Climate knowledge

Why a climate risk analysis concerns everyone (yes, including you!)

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Floods, heatwaves, new laws - climate risks come in many forms. The good news: with the right analysis, you can turn uncertainty into predictability. Why your company should take action and how you can even discover new business opportunities. Read it now!

Imagine you are planning a garden party. What will you always be keeping an eye on over the next few days? The weather forecast, of course. Because you want to be prepared in case of rain. When it comes to climate risks, many companies (still) do exactly the opposite: they simply hope that nothing will happen. Unfortunately, not a good strategy.

The uncomfortable truth up front: climate risks affect every company. Regardless of whether you produce screws, develop software or offer seminars. The good news? With a climate risk analysis, you can maintain an overview, take targeted countermeasures and even discover new opportunities.

Two types of climate risks you should be aware of

Climate risks come in two flavors. Both can be really expensive:

Physical climate risks - when nature gets serious: These are the obvious candidates. Floods that put your warehouse under water. Heatwaves that make your server rooms glow. Storms that paralyze supply chains. These climate risks are like uninvited guests - they arrive without warning and wreak havoc.
Transitory climate risks - when the rules of the game change: These are more subtle, but no less dangerous. New laws that suddenly drive up CO₂ prices. Customers who suddenly only want climate-neutral products. Investors who prefer to park their money elsewhere. These climate risks are creeping up - and if you're not careful, you'll be caught out cold.

Does that have to be the case? The legal framework for climate risks

Now comes the part that makes many people cringe: For some companies, analyzing climate risks is not an optional extra, but a duty.

The usual suspects: Do you fall under the CSRD (Corporate Sustainability Reporting Directive)? Then you will have to disclose your climate risks from 2024 or 2025. Does the EU taxonomy apply to you? Climate risks are also mandatory here. The scale? We're not just talking about corporations here. Even companies with 250 employees can be affected. And the trend is rising.

But here's the trick: even if you don't have to (yet) - your business partners could still ask you about your climate risks. Why? Because their climate risks are also your climate risks. Banks want to know whether you will remain creditworthy when the next flood comes. Insurance companies think twice about who they insure and on what terms. And your major customers? They have to assess their own supply chain climate risks - and that includes you.

In short: the question is not if, but when you have to deal with climate risks. Better sooner than later.

Climate risks are like bad weather - they are coming anyway.

An example from the real world: climate risks in concrete terms

Let's take a manufacturing company. For years, it has sourced raw materials from a region that has always been warm and dry. Perfect, they thought. Then the droughts come. First sporadically, then regularly. Without analyzing the climate risks: panic. Prices explode. Deliveries fail to materialize. Production comes to a standstill. Boss gets gray hair.

With analysis of climate risks: The company saw this coming. Alternative suppliers have long been involved. Plan B is in the drawer. Business as usual. The difference? About as big as between "We have a problem" and "We have a solution".

Why it pays to analyze climate risks

A climate risk analysis is like a good insurance policy - you hope you'll never need it, but when it comes down to it, you're glad you have it. Only better. Because it:

Protects you from expensive surprises caused by climate risks (and we've had enough of those recently)
Identifies new business opportunities despite climate risks (yes, really!)
Makes you the preferred partner for customers and investors who take climate risks seriously
Saves real money in the long run by proactively managing climate risks
Keeps you on the safe side of increasingly stringent climate risk regulations

The highlight of the matter

Here's the part that surprises many: a climate risk analysis is not a crystal ball that tells you the future. It is a tool that helps you to be prepared for different futures. Think of a navigation system: it not only shows you the traffic jams on your route, but also the alternative routes. And sometimes you may even discover a shortcut that you would never have found otherwise or simply a nicer route that may not get you to your destination any faster, but will make you more relaxed.

What's next?

Now you might be thinking: "Sounds all well and good, but how exactly do these climate risks actually work?" Good question!

In the next part of our series, we take a closer look at climate risks. We'll explain why it's not enough just to look at the danger and why three factors have to come together for a potential threat to become a real risk. Don't worry - we make it understandable without a physics degree. Stay tuned. It remains exciting.