At the dawn of 2022, national economies, businesses, and households are facing a very serious international energy crisis, with the debate in the public sphere being exhausted in the daily surge of energy costs which breaks one record after another. The spike in gas and electricity prices we have been experiencing in the last months is primarily due to geopolitical and economic interests of fossil fuel-producing countries.
Demand and prices for oil and natural gas have soared, increasing the cost of production and fulfilment significantly. Such extreme fluctuations illustrate the volatility of fuel costs, which makes accurate forecasting close to impossible.
Additionally, the surging prices of natural gas and coal are poised to shutter factories and drive-up power bills, further impacting the stability of the global supply chain. This shift will create a domino effect that affects every business activity in the global economy, leading to shortages and inflation.
Many corporations now recognize the interdependence of these moving parts and how their survival will pivot upon updating their business processes to address the global energy crisis. When inflation is persistently high, sectors such as Energy, Real Estate, Health Care, Utilities, and Consumer Staples historically have outperformed on average, but others such as Industrials, Materials and Financials have struggled.
Advantages for businesses to switch to renewable energy:
- Lower energy bills and increase profitability: harvesting renewable energy like solar and wind can reduce the energy bill and increase long-term profits.
- Increase predictability: since the business operations are no longer subject to fluctuating oil and gas prices, you can better forecast your expenses.
- Reduce dependency on imported fuels: using renewable energy frees your business from unpredictable global geopolitical issues that can impact the supply chain.
- Improve brand image: going green can give you a public relations boost and position your business favorably in the eyes of prospects and customers.
- Gain a competitive advantage: customers want to be associated with environmentally responsible brands, so switching to renewable energy can help you attract more business.
- Attract investors: many investors seek out companies with a sustainability and CSR focus as they recognize that these businesses will come out ahead in the long run.
- Ensure business continuity: your operation will less likely be disrupted by an electricity outage, which has become more frequent as the electric grid is strained.
More companies, and their investors, are recognizing sustainability as a strategic priority that involves significant business risks and opportunities. But historically, few companies have organizational structures that are designed to treat sustainability as a material business issue. Instead, sustainability activities—and the organizations that support them—have focused primarily on investor relations, PR, and corporate social responsibility.
Sustainability is no longer an issue of compliance for most companies but rather a strategic and operational one. Once senior leaders integrate sustainability into their corporate strategy, they will benefit from having a dedicated organization to support their sustainability efforts. There is no right structure that applies to every company; each will need a structure of its own and will likely need to adjust this structure as business conditions and requirements change.
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