Amy Simpson, executive vice president of energy transition at John Crane, and John Long, executive vice president of product line and operations at John Crane, answered these questions from Pumps & Systems for the 2022 State of the Industry section.
What industry trends are you seeing as we go into 2022?
Simpson: Going into 2022, two top trends are dominating headlines and top lines―regulations and investment.
Coming off COP26, 100+ countries have signed a first-of-its-kind pledge to cut methane emissions by 30% between now and 2030. The signatories represent 70% of the global economy, including six of the world’s top 10 methane polluters. Many countries have already backed up the pledge with newly announced emissions policies, so we see the regulatory landscape really heating up headed into next year. The U.S. has already released a suite of tougher oil, gas and pipeline regulations that would prevent tens of million tons from being released, at minimal cost to producers. The EPA predicts they’ll cut methane emissions from the energy sector by 75%. Even countries that have not joined the pledge are paying attention. China announced a joint agreement with the U.S. to “enhance ambition” on climate change, saying they would work together to do more to cut emissions this decade while China committed for the first time to reduce methane.
At the same time, investors are recognizing the urgency of climate change and the need for sustainable investing, with 88% of global investors rating the environment as the #1 priority across all sustainability issues (according to BlackRock). Environmental, social and governance-related factors that can influence future returns are increasingly driving investments. Exchange-traded funds, or ETFs, which are a widely available vehicle to help investors transition to new products with climate considerations, have increased inflow 63x over the past five years. Midway through 2021, sustainable investments already accounted for $35.3 trillion, or more than a third of global assets in five of the world’s biggest markets with no slow down in sight. In fact, we expect this momentum to further accelerate into 2022 as a growing consensus on the need to address climate risk has been highlighted over the past year by devastating wildfires, flooding, and deadly storms.
How have any price increases of products or materials impacted you or your company?
Long: Pricing is one challenge. Material availability and the ability to physically ship products is another challenging dimension, as well as the climbing costs of logistics. We have been somewhat buffered due to carrying inventory; however, that only gives protection for a period of time. What issues have you seen with any material shortages or supply chain issues? Global supply chains are strained for a variety of reasons and we anticipate that this will continue well into 2022 before we see any signs of stabilization. Suppliers are currently trying to pass on their costs primarily in the form of surcharges and we anticipate this to continue. We have been somewhat sheltered due to pricing agreements and contracts that we had previously negotiated for our main commodities; however, this situation is relatively unprecedented and we are getting push back from suppliers even where this is the case.