CEOs Navigate Profit & Sustainability Amid Energy Challenges
An Aggreko report is exploring the approach CEOs are taking towards the energy transition.
The report draws on insights from 400 European business leaders, unveiling a significant recalibration of sustainability objectives amid market uncertainties.
It finds that around 87% have embraced decentralised energy strategies, such as on-site power generation and energy storage systems, aiming to merge environmental objectives with financial viability.
Robert Wells, Europe President of Aggreko, says: “With appetite for decentralisation and alternative power agreements on the rise, we have launched our report to help leaders understand the market and how it is evolving."
- Decentralised energy solutions are energy systems that produce energy close to where it's used, instead of at a large power plant and then sending it through the grid.
- They can use a variety of renewable energy sources, such as: solar power, wind power, biomass, biofuels, small hydropower systems and combined heat and power (CHP) systems.
Navigating new environmental and financial realities
Recent research indicates an overwhelming majority, more than 95%,of European CEOs have revisited their energy transition timelines due to prevailing market pressures, with half deferring their net-zero goals.
This research surveys executives across vital sectors in the UK, Germany, France, and Italy, pointing to the increasing clash between environmental pledges and economic demands.
This reevaluation unfolds as European businesses navigate strict environmental legislations such as the Deforestation Regulation and the Corporate Sustainability Due Diligence Directive, demanding companies account for their environmental impact comprehensively.
Despite these regulatory demands, 12% of CEOs identify the pace of decarbonisation as their primary concern. Instead, cost reduction and gaining commercial advantages dominate their priorities.
Continued investment amid economic challenges
While facing economic headwinds, corporate leaders are persisting in their investments in green technologies, though with a note of caution.
About 80% expect increased spending on energy transitions by 2025, though most anticipate only marginal increases.
This measured approach illustrates the complex balance required in today's economic climate.
As alluded to in Aggreko's findings, there is a marked shift towards decentralised energy sources, with more than half of the companies planning to expand these systems due to concerns over grid stability and a yearning for energy autonomy, protecting operations from unforeseen external impacts.
Supply chain considerations shape corporate strategies
The report also identifies supply chain vulnerabilities as a significant concern for CEOs, with nearly half indicating it as a prime risk for their energy transition strategies.
Another 21% deem it their most considerable risk, underscoring the multifaceted challenges of implementing sustainable practices and reducing Scope 3 emissions.Robert says: “It is not surprising that our research has uncovered leaders across Europe are looking for change when it comes to their energy supply chain.
“In a tough economic landscape, grid instability and connection delays, price uncertainty and looming ESG targets are impacting many businesses’ energy transitions."
It’s important to highlight variations in regional responses, with distinct hurdles in decentralised energy adoption.
German and French leaders cite stakeholder support as a major obstacle, while Italian executives focus on commercial feasibility.
UK leaders, meanwhile, point to the intermittency of renewable sources as their central challenge.
The persistence of tradition
Aggreko's study reveals that, despite the shift towards more flexible energy procurement models like power purchase agreements and energy-as-a-service, nearly half of the firms still opt for traditional energy contracts.
This adherence to conventional methods prevails even as companies face increasing pressures to trim costs and meet environmental standards.
The report also emphasises the growing significance of data in shaping energy strategies, with 16% of CEOs ranking it as the foremost influence in their energy transitions, suggesting a move towards more sophisticated energy management techniques over traditional practices like hiring dedicated ESG directors or energy consultants.
The delicate balance of environmental and commercial imperatives
Throughout, Aggreko’s study illustrates the delicate balancing act required by European industries, negotiating environmental duties against commercial realities.
"Particularly when capital is at a premium, supporting customers with controlling costs and energy supply will remain a key part of ensuring a smooth energy transition," Robert says.
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