A median of just 9% of businesses say it is their top risk in this category, falling to just 6% in the US. Nevertheless, a median of 41% feel ‘very prepared” to anticipate and manage the risk – with US sectors feeling strikingly more secure.
Such high levels of confidence may reflect the fact that energy reform is far less advanced in the US than in the UK, which has already designated emissions zones in cities, named dates for ending petrol and diesel use in cars and begun the phasing out of gas fired boilers in housing construction and renovation. In October, the UK Government announced plans to incentivise people to install low-carbon heating systems as they replace their gas boilers over the coming decade.
Confronting hidden risks
In part, some of the difficulty in terms of energy transition is gaining oversight of the whole value chain. In a foretaste of things to come, the dramatic hike in the price of natural gas in September 2021 had unexpected knock-on effects on other industries in the UK including food and drink production. It is notable that when asked earlier in 2021, only 9% of respondents in this sector rated energy transition as their top risk, while 43% were confident in their resilience to it. These figures seem likely to be turned around significantly when our research is refreshed next year.
And unexpected consequences
Even when companies embrace energy transition issues with the creation of new products and new payment mechanisms, the environmental and associated reputational issues are not always apparent. This is one area where failure to take appropriate action now may result in elevated product recall or D&O risk down the line.
In one example, an electrical vehicle manufacturer announced that it would accept payment in bitcoin for its electric vehicles, citing its ability to make the company more flexible and maximise returns on its idle cash. However, when the environmental implications of this decision were made plain, the decision was rapidly reversed.
As activist pressure grows and the impact of climate change becomes more obvious regulatory and legislative interventions around energy transition will become an increasing reality.
How to strike the right balance between compliance and progress?
Supply chain networks have typically been designed for efficiency, cost and proximity to markets but not necessarily for transparency or resilience. In this era of increasing interconnected risk, these factors need to be taken seriously so companies can embed sustainability throughout the value chain to reduce waste, increase efficiencies and stay ahead of the competition. Ultimately, transparent and sustainable supply chains not only create positive impact for organisations’ own corporate interests, but also for society and the environment.
Chris IllmanHead of Responsible Business, Beazley