How procurement can tackle the costs of the energy crisis

With rising inflation and the energy crisis across the globe, procurement needs to adapt to reduce the impact

According to a recent Office for National Statistics (ONS) report, untameable increases in oil and gas prices have led to business insolvencies reaching their highest levels since the 2008 economic crash.

This skyrocketing rate of inflation is taking its toll on business across the globe. Just in the UK alone, 5,629 businesses have already crashed as a result of soaring energy bills and raw material costs, according to the report.

Recalcitrant oil and gas prices are giving way to record levels of global inflation, with energy-crisis-waves expected to continue expanding. 

The net of economic turmoil is cast much wider than the UK, with many countries in the EU and beyond 'at odds over how to tackle the energy crisis' according to another recent report by the International Business Times.

In the UK, the government has announced it will cap industrial prices to protect businesses from the toll of increasing costs, but the buffer still seems to be having little to no effect.

While in wider Europe, soaring prices "heighten inflationary pressures, constrain post-Covid recovery objectives and exacerbate the energy poverty predicament of millions of Europeans", according to the EU Institute for Security Studies

Director of AR Procurement Services, Annette Rothwell, warned “there is no silver bullet sadly” and “no one-size-fits-all” approach to solving the crisis.

Executive Vice President of procurement at Proxima, Simon Geale, added: “Current market conditions, as well as the green agenda, are shining a light on just how much wastage there is in the flow from generation to usage.

"Understanding usage and leveraging that information to change behaviours, in order to be more energy efficient and reduce waste, is where the big impact will come from in today’s market.”

To manage rising costs procurement leaders will need to implement systems such as contract evaluation, energy consultant procurement, supplier communication and standard cost-saving strategising.

Such approaches will not be a panacea to the ills of market troubles, but can serve to minimise the impact.

In uncertain times, procurement organisations need to increase certainty over those aspects of the function that they do actually have control over.

The road may be obscured and precarious, but the vehicle still needs handling with vigilance and expertise - and more so - and of course the correct gears and lights are required. There are destinations to be reached after all.

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