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ICAEW: why businesses need to plan ahead on energy

Author: Asma Jan Muhammad, ICAEW Member and Group Finance Director, WFC Holding

Published: 05 Mar 2024

Energy is critical to our economies and daily lives, and in today’s world, where geopolitical tensions and the green agenda have global impact, it has never been more important for countries and businesses to plan ahead and adopt sustainable energy strategies. Proactive energy planning is essential in an era of interconnected energy markets, growing concerns about energy security, cost management, and environmental responsibility. By doing this, countries and businesses can gain a competitive advantage and achieve long-term stability in an ever-changing world.

Recent geopolitical events, such as Russia's actions in Ukraine, have highlighted the importance of energy security. The interdependence of global energy markets means that disruptions in one region can have far-reaching effects worldwide. To safeguard operations, countries and businesses must diversify energy sources and reduce reliance on single suppliers. Embracing renewable energy, energy storage, and grid resilience solutions can enhance energy security and provide a stable foundation for business continuity.

Efficient energy usage is not only an environmental concern but also a strategic imperative for businesses. Energy wastage cannot be overlooked in today's market, where every penny counts. To optimise cost management, businesses must identify and address energy inefficiencies. Schneider Electric's 'Energy as Currency' report indicates that cutting energy consumption by 30% can reduce overall operating costs by up to 10%. Redirecting funds from wasted energy towards productivity-boosting measures or investments in sustainable practices can improve a company's financial performance and contribute to environmental responsibility.

Governments worldwide are increasingly implementing stricter regulations to combat climate change and promote cleaner energy. To avoid legal and financial consequences, businesses must proactively meet environmental standards. Planning ahead for compliance with evolving regulations allows businesses to adapt their strategies and operations in a timely and cost-effective manner, ensuring continuity and adherence to ethical and environmental responsibilities.

Forward-thinking businesses stand to gain a significant competitive advantage as the world shifts towards renewable energy and sustainable practices. Embracing renewable energy sources, such as solar and wind power, not only reduces carbon footprints but also provides budget clarity through fixed-price energy contracts. Such strategic decisions resonate positively with customers, investors, and stakeholders, differentiating businesses from their competitors and fostering a positive brand image.

Businesses must consider their long-term energy needs and anticipate the global shift towards a low-carbon economy. Investing in renewable energy solutions now will better prepare companies for the future, mitigating risks associated with potential energy price fluctuations and supply constraints. Moreover, sustainable practices and environmental, social, and governance (ESG) commitments can enhance a company's long-term stability, attracting sustainable investments and securing a positive trajectory for business growth.

Strategic energy planning is not an option but a necessity in today's dynamic landscape. By integrating sustainable practices and renewable energy solutions into core strategies, businesses can secure their futures while contributing positively to the global transition towards a greener, more sustainable world.