Aggreko: Are CEOs Balancing Sustainability & Profitability?
Aggreko, the Glasgow-based energy solution specialist, has released a new report on the approach CEOs are taking towards the energy transition.
For the report, Aggreko surveyed 400 business leaders from across Europe and the results are rather eye-opening. The study shows that, amidst market volatility, many of these executives are recalibrating the sustainability targets.
Some 87% are already implementing decentralised energy solutions (which usually include things like on-site power generation or energy storage batteries) to balance environmental goals and profitability.
Speaking of the report's purpose, 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.
A marked shift in priorities
New research reveals that more than 95% of European CEOs have adjusted their energy transition timelines in response to recent market pressures, with half of them extending their net zero target dates. The study, which features the contributions of executives from energy-intensive sectors across the UK, Germany, France and Italy, highlights the growing tension between environmental commitments and commercial imperatives.
The findings come at a time which sees European industry grappling with stringent environmental regulations including the Deforestation Regulation and the Corporate Sustainability Due Diligence Directive, both of which mandates that businesses address environmental impacts across their value chains.
Despite these regulatory pressures, only 12% of CEOs cited speed of decarbonisation as their primary concern, with cost reduction and commercial advantage taking precedence.
Investment continues despite headwinds
Nevertheless, investment in green technologies continues, albeit at a slightly more measured pace. 80% of executives expect to increase their energy transition investments through 2025, though most anticipate only marginal increases. This cautious approach reflects the complex balance leaders must strike in today's challenging economic climate.
As previously stated, Aggreko's research indicates a significant shift towards decentralised energy solutions, with 54% of businesses planning to expand their existing systems. This trend appears driven by concerns over grid stability and a desire to establish some energy sovereignty, shielding businesses from unpredictable externalities.
How supply chains are dictating corporate policy
The report also shows supply chain vulnerabilities to be a critical concern amongst CEOs. Nearly half of executives cite their supply chains as one of the greatest risks to their energy transition plans. 21% percent ranked it as their top risk, highlighting the interconnected challenges businesses face in implementing sustainable practices, especially when trying to reduce Scope 3 emissions.
Reflecting on this notion, 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 note that there are some real variations in the findings from region to region, with different markets facing distinct challenges. For example, in Germany and France stakeholder support emerged as the primary barrier to expanding decentralised energy solutions, while Italian executives pointed to commercial viability as their main concern. UK leaders identified the intermittency of green energy as their foremost challenge.
The persistence of tradition
Aggreko's research also shows that traditional energy procurement methods are still prevalent, with 46% of companies still favouring conventional energy contracts despite the availability of more flexible alternatives like power purchase agreements and energy-as-a-service models. This conservative approach persists even as businesses face mounting pressure to reduce costs and meet environmental targets.
With that being said, the report also shows that data is playing an increasingly crucial role in energy strategy. 16% of CEOs say that data is the single most important factor influencing their company's energy transition. It could be said that this represents a shift towards more sophisticated approaches to energy management, outranking traditional factors such as dedicated ESG directors and energy consultants.
Balancing steady transition with total transformation
All in all, Aggreko's study shows this to be an extremely delicate transition period for European industry as it balances environmental commitments with commercial realities. As the report intimates, it's a difficult prospect, especially when headwinds are so strong and CEOs are trying to maintain stability.
Aggreko's own leadership seem rather equanimous about the energy transition though, perhaps because market research such as this is always useful for gaining perspective and context.
"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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