Energy volatility a primary concern for businesses

Volatility in energy supply and energy prices is becoming a key concern for businesses, according to new research released by Schneider Electric.

The findings of Schneider Electric’s Sustainability Index, 2023 report, a quantitative survey conducted with over 500 decision-makers across corporate Australia, reveals that only one-third (32%) of companies feel adequately equipped to navigate future energy market volatility, with one in four businesses nominating it as their key concern.

Despite these concerns, the survey also reveals that a significant number of businesses are doing little or nothing to transition to cleaner energy sources.

“A strong, resilient energy mix is essential for every business,” said Gareth O’Reilly, Pacific Zone President of Schneider Electric. “Leaders should create holistic, optimised energy management strategies that look to action efficiency measures, electrify wherever possible, and develop a mix of onsite renewable generation, storage and real-time monitoring to help manage and reduce their energy needs,” he added.

Climate change and its associated impacts (34%) rounded out the top three energy supply concerns for business leaders, reflecting the growing recognition of the impact of climate change on economic performance.

The survey reveals that energy supply concerns are underpinned by several factors, including power grid reliability, with 24% of businesses expressing worry about grid resilience.

“Businesses should explore alternative energy management strategies to ensure a reliable supply of power and manage their reliability concerns, while advocating for policy that enables the transition,” Mr O’Reilly said.

“Volatile energy markets are encouraging businesses to act on both supply and demand to insulate themselves against unpredictable costs, with positive implications for sustainability. Actions taken are win-win, especially in the current energy market,” he added.

The survey highlights a trend among businesses to invest in energy efficiency and sustainability. Approximately 70% of businesses are currently discussing or implementing strategies to improve energy efficiency, recognising its potential to reduce costs and enhance environmental performance. Two-thirds (66%) of companies are considering implementing renewable energy solutions on site, such as solar power.

Electrification and fuel-switching solutions are also popular options, with half of surveyed businesses exploring these options. By transitioning to electrified systems and incorporating fuel-switching solutions, businesses can reduce their carbon footprint and minimise reliance on traditional energy sources, the prices of which are tied to global market circumstances.

“Volatile energy markets are encouraging businesses to act on both supply and demand to insulate themselves against unpredictable costs, with positive implications for sustainability. Actions taken are win-win, especially in the current energy market,” added Mr O’Reilly.

Schneider Electric’s Sustainability Index, 2023 underlines the significance of decarbonisation efforts among businesses. One-third (33%) of companies that have committed to decarbonising their operations have done so due to climate-related risks. Another 13% have identified the need to mitigate risks within their value chain, while 14% aim to enhance resilience against disruptions. These figures highlight the increasing recognition of the business benefits associated with sustainability initiatives.

Business leaders are acutely aware of the impact of energy costs on their operations. As one respondent highlighted, “Skyrocketing prices made us re-evaluate our energy needs and where we could decrease.”

Despite these concerns, a small but significant number of businesses are doing little or nothing to transition to cleaner energy sources, according to the research.

The Sustainability Index reveals that over one in five businesses (23%) still have no plans to implement a strategy to address Scope 1 and 2 emissions — direct emissions from sources owned or controlled by the organisation. This figure increases to one in four businesses (25%) when it comes to inaction on Scope 3 emissions, which include indirect emissions from the value chain.

A small minority, five per cent, of businesses have reduced their spending on initiatives aimed at cutting carbon emissions over the past three years.

“Although businesses are juggling competing challenges and priorities, it’s essential to maintain a focus on sustainable transformation which drives a competitive edge economically in addition to the environmental and societal benefits,” said Mr O’Reilly.

The findings of Schneider Electric’s report show that most businesses do recognise the urgent need for climate action. More than three-quarters of businesses agree that sustainable transformation is the driving force behind gaining a competitive edge in today’s business landscape.

Professional, scientific, and technical services (39%) and financial and insurance services (39%) providers were most likely to report that their company would reach net zero carbon emissions by 2030. Only one in four construction businesses felt this milestone would be achieved in the timeframe, followed by respondents working in healthcare (29%), education and training (32%) and manufacturing (32%).

“Australia can’t afford to have businesses left behind on the road to net zero,” said Mr O’Reilly.

“Sustainability challenges and opportunities vary from industry to industry, but the target doesn’t. The economic benefits of energy transition are clear. It’s important that industry, and government, understand the needs of these businesses, so that they can be supported and get on track to decarbonisation.”

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