Navigating the Next Decade: How Climate Change Will Shape Business Strategies | INTHEBLACK

Understanding climate risks is crucial for businesses today. Adrian King, an expert at KPMG Australia, emphasizes the importance of knowing a company’s exposure to these risks. He notes that when assessing emissions, 90% of climate risks come from Scope 3, which involves emissions across the entire supply chain.

Once a business identifies where these risks lie, it can take steps to manage them. This can include diversifying suppliers or locking in low-cost and low-carbon options. “Using the 80-20 rule can help focus efforts on the most significant emissions sources,” says King. This approach allows businesses to strategically address their vulnerabilities and streamline their operations.

Alan Dayeh from ERM highlights that calculating these risks can be tricky. Organizations face unique challenges that require tailored solutions. He notes, “Those companies that invested early in climate solutions are seeing financial gains now.” He urges finance leaders to engage with sustainability teams. Instead of cutting costs, they should consider the benefits of strategic investments in sustainability. This shift in thinking can align financial growth with climate action.

These conversations are becoming more relevant as standards like IFRS S2 take effect. This framework requires companies to disclose their climate-related risks and opportunities in their financial statements. Key details include governance processes, risk management strategies, and performance metrics pertaining to climate risks.

For small and medium-sized enterprises (SMEs), navigating this landscape can be particularly challenging. The International Federation of Accountants (IFAC) has developed the Small Business Sustainability Checklist. This tool helps SMEs pinpoint sustainability risks and identify areas for growth. Engaging with accountants during this process is vital. Their expertise can guide SMEs in implementing effective systems and best practices for tracking sustainability metrics.

Research indicates that businesses taking proactive steps towards sustainability are not only helping the environment but also enhancing their bottom line. A recent survey found that 75% of consumers prefer brands committed to sustainability, suggesting that eco-friendly practices can drive customer loyalty and sales. Social media trends also reflect this shift, with hashtags like #SustainableBusiness gaining traction as more consumers advocate for responsible corporate practices.

In summary, as climate change impacts become more apparent, understanding and managing these risks is essential for companies of all sizes. By embracing sustainable practices, businesses can not only contribute to the greater good but also position themselves for long-term financial success.

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