Bosses' fears over energy and resource costs hit new high
More than half of chief executives regard energy and raw material costs as a major threat to their growth prospects, according to a new survey of nearly 800 corporate bosses from around the world.
Preliminary findings from PwC’s Annual Global CEO Survey reveal concerns over energy costs and resource scarcity are at a three-year high, with 53 per cent of chief executives claiming the issues have overtaken sluggish consumer spending as one of the top threats to future growth, a seven percentage point increase on last year.
The company said concerns over rising energy prices and raw material price shocks were most pronounced in developing economies in Asia and Africa, but high numbers of chief executives in all geographies regard environmental issues as a growing risk.
For example, a quarter of European chief executives identified energy and resource costs as a problem, while a third said increasing natural disaster risks could have a negative impact on their operations.
Significantly, large numbers of businesses are now taking action to address these risks, with 47 per cent of CEOs claiming they will increase their focus on reducing their environmental footprint next year.
“With a much more challenging environment for growth, businesses can ill afford price shocks in energy and resource costs for business, so it’s no surprise they are rising up the list of threats to their future growth prospects,” said Richard Gledhill, partner at PwC’s sustainability and climate change division.
He added that, despite the global economic slowdown and the gas boom in the US, the long-term trend for energy prices remained upwards due to “demand from emerging markets, regulatory pressures and the scale of energy investment that’s required”.
He also warned that similar upward pressures were facing a host of important raw materials. “Demand from emerging markets has kept the pressure on commodity prices, and extreme weather or natural disasters have exacerbated price uncertainty and security of supply risks, particularly in agricultural commodities,” he said. “It all adds up to ratchet up CEOs’ concerns.”
PwC warned that with last week’s Doha Climate Summit failing to deliver significant progress, it looks increasingly unlikely businesses will be able to rely on governments to address rising environmental risks and as such corporate leaders will have to undertake their own efforts to enhance operational resilience.
“The Doha summit was a small step towards a long-term agreement on climate change. But disputes and disagreement at this stage show how far we have to go to get agreement in 2015,” said Gledhill. “For business, the long-term direction can’t come soon enough, if they are to make the kind of investments needed to get us on a low-carbon track, not to mention adapting to a new normal of high uncertainty, subdued growth and volatile commodity prices.
“It’s worth repeating that if regulatory certainty doesn’t come soon, businesses’ ability to plan and act, particularly around energy, supply chain and risk, could be anything but ‘normal’.”