Businesses around the world remain concerned about the impact on energy security and prices, which could trigger a series of environmental, social and economic knock-on effects.
According to ABB Electrification’s Energy Insights survey of 2,300 leaders in 10 markets around the world, including the UAE, representing businesses large and small across a variety of industries, 92% of respondents believe continued energy instability is threatening their bottom line capabilities and competitiveness.
Energy costs and insecurity are having a major impact on the workforce as investment in employees dwindles. Business leaders are also concerned about the potential impact of achieving the Sustainable Development Goals.
Loay Dajani, Managing Director Electrification Middle East and Africa, ABB, said: “As the UAE prepares to host COP 28, this survey underscores the importance of prioritizing sustainable energy practices for businesses in the region. By recognizing the impact of energy issues on competitiveness, workforce and the impact of decarbonization efforts, companies can take proactive steps to achieve a more sustainable future that supports economic growth and environmental protection. It highlights the urgent need for collective action to address these challenges and accelerate the transition to a sustainable low-carbon future. ”
Limit business investment and growth
Rising energy costs and insecurity are forcing business leaders to rethink how they operate and where they invest in order to grow and remain competitive. The main impact of rising energy costs on businesses last year included lower profit margins (34%) and spending cuts in some areas (34%), diverting investment in research and development and other business growth initiatives. More than a third (38%) have or plan to reduce technology investments, while a third (33%) expect to cut infrastructure spending and 31% expect to reduce marketing spending.
Impact on employees
Businesses said they reduced investment in their workforce in the last year because of higher energy costs and the need to implement mitigation measures. This is expected to continue over the next three to five years if the energy challenge persists. Of the top five business areas of budget cuts, three are workforce-related: 42% will reduce spending on recruitment; 38% will reduce payroll, overtime and bonus spending; and 37% will reduce investment in employee training and development.
Respondents further expressed concern that energy pricing and insecurity could delay progress on climate change, and meeting carbon reduction commitments is now seen as less important than reducing energy costs. More than half (58%) of business leaders surveyed said energy costs could delay their achievement of sustainability and carbon reduction goals by one to five years. While reducing energy costs is a top priority for 61% of companies, only 40% currently include reducing carbon emissions as an overall business priority.
83% of business leaders are concerned about the security of their business’ energy supply, and many are taking action to address the issue. More than a third (36%) are concerned about further increases in energy costs, 31% are concerned about blackouts and outages, and a quarter are concerned about energy rationing. In response, 34% have increased investment, with a particular focus on improving energy efficiency, and 40% want to install on-site renewable energy generation to reduce reliance on the grid.
Morten Wierod, President Electrification at ABB, said: “Companies say they need to insulate themselves from energy prices and insecurity and are reassessing current and future spending plans. Sure to be a catalyst for potential labor or environmental impact. Investing in smart and sustainable on-site renewable energy and energy efficiency technologies means businesses can cut costs and reduce emissions at the same time. With the right approach, industry has the potential to grow without sacrificing competitiveness, Cost savings without labor or decarbonisation journey.”
While businesses overall want to take proactive action to address energy challenges, one-third are put off by the cost of implementing energy efficiency measures, and nearly half (49%) feel they don’t have the expertise or resources to continue.
Many technologies that can help businesses, large and small, optimize energy management and reduce costs are already widely available and affordable. For example, at a telecom headquarters in Hanoi, smart building technology reduced energy costs by 20 percent, while retrofitting hardware and using energy management solutions at an ABB factory in Italy saved 30 percent. — trade arab news agency