New research shows Australian businesses remain concerned about the impacts of energy security and prices, which could be a catalyst for a range of environmental, social and economic ripple effects.
ABB’s Electrification Energy Insight survey of Australian leaders from small and large businesses across a range of sectors reveals that 89% of respondents feel that the continuing instability of energy is threatening their profitability and competitiveness.
Energy costs and insecurity are also having a significant impact on the workforce with decreased investment in employees. More than half (53%) of leaders say the cost of energy will delay them meeting their sustainability targets.
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Restricting business investment and growth and impact on customers
Rising energy costs and insecurity are forcing business leaders to rethink how they operate and where they invest in their businesses, to grow and remain competitive.
The survey showed 36% of Australian businesses cut spending in some areas over the past year in response to higher energy costs. The biggest cut was on technology spend with 46% of respondents reducing outlay in this area. Spending was also substantially reduced on marketing (36%) and training and development (36%).
The research showed one in five businesses (20%) said rising energy prices delayed the launch of new products/services and 21% said it had delayed future investment.
More than a quarter (26%) of respondents said higher energy prices had reduced their profit margins over the past 12 months with 30% predicting the higher prices would negatively impact profit margins over the next three to five years.
Rising energy prices have also led 26% of businesses to pass price rises to customers with 28% predicting that they will need to do this over the next three to five years.
Impact on employees
Businesses say they have reduced investment in their workforce in the last year because of increased energy costs and the need to implement mitigation measures. This is expected to continue over the next three to five years if energy challenges persist.
Three of the top five business areas where spending was reduced over the past year are related to the workforce: 37% tightened spending on salaries/overtime/bonuses, 36% invested less in training and development and 35% spent less on recruitment.
In the next three to five years, 50% of businesses predict increased energy prices will result in reduced spend on recruitment, 36% anticipate they will spend less on training and development and 36% expect to cut spending on salaries/overtime/bonuses.
Delaying decarbonisation
Respondents further cite concerns that energy pricing and insecurity could delay progress on climate change, with meeting carbon reduction commitments currently considered less of a priority than reducing energy costs.
Over half (53%) of business leaders surveyed said the cost of energy could delay achieving their sustainability and carbon reduction targets by anywhere from one to five years. While reducing energy costs is the top priority for 60% of companies, only 42% currently have reducing carbon emissions within their overall business priorities.
Energy security
More than three quarters (77%) of business leaders express concern about the security of their business’s energy supply, and many are taking action to address this. Over a third (37%) are worried about further rises in energy costs and 36% are concerned by power cuts and blackouts. In response, 27% have already increased investment specifically focusing on improving their energy efficiency, 19% are switching suppliers and 15% are integrating more renewable energy.
ABB Electrification president Morten Wierod said, “Businesses say they need to insulate themselves from energy prices and insecurity and are re-evaluating current and future spending plans. Taking action to mitigate this is a clear priority, but this doesn’t have to be a catalyst for potential workforce or environmental impacts. Investing in smart and sustainable onsite renewables and energy efficiency technology means businesses can simultaneously cut costs and reduce their emissions. With the right approach, it is possible for industry to achieve cost savings without sacrificing competitiveness, workforces or the journey to decarbonisation.”
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Taking action
While businesses overall want to take proactive actions to address their energy challenges, 30% are being put off by the perceived cost of implementing energy efficiency measures, and 21% feel they don’t have the know-how or resources to proceed.
Much of the technology that can help businesses—large or small—to optimise their energy management and reduce costs, is already widely available and at a reasonable cost. For example, at a telecoms HQ in Hanoi, smart building technology reduced energy costs by 20%, while retrofitting hardware and using energy management solutions at an ABB factory in Italy has led to 30% energy savings.
