Written by Vincent Govaers and Luc Machiels
While we continue to deal with the pandemic's aftermath, our economy is already facing a shock in the energy supply. It's no secret that this is wreaking havoc on businesses worldwide. Prices are soaring, and it is impossible to predict precisely where this will end; however, we can be sure that the new energy equilibrium will differ from the one we knew in the recent past.
Businesses of all sizes play a crucial role in safeguarding our welfare as a country. And to bounce back, we must understand the issues that should be tackled.
If you're a business owner, you're probably wondering: how can I act effectively during this challenging time? In this blog post, we share some tips to help your business stay afloat during the energy crisis.
What is the problem?
One of the key problems during this energy crisis is that we are mainly dependent on depleting resources provided by a few supplying countries. For the past decades, we spent billions building a global energy infrastructure that has made us increasingly reliant on oil and gas. However, we are not prepared to deal with a sudden scarcity of these resources today.
For many companies, this is unmanageable. With labour costs simultaneously rising due to inflation, and revenue dropping, it seems like we're caught in an endless loop.
What can companies do?
To get out of our current slump, we need to establish robust businesses. Just like we had to rethink our supply chains during the pandemic, we must redefine energy production and consumption. Business leaders are pivotal in driving our economy and society forward; to stand by and watch is not an option. Although it may seem daunting, there are several steps you can take today:
Optimize energy consumption
Like individuals, companies should save money by managing their energy consumption more efficiently. Energy has already been a significant cost factor for energy-intensive organizations, but now it is a fundamental factor for almost every organization. Analyzing and monitoring consumption patterns is one way to control this. In essence, you need to know how much energy you really need and when. Taking a deep dive into this can help a company optimize its costs and avoid wasting energy.
Produce energy locally
Direct investments in on-site energy production are another lever companies can use. Most businesses have not investigated all the possibilities to their full extent, and now is the time to do so. Selling energy leftovers to the grid was never more profitable. Additionally, renewable energy technologies continue to improve every year, providing a wide array of potential solutions.
Install a solid operational control
In challenging times, a strong KPI framework is necessary to ensure proper operation and financial control (including cash flow optimization and management). Companies should re-assess the measures they are currently tracking to navigate this increasingly challenging environment. Identifying the right KPIs should help the organization gather insights that can drive action throughout the organization. To clarify strategic directions, KPIs should cascade down from C-level to operational teams.
Assess and mitigate risks
Building a resilient organization starts with understanding risks. This is especially important for financial institutions that need to perform thorough portfolio risk assessments. Banks, for instance, will need to develop a deeper understanding of how soaring energy prices can impact their portfolios. A crisis like this often ends in cutting debts, which should be prevented when investments into more sustainable infrastructures are needed.
Furthermore, private equity firms will need to revise their due diligence processes to identify robust business models more accurately. In the future, entire industries might become less attractive to invest in. Sustainability due diligence considers long-term parameters to assess business survival chances and provides critical information to make sound investment decisions.
Listen to your stakeholders
A crisis like this can cause unrest within businesses. As an organization, remaining aware of how the crisis impacts your stakeholders and how your company relies on them is critical.
You should always be aware of how your clients and suppliers are doing since their business continuity significantly impacts yours. Strong partnerships with open communication are necessary to maintain a successful business relationship. If one of your partners is facing difficulties, come together and work towards a win-win that benefits everyone in the long run.
Among your most important stakeholders are your employees. They keep your business running on a day-to-day basis. As a responsible business leader, you should ensure that everyone can pay their bills at the end of each month. And as a responsible employee, you should contribute to finding and implementing sustainable solutions. Employers and employees need to work together to find answers to this crisis since it affects both our professional and personal lives.
Keep in mind that none of the proposed actions will be enough on their own. Multiple initiatives should therefore be put into place at once. It will also take time to transition to an economy based on renewable energy — so now is the time to act.
How can BrightWolves help?
The people who will come out of this crisis the strongest are those who can take quick and effective action. We need to base decisions on facts and data rather than gut instinct to make decisions quickly. This way, we can create more robust business models that will be able to weather any storm.
At BrightWolves, we helped our clients through many challenging transformations in various industries, always keeping a long-term perspective. Our business and sustainability experts have a proven track record in value chain optimizations, due diligence, process improvements and portfolio management. On top of that, our digital and data practices bring the necessary skills to rapidly analyze your data and bring a compelling story that translates insights into action.
If you're interested in exploring how your company can become more sustainable, please get in touch with Luc or Miguel for a conversation.