their changing environment, with some thriving and some saying they’re surviving day-to-day.
Around a third of businesses in Poland (35%), Italy (33%), Sweden (32%) and Germany (32%) say they are thriving, the highest levels across Europe, while around a quarter of businesses in Belgium (27%), the UK (23%) and the Netherlands (22%) say they are simply surviving day-to-day.
Unsurprisingly there is a trend of increased pessimism across all markets compared with last year’s report. Over two-thirds of European companies don’t expect to return to pre-COVID levels of profitability until the end of 2022, and 27% think that they will achieve this by the end of this year.
The most dynamic recovery expectations for a return to normality by the end of 2022, are in Italy (78%), Russia (77%) and Spain (74%), which are slightly above the global average (73%). Recovery expectations centre around several aspects of building business resilience.
Optimising supply chains
In the face of increased costs, transport, movement restrictions, and the unpredictable nature of national health measures, supply chain optimisation has been a unanimous concern for European companies, with 95% having made changes in the last year. A quarter of these changes have been made due to suppliers’ operational business resilience.
Selecting suppliers based on operational resilience and their ability to deliver quickly and reliably were both cited as immediate investment priorities by businesses adapting their supply chains.
Achieving a strong supply chain through diversification and reducing the number of suppliers overall have both been practiced by large numbers of European companies in similar proportions, with 21% diversifying and 20% reducing the number of suppliers. Both approaches show a trend of greater scrutiny over supply chain stages and contingency planning, whether that’s to move to a smaller number of reliable suppliers or to widen contingency options.
Driving greater sustainability
The vast majority, more than four fifths (81%) of European companies believe that there is opportunity for growth in sales from a greater focus on sustainability. Businesses cited multiple avenues including promoting employee well-being, new ways of working and enhanced reputation as possible areas of focus. Compared to 2019, more companies have been measuring environmental and social sustainability, with 44% believing that social and environmental responsibility was key to being a ‘successful business of the future’.
A third of companies also said that environmental and ethical sustainability was among the top priorities for stimulating growth and driving demand in 2021.