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The billion-dollar bill: Why environmental reporting is now part of the business

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Imagine the global economy losing more than a third of its total output by 2050. That equates to 38 trillion US dollars - a sum that is hard to imagine. By comparison, that is more than three times Germany's gross domestic product. This figure does not come from a disaster movie, but from the new CDP report "The Disclosure Dividend 2025". It shows what happens when companies around the world turn a blind eye to environmental risks.

What is CDP and why should we care?

CDP is a non-profit organization that operates the world's largest environmental disclosure system. Simply put, they collect data on how companies deal with climate, water and forest risks. For their latest report, they analysed over 24,800 organizations - companies that together represent two-thirds of global market capitalization. It's like an X-ray of the global economy.

The procedure was simple: CDP asks companies annually about their environmental risks, their impact and how they deal with them. The answers are analyzed and show where the economy stands - and where it is heading.

When cocoa suddenly becomes unaffordable

Let's take a look at what this means in concrete terms: cocoa prices at a record high because extreme weather in West Africa is destroying the harvest. 80% of the world's cocoa production comes from there - if the region fails, chocolate will become a luxury good.

Or Taiwan: semiconductor factories have to close because the water is running out. A large proportion of the chips for our cell phones and cars come from there. No water means no production.

In the USA, insurance premiums have doubled since 2017 - thanks to climate-related disasters that are becoming increasingly expensive.

These are not abstract future scenarios. It's happening now. And it's hitting companies directly in the wallet.

The good news: there is a dividend

Here's the interesting part: companies that disclose their environmental risks and respond to them receive a "disclosure dividend" - a kind of return on transparency.

What does that mean in concrete terms? Imagine a company recognizes early on that its production facility is located in an area at risk of flooding. Instead of waiting until the floods come, it invests in protective measures or relocates production. The result: while competitors suffer millions in damage, business continues.

The figures speak for themselves:

67% of companies have already identified environmental risks with a significant financial impact
Over 90% of large corporations already have risk assessment processes in place or are planning them for the next two years

Three paths to success

The CDP analysis shows: The Disclosure Dividend pays off in three areas:

1
Better access to capital
Today, banks and investors want to know what environmental risks are involved in an investment. If you are transparent, it is easier and cheaper to get money.
2
Business resilience
If you know your risks, you can take countermeasures. A car manufacturer that knows that its steel supplier is located in a drought-prone region can develop alternative sources in good time.
3
Compliance
The EU taxonomy, the Supply Chain Act, CSRD - regulation is becoming ever stricter. Those who already have data have an advantage.

The supplier problem: why 75% are invisible

Now it's getting complicated - but also exciting. When we talk about environmental risks, most people think of their own company: the factory, the offices, the vehicle fleet. But that's just the tip of the iceberg.

Let's take an example: a German car manufacturer produces a car. The direct CO₂ emissions during assembly in the factory are relatively low. But what about the steel from India? The lithium from Chile? The semiconductors from Taiwan? The leather from Brazil? All of these preliminary products have already caused CO₂ emissions before they even arrive in Germany.

This is exactly what the CDP analysisshows :75% of a company's greenhouse gas emissions are not generated in its own operations, but in the supply chain. Three quarters! This means that anyone who only looks at their own four walls is overlooking the majority of their environmental impact.

Why CO₂ emissions become business risks

But why are these CO₂ emissions a problem at all? After all, they are not generated in your own company. The answer: they become tangible financial risks:

Regulatory risks:
The EU is introducing CO₂ border adjustment from 2026: Importers will have to pay for CO₂ emissions from their suppliers. If your Chinese steel supplier emits a lot of CO2, you as a German importer will pay extra.
Physical risks:
High CO₂ emissions often mean outdated, inefficient systems. These are more susceptible to extreme weather - power outages, overheating, production stoppages. Your supplier fails, your production comes to a standstill.
Market risks:
Customers are increasingly demanding climate-friendly products. If your supply chain is "dirty", you will lose orders. B2B customers are increasingly asking about the CO₂ footprint.
Financing risks:
Banks view CO₂-intensive supply chains as a risk and demand higher interest rates. Investors avoid companies with high supply chain emissions.

Concrete example: A German car manufacturer sources steel from a coal-intensive plant in Poland. The risks: From 2026, the CO₂ border adjustment will cost extra, there are cooling problems in the steel plant during heatwaves, customers ask "How climate-friendly is your car?", and the bank asks about supply chain emissions.

CO₂ emissions are therefore not the real problem - they are the indicator for various business risks.

And therein lies the problem: although these supply chain emissionsmake up the lion's share, only 11% of companies offer their suppliers financial incentives for better environmental performance. Research shows that financial incentives are 52% more effective than training. Money talks - even when it comes to sustainability.

Regional differences: Why do some see more opportunities than others?

The regional differences in the CDP report are fascinating - and confusing at first glance:

Japan: 73 million dollar opportunities per company
China: Only 9.8 million dollars
Canada: 71 million dollars
USA: A meagre 15 million dollars

But what do these "opportunities" actually mean? These are potential additional sales or cost savings that companies expect from environmental business opportunities.

Specific examples of such opportunities:

New revenue streams:

A Japanese car manufacturer is developing electric vehicles and anticipates 50 million dollars in additional sales
A technology company offers energy-efficient solutions and expects 20 million dollars in new revenue
A chemical company develops environmentally friendly materials for 30 million dollars in market potential

Cost savings:

Energy efficiency saves 10 million dollars in electricity costs per year
Water management reduces operating costs by 5 million dollars
Waste prevention saves 3 million dollars in disposal costs

Why do Japanese companies see so many more opportunities?

Japan (73 million dollars):

Strong government support for cleantech and green technologies, large export markets for environmentally friendly products, and high energy costs make efficiency particularly valuable.

China (9.8 million dollars):

There is still a strong focus on conventional growth, environmental opportunities are valued more conservatively, plus regulatory uncertainties.

USA (15 million dollars):

Inconsistent policies between states, fewer government incentives than in other countries, and greater focus on short-term profits.

Important: These figures are based on companies' self-assessments. A Japanese company therefore expects to earn or save an additional 73 million dollars through green business. Whether this will actually happen is another matter. The regional differences show above all: how optimistic or pessimistic are companies in different countries about their green business opportunities?

What needs to be done now

The CDP recommendations are surprisingly pragmatic:

Establish processes for environmental risks and impacts - including in the supply chain
Know risks and opportunities - with concrete figures, not just gut feelings
Involve suppliers in the strategy - they are part of the solution
Make plans based on the findings - strategy instead of actionism
Develop new products in response to the challenges

The bottom line: transparency becomes a business model

The time of voluntary environmental PR is over. Environmental disclosure is becoming an economic necessity. Companies that act now will secure competitive advantages. The others are paying the price - in the truest sense of the word. The 38 trillion dollar loss by 2050? That's the price if everyone carries on as before. But it is also an opportunity for those who change course early.

The question is no longer whether environmental risks affect business. The question is: who collects the dividend and who pays the bill? The answer lies in your data. And in what you do with it.

The CDP report "The Disclosure Dividend 2025" is based on data from over 24,800 organizations. The next reporting deadline is September 17 - high time to get involved.