How to Prepare Your Business for Climate Change Risks

2024 was the hottest year on record, with devastating wildfires and catastrophic floods making global headlines. As climate-related events escalate, businesses must ask: How will climate change impact my operations, and how prepared is my company to adapt?

This article will explore the different types of climate risks, how to assess their impact, and the steps your business can take to build long-term resilience.

Understanding Climate Risks: What’s at Stake?

Climate risks refer to the threats climate change poses to businesses, communities, and the environment. These risks can disrupt operations, supply chains, and financial stability.

There are two key types:

• Physical Climate Risks – The direct effects of climate change, which fall into two categories:
  • Acute risks: Sudden, severe events like floods, wildfires, or hurricanes that damage infrastructure and disrupt supply chains.
  • Chronic risks: Long-term changes like rising sea levels or increasing insurance costs for high-risk areas.
• Transition Climate Risks – Challenges businesses face as the world shifts toward a low-carbon economy, including:
  • Regulatory risks: Stricter environmental policies, carbon taxes, and mandatory emissions reporting.
  • Technological risks: Costs of adopting low-carbon innovations.
  • Market risks: Changing supply and demand, leading to rising costs of materials.
  • Reputational risks: Public backlash and loss of market share for businesses that fail to act on sustainability.

These risks have significant financial implications. If businesses don’t assess and quantify them, making a strong case for proactive action becomes difficult.

How to Identify Climate Risks in Your Business

A structured climate risk assessment can help businesses understand and prepare for climate-related challenges. This process involves:

• Identifying potential climate risks relevant to your business in the short (1-5 years), medium (5-10 years), and long term (10+ years).
• Engaging leadership and experts to determine which risks are most significant (material risks).
• Assessing existing controls to manage these risks and identifying any gaps that need to be addressed.
• Integrating climate risks into your enterprise risk management framework to ensure they are monitored and mitigated over time.

How to Report on Climate Risks Effectively

To meet evolving regulatory expectations, businesses should align their climate risk reporting with the ISSB’s IFRS Sustainability Disclosure Standards, which replaced the TCFD framework in 2024. This includes:

• Governance – Who oversees these risks in your company? Have you set clear sustainability targets?
• Strategy – What risks could impact your business? How will they affect costs, revenue, and investments?
• Risk Management – How does your company monitor and prioritize climate risks?
• Metrics & Targets – How are you measuring climate-related performance? Are you tracking Scope 1, 2, and 3 emissions?

Final Thoughts: Act Now or Fall Behind

Climate change is no longer a distant threat—it’s a business reality. Companies that take action now will be better positioned for long-term resilience and competitiveness. Those that delay face rising costs and reputational risks.

For more information or to explore how Action Sustainability can support your organisation, please contact our team