Greater reorientation on strategic choices due to geopolitical conflicts

This year, 4,454 CEOs worldwide participated in the survey, of whom 483 were from the energy sector. Geopolitical conflicts in particular call for a different approach to the international commodity market.

Geopolitical tensions

It is not surprising that the energy sector is more concerned than average about geopolitical conflicts around the world. The sector has traditionally been an international one, with multinationals operating worldwide. Geopolitical tensions often affect the sector directly. This became evident after the invasion of Ukraine, when energy prices soared. Although the disruption concerned only part of the supply, the entire system was impacted.

These concerns certainly apply to Dutch CEOs in the energy sector. 'The Netherlands has a major transit port for oil and oil-related products. Many local players are located nearby. We also import a lot of gas, components and critical infrastructure for our electricity supply from abroad. We have traditionally thrived on good relationships,' says PwC partner and energy specialist Paul Nillesen.  

Increased cybersecurity and supply chain restructuring

Many CEOs in the energy sector see strengthening cybersecurity as the main response to geopolitical threats, which aligns with trends in other industries. However, they are looking at restructuring their supply chains more often than the global average.

Nillesen: 'When it comes to restructuring the supply chain, it is important to examine which suppliers you depend on. Who are your key suppliers, and which players are you reliant on? Map out whether there are alternative suppliers, across sectors and across borders. And make a plan for what to do if something happens. Develop different scenarios and describe your actions for each.'  

Reorientating strategic choices

According to Nillesen, the time when you had access to raw materials everywhere and could treat the world as one global market is over. That is why reorienting strategic choices is crucial for the energy sector. 'There is increased attention on where goods are produced and purchased, and on the security of supply. Because how do you ensure that your suppliers are reliable? This is not only about gas deliveries, but about the entire supply chain of materials, services, and people.”

This reorientation of strategic choices is advancing step by step. The question many companies are now asking is: which components are inside the components I rely on? Nillesen: 'Five years ago, that would have been unthinkable. Back then, you had something manufactured in China because it was cheapest. Where and with whom you do business is now much higher on the agenda. Even players that are not internationally oriented, such as local energy companies, are being confronted with this.'

Climate change and energy transition remain high on the agenda

Energy companies are more concerned than other sectors about the potential impact of climate change. They have therefore, more than the global average, established processes that consider both the opportunities and the risks associated with climate change. The energy transition remains an enormously important topic within the sector.

Nillesen: 'In the Netherlands, we see that many players want to accelerate the energy transition but are running up against constraints. Higher prices, grid congestion, and shortages are having a major impact on the sector. The biggest challenge in moving from plans to tangible results is coherent government policy. Companies want to know what the world will look like ten years from now. Over the past four years, it has become much more difficult to look ahead. There is enough capital available for investment but he bottleneck lies in certainty. As a result, we see companies hitting the brakes, investing less, or slowing down.'

A critical look at the role in the value chain

In sectors other than the energy sector, climate change has moved down on CEOs’ 'lists of concerns' in recent years. This is due to the emergence of other major worries (such as geopolitics) and the more negative social and political sentiment surrounding the topic. Nillesen advises companies to think critically about their position and role in the value chain.

Nilessen: 'Take a much more deliberate look at the future and be critical of your own expectations. In Europe and the Netherlands, for example, we continue to believe in our ambitions for the energy transition, but that may not be the case for the rest of the world. There, ambitions are being scaled back. Taking different perspectives into account, and understanding how they influence your decisions, has therefore become even more important.'