Turning energy instability challenges into opportunities

In the context of energy instability, manufacturing enterprises in Vietnam need to build a long-term investment strategy, including investing in renewable energy and transitioning to a sustainable model...

Illustration (Source: Unplash)

In the world and in Vietnam, the manufacturing industry is a field that has a far-reaching impact on the environment and consumes a lot of resources. According to a report by the World Economic Forum 2022, the manufacturing industry currently accounts for 20% of total global carbon emissions and consumes up to 54% of the world's energy.

The World Economic Forum in 2023 also emphasizes that the demand for sustainability in the manufacturing industry is becoming more urgent than ever due to its significant impact on global CO2 emissions.

In the context of technological advancement, climate change and geopolitical challenges, the global manufacturing industry is transforming drastically. Manufacturing enterprises must adjust their strategies to cope with various challenges in economic policies, climate policies, global geopolitical risks, as well as energy-relate issues.

ENERGY INSTABILITY IMPACTS THE MANUFACTURING INDUSTRY

According to a recent study by a research team consisting of Dr. Dao Le Trang Anh (RMIT University), Dr. Nguyen Thi Thieu Quang (University of Da Nang), and Dr. Nguyen Tuan Anh (BIDV Institute of Training and Research), with the essential role of energy in the operation of machinery, manufacturing enterprises are highly dependent on the supply and volatility of the energy market.  Therefore, energy instability plays an important role in the financial decisions and long-term strategic plans of manufacturing enterprises.

Research indicates that in recent decades, energy instability has significantly increased globally. Fluctuations in the energy market are influenced by various factors, including geopolitical tensions, changes in supply and demand, production fluctuations, economic conditions, technological advancements, and renewable energy policies.

For example, the global financial crisis caused oil prices to drop from a high of $140 per barrel in July 2008 to $30 per barrel by the end of that year. In less than a year, oil prices surged back above $80 per barrel.

More recently, the Russia-Ukraine conflict has led to disruptions in the supply of oil from Russia to the global market, causing oil prices to rise from $74 per barrel in January 2022 to $129 per barrel in March 2022.

According to the research team, in the context of energy instability, large manufacturing enterprises in many countries around the world tend to invest more in new equipment, technologies, and processes to meet new energy requirements, aiming to reduce environmental impact and enhance sustainability,..

Similarly, Vietnamese manufacturing enterprises also need to have a long-term vision and appropriate investment strategies to maintain stability and sustainable development.

HOW VIETNAMESE BUSINESSES RESPOND TO INSTABILITY, SEIZE OPPORTUNITIES

In order to respond to energy instability and capitalize on emerging trends, the research team suggests that Vietnamese manufacturing enterprises need to develop long-term investment strategies.

Firstly, investing in renewable energy. One of the primary solutions to reduce dependence on traditional energy sources is to invest in renewable energy sources.

Vietnam has natural advantages such as sunlight and wind conditions. Therefore, manufacturing enterprises can consider installing rooftop solar energy systems or investing in wind energy projects.

Secondly, improving technology and enhancing efficiency. Investing in advanced technology is crucial for enhancing energy efficiency. Manufacturing enterprises should consider implementing automation systems, energy-saving machinery, and green production processes to minimize energy consumption and operational costs

Fourthly, transitioning to a sustainable and socially responsible business and production model. Manufacturing enterprises need to integrate environmental protection elements into their business strategies, including reducing emissions, optimizing production processes, and utilizing recycled materials.

In Vietnam, Vinamilk is one of the leading enterprises in green transformation of its production activities and has achieved some successes in sustainable development goals.

The research team believes that "although investing in renewable energy and transitioning to a sustainable model may incur high costs and not immediately yield results, businesses will reap significant benefits and competitive advantages in the future."

"With strategic vision and flexibility in investments, manufacturing enterprises can overcome challenges and thrive in a world marked by energy fluctuations."

In addition, to support businesses, the research also points out priorities that the government and state management agencies need to focus on.

Creating a favorable business environment and supporting enterprises is crucial to mitigate the negative impacts of energy instability and promote sustainable economic growth. The government can consider implementing encouraging and reasonable policies to help alleviate the initial cost burden for businesses investing in sustainable projects, enabling them to become "green enterprises."

Furthermore, the government needs to establish and reinforce clear, transparent legal regulations related to environmental and sustainability standards. This includes issuing regulations on energy efficiency and greenhouse gas emissions reduction. These regulations help businesses understand requirements and easily fulfill sustainable commitments.

Lastly, the government can promote technological innovation by providing financial support for research and development (R&D) in green technology. Establishing research funds and innovation centers will help businesses access advanced technology and improve production efficiency towards sustainability.

Source: vneconomy.vn