What immediate actions should we be taking to respond to the energy crisis? And should we be rethinking how we use energy in the long run?
These are the questions we hear time and time again from manufacturing company leaders.
Resilience is already a priority for them following the pandemic. In our latest Global Manufacturing Prospects report, more than two-thirds of CEOs say they want to have a resilient supply chain to withstand a global lockdown. The ongoing global energy supply crunch has only reinforced why they need to think about their energy approach from the ground up.
The high cost of energy is already affecting individuals and businesses across the UK; the impact has been swift, direct, and visible. There is indeed lots to grapple with as we continue to see strained supply in the global energy market along with ever growing demand. We are seeing a lot of executive engagement on this topic and firms that started working on their energy crisis response over the summer already have an edge.
When it comes to energy for industrial use, there are two key issues. The first is the reliability and pricing of your existing supply and the second is the way you use energy in your operations. The fact that energy consumption is inextricably linked to the ongoing cost of living and climate crises makes it more complicated to form an energy strategy.
But right now, the focus must be on the immediate energy challenges. How are you going to deal with your worst-case scenario? Here are some important considerations:
Get ready for a challenging winter ahead: You will have seen the projections and the forecasts. We might be fortunate and sail through with limited impact if the winter remains as mild as it has been. But that’s not a given, and European countries are already working on reducing peak demand to contain the risk of blackouts.
Nonetheless, you’ll need plans for different scenarios. What is your contingency plan if energy supplies remain strained and prices continue to rise? Have you done a red flag assessment?
Know where exactly you’ll be impacted: Not all businesses are equally dependent on energy. Some like glass and steel are standouts. But you might be dependent on suppliers who rely on a steady supply of energy at relatively stable prices. Identify those links and find alternatives where necessary. That means looking at your upstream and downstream supply chains.
Go beyond temporary fixes: The current situation is not just a result of the Ukraine conflict and will likely persist. Beyond addressing the immediate challenges, look at longer-term solutions to becoming more energy efficient and moving towards renewable sources of energy for your operations.
Work on reducing demand: This will not only help you get through the immediate energy crisis but also enable your organisation to save cost and become sustainable in the long run.
Account for impact on people: If your business gets affected, how are you going to support suppliers, employees, and customers? Find areas where you can step in and minimise adverse impact on the people involved. Your actions will affect not only your bottom-line but also your stakeholder relationships.
The spring beyond the winter: an opportunity for UK manufacturing
This is also a time to think about where we are heading with the future of energy and how government and businesses could be shaping a resilient and sustainable strategy together. We see purpose and opportunity for UK manufacturers in this – infrastructure for hydrogen and electrification, improved energy efficiency, and research and development – all things that will give us compounding benefits, if we get on the front foot now.
Let’s remember we have been here before in the 1970s with the energy price shock. The crisis spurred advances in energy efficiency and improved our energy policy outlook. Today’s ongoing crisis should once again drive us to embrace the challenge and fight for long-lasting change.
If you would like to discuss any of the topics above in more detail, please contact Rebecca Shalom or Jonathon Gill.
