Energy Strategy & Procurement
Utility costs are no longer a passive line item. For businesses with significant energy spend, strategy and procurement are critical levers for cost control, risk reduction, and long-term competitiveness.
Why Strategy Matters in Energy Procurement
Many businesses approach energy contracts reactively: waiting until renewal, taking a broker’s offer at face value, and hoping for the best. This approach leaves money on the table and exposes organisations to unnecessary risk. A strategy-led approach ensures that procurement aligns with consumption patterns, financial goals, and governance requirements.
- Alignment with Business Objectives: Contracts structured around risk appetite, budget certainty, and growth plans.
- Timing & Market Insight: Using forward pricing intelligence to secure competitive terms.
- Risk Management: Balancing fixed vs. flexible purchasing strategies.
- Sustainability: Integrating green energy and ESG commitments into procurement decisions.
Without strategy, procurement is guesswork. With strategy, it becomes a tool for competitive advantage.
Procurement Models Explained
Understanding the different procurement models is essential for making informed choices. Each model offers benefits and trade-offs depending on market conditions and business priorities.
- Fixed Price: Simple, predictable budgeting but less flexible if market prices fall.
- Flexible Purchasing: Buy in tranches across the contract period to spread risk and capture market dips.
- Pass-Through Contracts: Supplier passes wholesale costs directly with minimal margin, suitable for businesses with market expertise.
- Hedging Strategies: Blend of fixed and flexible elements to balance certainty with opportunity.
Choosing the right model requires a detailed understanding of consumption, risk tolerance, and financial reporting needs.
Using Market Intelligence
Energy markets are volatile and influenced by global events, weather, regulation, and infrastructure. Effective procurement relies on accurate intelligence, not guesswork.
Finance leaders should demand:
- Transparent data on wholesale price movements.
- Forward market forecasts and risk scenarios.
- Regular updates that inform board-level decisions.
- Supplier performance benchmarking.
By incorporating intelligence, procurement shifts from reactive to proactive, enabling better timing and stronger negotiating positions.
Governance in Procurement
Boards increasingly scrutinise utility contracts because they represent multi-million-pound commitments. Governance requires:
- Policy: Define procurement authority, tender processes, and approval thresholds.
- Audit: Document supplier selection and contract validation.
- Reporting: Deliver board-ready summaries showing savings achieved and risks mitigated.
- Compliance: Ensure contracts meet regulatory and ESG reporting requirements.
Good governance ensures that procurement is not only cost-effective but also defensible at audit and board review.
Integrating Sustainability
More businesses are linking procurement to sustainability targets. This is not just about compliance; it’s about competitive positioning, brand value, and access to capital.
- Specifying renewable sources in contracts.
- Securing green certificates to support ESG disclosures.
- Evaluating suppliers based on environmental performance.
- Building sustainability clauses into tender processes.
When integrated into procurement strategy, sustainability can reduce risk, support stakeholder trust, and enhance brand equity.
Summary
Energy strategy and procurement are no longer about finding the cheapest tariff. They are about building resilience, managing risk, and aligning with long-term business goals. By adopting a strategy-led approach, leveraging market intelligence, enforcing governance, and integrating sustainability, finance leaders can protect margins and position their business for future success.
Transform Your Energy Procurement
Don’t wait for renewal day. Start building a procurement strategy that reduces risk, secures competitive pricing, and strengthens governance. Our specialists can provide a clear, board-ready roadmap today.