Integrating climate risk into the business

Make your business more resilient

In our previous article, we considered how a business can build its awareness around climate change, and identify and assess the range of risks and opportunities that climate represents. Here, we take the process further, to consider how such practices can be integrated into business operations, to make more organisations more resilient.

The foundation for a future-proof business

Building awareness around climate change, and assessing the risks and opportunities it represents, creates an important foundation for future-proofing a business. However, to realise lasting value, these must become integral to everyday business processes, which we address in the final two parts of our four-step methodology.

The third step involves integrating climate risk and opportunities into existing business processes. A core element is the climate risk roadmap, which gives organisations a plan for responding to the risks identified, across strategy, governance, policies and risk management. This shows the way to integrate climate risks and opportunities into business risk management, and to build effective governance systems that can respond to regulatory changes. The outcome is more robust management and governance for climate risks and opportunities, leading to a more resilient organisation. By way of example, for physical risks, climate risk analysis should be embedded into the decision-making process for capital projects, and should be part of the standard risk assessment in the investment process.

Finally, we consider climate risk disclosure. For instance, companies are required to report on how climate change affects their business as part of the CSRD, and also as part of the EU Taxonomy (Do No Significant Harm) climate adaptation criteria. Although compliance and reporting can often be the initial prompt for companies to take action on climate change, the disclosures can actually be regarded as outcome of the previous steps – indeed, being able to understand, assess and integrate climate risks and opportunities helps to create robust disclosures. Once awareness, assessment and integration are in place, a business is better-placed to develop its disclosure processes. Our starting point is typically a gap analysis, which compares the reliability and accuracy of existing information with what’s needed for disclosure regulations, to identify areas for improvement. This allows us to create a practical action plan to ensure organisations meet upcoming regulations. Last, we assess the readiness of the business for disclosure assurance, to guarantee that data and reporting are fully accurate. This is a substantial undertaking, but made simpler by building on the integrated processes established in the earlier steps.

Readiness for disclosure will also equip a business to track its own progress on both sustainability and the associated business risks and opportunities. It will satisfy growing demand from stakeholders for transparent reporting on climate risk exposure. And it will underpin a more resilient company that’s ready for upcoming regulations – and ensure the business is future-proof.

To learn more and start taking practical action, contact Ivan Kukhnin.

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