It's a very unique time in our world. We're facing unbelievable amounts of regulatory volatility.
There are technologies that are advancing at a speed which you never never seen before. And there continue to be just fundamental supply chain and labor shortages across the world. And that creates an environment which is difficult to navigate, and we think companies need to react to that quickly.
Some of it is around short term geopolitical regulatory uncertainty.
We've seen, obviously, a lot of the the headwinds and the challenges to traditional ESG. The omnibus regulation is is changing how sustainability is going to be reported and what companies need to do to comply with those regulations. So there's, a lot of uncertainty around how that's going to impact businesses. On the other hand, we're seeing some questions around energy security. Energy costs are still high. Thinking of energy security, energy costs are still high, thinking about decarbonization and the the cost of doing that. I think the scale of the long term challenge is becoming clear whilst also there's these, short term headwinds that that everyone is needing to respond to.
The fundamental imperatives still remain. We have to think about the energy transition. It's having a huge impact particularly on, industrial sectors. It's impacting every single business in every single sector.
We have to think about the use of our resources, how we think about long term sustainable growth. It's about where can you get efficiency gains? Where can you think about cutting back, where can you think about reducing your waste, using your materials better. All those things are no brainers from an operational perspective, but also, they're very, beneficial from a from a sustainability perspective as well.
We're also seeing with supply chain that this is going to make a big difference, really thinking about how can you think about your supply chain strategically, how can you make sure that you're set up for success, engaging with your suppliers in a better way? All that, it has this dual benefit of short term financial performance, as well as sustainability benefits. And that's where I think we're seeing increasing shifts toward actions that have both a sustainability benefit and a bottom line benefit as well.
It is crucial for businesses to still take planning and decision making very seriously. The answer to volatility is not to ignore planning, but the answer to volatility is to actually embrace that, just accept that as reality and respond with agility and how to inject agility as a core part of decision making. And that is related to sustainability choices, but in reality, it's related to the broader strategic decision making any business needs to do. We think about key areas that businesses need to worry about.
The first is to have scenario planning as a starting tool for everything which go from quite unlikely to highly likely. Once you have a set of scenarios that feel plausible for your local context, then businesses need to come up with a plan that appropriately weigh the risk and rewards.
And as as it's then starting to build a plan that that attacks those risks and rewards appropriately, then the key issue becomes how do you inject modularity, decentralization, and flexibility in all parts of business operations.
So while you're committing to a direction based on a certain belief of scenario, they have the ability to adjust if things need to be adjusted.
We are we're in a stage of world where static plans three or five years just will not work. Businesses need to come back to those scenarios and the associated plans ever so frequently, and the frequency will vary in which business and market you're in. But just making that as part of your ongoing decision making in an agile manner is what we think is required.
Sustainability is a space that's evolving so quickly, and it really is changing very fast. Businesses that react to that by swinging one way or the other are going to really struggle and ultimately fall behind in what we know are long term imperatives. LEK always has commercial and strategic priorities at the heart of any work that we do with our clients, and I think that's even more important now. That's in our DNA. That's how we think about the world anyway, and I think we're therefore very well placed in terms of the advice we're giving our clients. It it always has to make commercial sense.
We strongly believe that businesses that will continue to embrace sustainability and be agile towards it will not only survive, but thrive in the longer term.
