Survey: Business Concerns Increase as Energy Prices Rise
ABB Electrification has published a 2023 report detailing the findings of their Energy Insights Survey. Of 2,300 global business leaders surveyed, 92 percent feel the rising cost of energy is impacting their competitiveness. Results also suggest the cost is affecting their workforce and other investments.
A recently published 2023 Energy Insights Survey polled a diverse group of 2,300 business leaders from small and large enterprises spanning various industries. The comprehensive global survey, commissioned by ABB Electrification, delved into the effects of the recent surge in energy costs on businesses. The results indicate a significant proportion of business leaders are experiencing a considerable impact on their competitiveness, workforce retention, and sustained profitability.
Image used courtesy of ABB
Overall Energy Findings
The global survey indicates that business leaders are reassessing their investment plans due to ongoing concerns about energy costs and supply security. The survey highlights four significant impacts of energy concerns on businesses, including reduced investment in the workforce, delayed progress on decarbonization goals with a shift in investment focus from the green agenda to cost reduction, a threat to competitiveness, and a focus on increasing energy self-sufficiency to mitigate the effects of energy costs and security challenges.
Ninety-two percent of respondents agreed that the volatility of energy costs and the uncertainty surrounding energy supply pose a significant threat to their business competitiveness. Most respondents identified a reduction of investment in recruitment, employee development, and compensation as an important consequence of this challenge. Additionally, companies are setting aside their decarbonization goals and sustainability investments in response to the mounting energy concerns.
Business Leader Concerns
Restricting Business Investment and Growth
Respondents are adamant that the existing energy challenges require revising company spending plans that minimize investments that would typically benefit their competitiveness.
The escalation of energy costs and insecurity has compelled business leaders to reconsider their operational strategies and investment decisions to remain competitive and grow their businesses. When asked to identify the effects of rising energy costs on their companies over the past year, leaders indicated a decrease in profit margins (34%) and spending (34%), resulting in a diversion from investment in research and development (R&D), and shifting the cost onto end customers (25%).
A significant number (38%) have already or intend to reduce their technology investment, while 33% anticipate cuts on infrastructure and 31% predict a decline in marketing expenditure.
Other concerns for business competitiveness include delaying new product launches, reducing the availability and level of services they can provide, moving production to a cheaper country, and canceling future investment opportunities.
Businesses have reported a reduction in their workforce investment over the last year, owing to the need for mitigation measures and the escalating energy costs.
Notably, three of the top five business areas earmarked for budget cuts are workforce-related. Specifically, 39% of businesses plan to reduce spending on recruitment, 36% will decrease expenditure on salaries, overtime, and bonuses, and 35% will curtail investment in staff training and development.
If energy challenges persist, this trend is expected to continue for three to five years, and respondents anticipate an increase in remote working, a reduction in working hours, and an adjustment to shift patterns. These changes would likely impact business profitability.
The survey respondents also expressed apprehension that energy pricing and insecurity could potentially hinder progress on climate change initiatives.
The ABB report highlights that industry and government leaders must prioritize sustainability to achieve critical global decarbonization goals. Unfortunately, 58% of business leaders are delaying sustainability and carbon reduction targets by one to five years due to the cost of energy.
Image used courtesy of ABB
Sixty-one percent of companies are prioritizing reducing energy costs. Only 40% consider reducing carbon emissions part of their overall business priorities.
According to the report, 83% of business leaders are concerned about their business's energy supply security, with many taking action to address energy insecurity and fluctuating energy prices. Over a third (36%) are worried about further increases in energy costs, 31% are concerned with power cuts and blackouts, and a quarter with energy rationing. To address these concerns, 34% have increased investment in improving their energy efficiency, while 40% of planning to install on-site renewable energy generation to become less dependent on the grid.
Morten Wierod, President of ABB Electrification, understands the need for businesses to insulate themselves from energy prices and insecurity and reevaluate their current and future spending plans. He emphasized that investing in smart and sustainable on-site renewables and energy efficiency technology can help businesses cut costs and reduce emissions. This approach can ensure that competitiveness, workforces, and the path toward decarbonization are not compromised. The report highlights the importance of adopting a sustainable approach to energy consumption to achieve cost savings and mitigate potential workforce and environmental impacts.
Optimizing Energy Costs
Overall, business leaders (61%) have said their top priority is mitigating the rising energy costs. 74% have said that they have already or are considering actions supporting cost savings and energy security.
To achieve their goals, 34% have already begun to increase energy efficiency, while 40% are working to install on-site renewable energy generators.
A third of respondents said the associated cost is the largest barrier to taking action on energy management. Nearly half (49%) feel unsure about how to proceed, lacking knowledge or resources.
The report highlights that despite rising energy costs and insecurity challenges, it is encouraging that businesses are becoming more energy conscious and investing in energy efficiency and measures to become self-sufficient.
The report concludes with five recommendations for businesses looking to mitigate energy cost and security concerns while also maintaining sustainability efforts; establish a baseline of energy consumption through an energy audit, create a long-term plan for transitioning to clean and sustainable electricity, including on-site generation and energy management, understand the economic benefits of energy efficiency and low-risk solutions, education and involve the workforce in energy optimization, and work collaboratively with business partners to bring about the global energy transition.