Written by Georg Knill, President of the Federation of Austrian Industries (IV), spoke with Jürgen Spari, GrECo‘s Regional Manager in Styria, Austria, about the challenges of the energy transition for the industrial sector and the impact of the Russia-Ukraine conflict on domestic companies.
Spari: Industries in Austria are challenged by the change towards renewable energy. Do you regard the energy crisis, fuelled by the war in Ukraine, as a threat to our domestic industry and its climate targets or as an opportunity to accelerate technological developments or even fast-track change?
Knill: The war in Ukraine has made our dependency on Russian Gas painfully obvious. If the gas supply from Russia were to be stopped from one day to the next, we would experience a catastrophe of unknown dimension because our industry and our entire economy need natural gas – now, and for many years to come. The process of transformation to reach the climate and energy targets in 2030 and 2040 is already underway but will take quite some time. The current uncertainty regarding the supply of energy increased peoples’ awareness and in turn accelerated some processes. We must also understand that the resources that are now being used to tackle the crisis can later possibly not be used as an investment for the transformation.
Spari: Let’s look at supply chains. What do the current crisis and the impact of the war in Ukraine teach the industrial sector? Which measures should be taken to counteract disruptions in supply and value chains? Is nearshoring an option?
Knill: Austria’s participation in world trade is decisive for our wealth, prosperity, and employment because our export rate makes up 59% of our GDP. International trade has not only fully recovered after 2020, the first year of the pandemic, but it was also higher in 2021 than in 2019 – just like Austria’s foreign trade. Globalisation is still part of the game.
However, we require more diversification among trading partners – putting all your eggs in one basket is just not good enough. We learned that from the COVID-19 pandemic, and we see it again with the effects of the war in Ukraine. This, however, should not put an end to globalisation. On the contrary, it should be an appeal to our trading partners to choose wisely and with strategic foresight. This would require additional EU trade agreements like Mercosur or agreements with Australia or the USA. While nearshoring may be feasible for some sectors, it depends on many different factors: the industry sector itself, the individual company, the availability of raw materials or the workforce.
Spari: Given today’s multiple challenges and – apparently – increasingly frequent crises, the resilience of industries is permanently put under the microscope. Companies seem to be subject to a constant process of transformation. Which possible crises or risks do you think many industries be facing in future, and which strategies would best prepare companies for this rising uncertainty?
Knill: As I see it, there are currently three central challenges for people and businesses in Europe and Austria.
First, there is Russia’s brutally aggressive war against Ukraine and the ensuing humanitarian catastrophe. Besides the social consequences, we now increasingly see and feel the economic consequences in Europe. The volatile supply of energy is one direct consequence of the war because Putin uses energy exports to put pressure on the Western world, and this spreads uncertainty and instability in Europe. We, therefore, need a pragmatic approach and we need to focus on a fossil transitional strategy. We already see the first signs – following our continued criticism – in the connection of the Haidach gas storage, in restarting operations in the decommissioned coal-fired power station Mellach, and in securing OMV’s supply capacities with 40 TWh.
Secondly, the current skills shortage is gradually turning into a labour shortage. The number of open jobs in the manufacturing sector has almost quadrupled over the last ten years. This requires a comprehensive strategy on part of our federal government, addressing the need for skilled employees and migration while realising the full potential available on the job market.
Third, Austria and Europe are challenged to master the green and digital transformation in the years to come – a huge opportunity for us all. The current crises will accelerate this change and spur us on. For example, the COVID-19 pandemic has undoubtedly added thrust to digitisation. For many sectors, it was like a crash course in digital transformation. Notwithstanding that, we have a long way ahead of us if we want Austria to become a competitive digital business location. A new study conducted by the IV and Accenture mirrors this conclusion: 33.3% of large companies use analyses and forecasts based on data or rely on business models. At the same time, less than half of the small and medium-sized companies do the same. Therefore, there is not only a need for more digital action among small and medium-sized businesses but among the big players as well. Europe is losing ground against the USA and Asia, especially when it comes to future-oriented key digital technologies.
Spari: How significant is holistic risk management for industrial companies?
Knill: The industrial sector lives with change and uses the crisis as an opportunity to grow, move forward and put new ideas into practice. We have proven these capabilities time and again in the past and continue to do so every single day. Risks and challenges are growing, yet so do opportunities. To make the most out of them, we will need it all: society, politics as well as our economy with all its variety and diversity, from large industrial companies down to one-man businesses.
Georg Knill has been President of the Federation of Austrian Industries since June 2020. He started his professional career at Knill Group in 1993, has been active as managing partner, has held other management responsibilities, and currently chairs the supervisory board of Rosendahl Nextrom GmbH.
KNILL Group is a globally active group of companies, owned the Knill family and led by the brothers Christian and Georg Knill in the 12th generation. The head offices of the Austrian Group are in Weiz in Styria. KNILL Energy Group provides components and systems for the global energy industry, focusing on energy transmission and distribution. KNILL Technology develops and produces customised manufacturing solutions for the battery, cable and wire, and fibre optic industry. Some 2,230 employees in 29 companies and in 17 countries achieve a Group turnover of about 336 million EUR.
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