CEO’s fear energy costs more than consumer spending

THE RISING costs of energy and raw materials now concerns businesses more than consumer spending and behaviour.


According to preliminary results from PricewaterhouseCoopers’ global annual survey of almost 800 CEOs, 53% said energy and raw material costs are a major threat to their growth prospects – a 7% increase on last year’s results.


Concern currently is at its highest amongst Asia Pacific and African business bosses. Meanwhile, one in four (24%) Western European CEOs are concerned, or extremely concerned about energy and natural resources costs.


Businesses are expected to take action, with 47% of CEOs aiming to increase their focus on reducing their environmental footprint in the next year, while 41% said there would be no change. A quarter of CEOs also plan to increase investment in securing natural resources critical to business, and addressing the risks of climate change and protecting biodiversity.


Questioned on their businesses’ ability to cope with extreme events, over a third say natural disasters threatening major trading and manufacturing hubs would have a negative impact on them.


Richard Gledhill, partner at PwC’s sustainability and climate change division, isn’t surprised by the findings. “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.


“The upward pressure on energy prices has been tempered by the global slowdown and, in North America, by the boom in gas. But the long term trend is upwards driven by demand from emerging markets, regulatory pressures and the scale of energy investment that’s required.??”


The results come as negotiators leave the UN Climate Summit in Doha, which was seen as a stepping stone to a global agreement in 2015 on how to tackle climate change and limit global warming to 2°C.


However, governments struggled to achieve a moderate outcome from the talks, and environmental groups were unanimous in describing the talks as a failure. Many had arrived at the Doha talks expecting action, after a year of extreme weather events, along with price shocks in commodity and energy price spikes. But it didn’t happen. Gledhill warned 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’”.


He added: ??“While a global deal on climate change won’t eliminate future threats or uncertainty, the slow speed and confusion surrounding negotiations to date has delayed investments, action and decisions that could build that resilience in businesses.


“The Doha summit was a small step towards a long term agreement on climate change. But disputes and disagreement at this stage how far we have to go to get agreement in 2015. 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.”