Businesses to lose competitiveness if no action is taken to combat environmental issues

Businesses to lose competitiveness if no action is taken to combat environmental issues

Energy and raw material costs are an increasing worry for global businesses according to the latest findings from the Grant Thornton International Business Report (IBR). The biggest worry for businesses are raw material costs with 44% of global businesses identifying these as having a major impact on cost pressures in the next twelve months, followed by 41% who were concerned about staff costs, 37% about energy costs and 34% about transport costs. Property costs (15%) are expected to have a lesser impact over the coming year.

Raw material and energy cost pressures Energy costs appear to be affecting Europe more than the rest of the world with five of the region’s top ten countries citing energy as having a major impact on cost pressures: Germany (58%), Ireland (47%) and France, Luxembourg and Italy (all 44%). Globally, companies in the Philippines (68% ) are due to be most impacted by energy cost pressures, followed by Botswana (65%). Companies in Australia (18% ) are least likely to be impacted by the cost of energy.

In comparison, raw material costs are due to have a greater impact on global businesses with companies from every continent appearing at the top of the table. Businesses in Spain (61% ) are due to be most impacted by the cost of raw materials, followed by Botswana and Singapore (both 60%), and Thailand and France (both 56%). Raw material costs are due to affect businesses least in the Netherlands (29%), followed by the US, UK and Sweden (all at 31%).

The International Business Report covered the opinions of 7,200 privately held businesses in 32 countries, representing 81% of global GDP.

Managing future energy cost pressures Companies in the emerging markets have done most to date to manage future energy cost pressures* according to the Grant Thornton International Business Report. Out of a maximum score of 600, companies in the Philippines (410) lead the way, followed by: Brazil (360), mainland China (341), Malaysia (307), Germany (306) and Turkey (303).

Main action taken by companies to reduce energy cost pressures:

• 58% of businesses globally have undertaken an energy review to understand how they may be wasting energy, led by companies in the Philippines (83%)
• 59% of businesses have reduced their energy consumption, again led by the Philippines (85%)
• 60% of businesses have put in place measures to ensure all computers and electrical equipment is turned off, top were Malaysian companies on 85% . The least action taken was by businesses in Thailand (16% ) and Sweden (39%)
• 44% of businesses have spent most on energy saving equipment with Brazilian businesses (66%) the most likely to invest
• 20% of businesses have invested in alternative fuel/energy supplies. European businesses are more likely to have invested in these (24%)
• 22% of businesses have considered relocating to reduce transportation costs with companies in mainland China (46%) most likely to have contemplated this

Alex MacBeath, global leader of privately held business services for Grant Thornton International, said:

"There is a simple clear message from our findings. Unless environmental factors such as energy and raw material costs become issues that significantly affect a company’s profitability there is no incentive for it to take action, and reduce its impact on the environment. There must be motivation to take action on raw material and energy costs or companies will continue to focus on other cost pressures such as salaries and wages.

"We are now at a tipping point in looking at climate change and environmental management. It is time businesses recognised the fact that unless they take action to reduce their impact on the environment, it will harm their long-term competitiveness.

"There is also a role for national Governments to look at the long-term competitiveness of their economies and factor energy and raw material costs into that equation. Unless they take action to actively encourage businesses to invest for the future and reduce their impact on the environment, they will ultimately damage their economies."