Climate Risk is Business Risk

Climate-related impacts can disrupt operations and drive up costs. Physical risks include natural disasters like floods, droughts, and extreme weather. These events can disrupt global supply chains through impacts to production and storage facilities, interruptions to transportation, and marketplaces.

• Businesses are already feeling the financial and operational impacts of climate risk.
• Extreme weather costs EU farmers 28 billion euros a year.
• Insurance costs for commercial real estate are outpacing rent increases and general inflation.

Regulatory and Market Drivers are Accelerating Change

New corporate climate regulations, such as the Corporate Sustainability Reporting Directive (CSRD) in the EU and the California bill 261 and other state bills in the U.S. accelerate the need for corporate climate strategy. These laws require reporting on:

1. Business impact on environmental and social factors
2. Identified climate-related risks and opportunities
3. Sustainability-related financial information
4. Standards covering ESG topics

Beyond regulatory reporting requirements, climate-related aspects are also being integrated into standardized management systems. In February 2024, the International Organization for Standardization (ISO) amended ISO 9001, ISO 14001, and ISO 45001, to incorporate direct and indirect impacts related to climate change. Organizations certified under these standards are now required to assess climate-related risks and opportunities as part of their risk management processes.

The Business Case for a Corporate Climate Strategy

Climate action supports operational efficiency, energy savings, and cost control. Green buildings, for example, can enhance return on assets and profits due to savings in utility operating costs. The use of sustainable components/materials in building construction can increase overall property value.

• Businesses of any size can take meaningful action to achieve climate goals.
• Public and high-profile initiatives, such as achieving climate neutrality, gain the favor of employees, customers, and partners who want to be part of the solution to climate change.

Key Elements of an Effective Corporate Climate Strategy

Comprehensive climate strategies must be actionable and aligned with global standards, including:

1. Comprehensive Greenhouse Gas (GHG) Inventory
2. Science-Based Emissions Reduction Targets
3. Actionable Decarbonization Roadmap
4. Governance Structures Embedding Climate Risk into Business Planning
5. Routine, Transparent Reporting and Stakeholder Engagement

Global Execution Requires Local Expertise

Implementing a corporate climate strategy across multiple countries presents complex challenges. Multinational organizations must navigate a patchwork of regulatory frameworks, cultural nuances, and technical requirements that vary significantly by region. That’s why local expertise is essential to deliver results that meet regional regulations and cultural expectations.

Assessing Readiness

Corporate climate strategy is critical not just for compliance, but for long-term resilience, competitiveness, and value creation. Businesses that take action immediately will be able to manage the accelerating changes and increasing pressure from regulators, investors, and customers.