Green ambitions under threat as economy bites business aspirations

There are growing fears that businesses will throw their green aspirations out of the window as they look to ways to manage their finances through the current economic crisis.

As fears of recession hit the USA, Germany and the UK the Confederation of British Industry (CBI) has warned soaring energy prices are making businesses rethink their investment in ESG.

The organisation conducted a survey in which over two-thirds of firms said they expect their energy costs to increase over the next quarter. A third of firms added they expect energy price rises to act as a barrier to growth, by stifling current or planned investment in energy efficiency or Net Zero measures.

It warned with many firms, particularly Energy Intensive Industries and SMEs, already feeling the pinch, further energy price rises could push many viable businesses to the brink unless urgent action is taken to support them and their supply chains.

Matthew Fell, CBI chief policy director, said not only will the continued energy costs crisis threaten the future of many firms for others green investment is becoming less attractive.

“The impact of soaring energy prices on households is going to have serious consequences, not just for individuals but for the wider economy,” he warned.   “While helping struggling consumers remains the number one priority, we can’t afford to lose sight of the fact that many viable businesses are under pressure and could easily tip into distress without action.”

Fell continued: “Firms aren’t asking for a handout. But they do need Autumn to be the moment that government grips the energy cost crisis. Decisive action now will give firms headroom on cashflow and prevent a short-term crunch becoming a longer-term crisis.

“With firms under pressure not to pass on rising costs, there is a risk that vital business investment is paused or halted entirely. That in turn could pose a real threat to the UK’s economic recovery and Net Zero transition.”

It creates a major issue for Western governments who have pledged to hit net zero targets via a swift reduction in emission levels. With regulators pushing hard for financial institutions and firms to examine the ESG credentials of their partners across the supply chain it may well impact the efforts that insurers have pledged to make to support the transition of their energy intensive clients to a more sustainable future.

Support is only effective if those you are seeking to support want the support, but more fundamentally are actually committed to the path you are seeking to support them to take.

Jon Guy, Editor

Emerging Risks