Climate action and transition plans are important tools for organizations seeking to future-proof their operations and develop pathways to net-zero emissions, in alignment with global science-based targets. As environmental changes accelerate, businesses must proactively manage climate-related risks and opportunities to ensure long-term resilience and profitability. Responding to climate risk and opportunities is especially critical for companies operating globally in jurisdictions that mandate climate-related disclosure, as it is key to maintaining operational continuity and supply chain stability. Enhancing climate risk assessment is no longer just a compliance requirement; it’s a strategic imperative for safeguarding financial performance and driving sustainable growth.

In a recent webinar hosted by EcoEngineers, an LRQA company, Dan Krekelberg, director, climate strategy at EcoEngineers, Thomas Zumbühl, associate director, advisory at LRQA, Ece Satar Pfister, senior consultant at LRQA, and Josh Bell, senior consultant at LRQA, discussed the importance of climate action planning and risk management, the evolving regulatory landscape, and practical approaches for organizations to navigate these challenges effectively.

Blueprint for Strengthening Climate Risk Management

Climate risk management is crucial for businesses as climate change disrupts supply chains, damages assets, and reshapes markets. The increasing frequency and severity of events like floods and wildfires, along with shifting regulations and evolving consumer expectations, pose significant risks. Effective climate risk management allows companies to anticipate these challenges, adapt operations, and protect financial performance. It ensures compliance with new laws, builds stakeholder trust, and fosters innovation and market opportunities, ultimately enhancing long-term resilience and competitiveness.

The global regulatory landscape is evolving rapidly, with more than 100,000 companies expected to disclose their climate-related performance in the next five years. This shift emphasizes materiality and transparency in sustainability reporting. Companies must clearly and consistently disclose risks and opportunities related to their environmental and social impact, adhering to emerging climate-reporting regulations, such as California’s Accountability Package (SB 253 and SB 261) and the EU’s Corporate Sustainability Reporting Directive (CSRD). Understanding these frameworks is critical for compliance, credibility, and long-term success.

Climate risk assessment is integral to effective climate risk management. It involves identifying and managing climate-related risks and opportunities to build trust and drive sustainable growth. The Task Force on Climate-Related Financial Disclosures (TCFD) framework provides recommendations on the information companies should disclose to help investors, lenders, and underwriters assess and price climate-related risks appropriately. The framework covers four areas: governance, strategy, risk management, and metrics and targets, aiding investors in understanding how organizations approach climate-related risks and opportunities.

Scenario analysis is a vital tool for preparing for the potential impacts of climate change on operations, strategy, and financial performance. It tests the resilience of an organization’s strategy against different climate-related scenarios, including a 2°C or lower scenario, helping organizations develop strategies to mitigate risks and seize opportunities. Conducting scenario analysis enables companies to better prepare for the future and ensure long-term resilience.

A comprehensive approach to climate risk assessment involves a multi-step process starting with scope analysis. Assessing 95 countries based on business leverage and climate vulnerability helps identify priority markets for deeper evaluation. Grouping these countries into tiers based on segmentation models allows for targeted risk management strategies. Key operational geographies like the United States (U.S.), the United Kingdom (UK), Canada, Brazil, and Australia often require focused attention due to their significant market impact.

Developing a global risk catalog is the next crucial step. Identifying material risks, including seven transition risks like carbon pricing, ESG customer requirements, and macroeconomic disruptions due to climate change, alongside five physical risks such as extreme weather events, provides a comprehensive risk profile. Recognizing climate-related opportunities, such as increased demand for sustainable products and material substitution, offers strategic advantages. This dual focus ensures a balanced approach to climate resilience.

Scenario analysis based on established frameworks like TCFD and Intergovernmental Panel on Climate Change (IPCC) guidance is essential for understanding potential future impacts. Assessing three transition scenarios—orderly net zero by 2050, disorderly delayed transition, and a hothouse world following current policies—across short, medium, and long-term timeframes (2030, 2040, and 2050) provides a robust foundation for strategic planning. Considering best, medium, and worst-case outcomes enables businesses to prepare for various futures, enhancing adaptability and resilience.

The final step is conducting a financial impact assessment. Qualitative prioritization of climate risk-related opportunities and tailored recommendations for mitigating critical risks are crucial for effective risk management. This approach not only protects businesses from the financial consequences of climate change but also improves financial resilience. Strengthening compliance with future climate-related reporting regulations positions companies ahead of current requirements, facilitating better investment and partnership decisions.

Companies evaluating climate risk under the TCFD framework are also positioned to align globally with mandatory and voluntary disclosure frameworks. In 2023, the International Sustainability Standards Board (ISSB) published a set of global sustainability standards, International Financial Reporting Standards (IFRS) S1 and S2 (ISSB Standards), which fully incorporate the recommendations of the TCFD. IFRS S1 and S2 also include elements of the industry-specific sustainability standards from the Sustainability Accounting Standards Board (SASB) and the GHG Protocol.

As of July 2025, thirty-six jurisdictions worldwide have adopted or are otherwise using the ISSB standards or are in the process of finalizing steps towards introducing them into their regulatory frameworks. This primarily includes countries, but also subnational jurisdictions, such as California’s SB 261, where reporting via the TCFD framework or IFRS standards can be used for compliance beginning January 1, 2026. To provide confidence in quality reporting to end users of the data, third-party verification and assurance of climate risk reporting is possible under existing standards and proposed auditing standards.

Summary

Climate action and transition planning have become a critical business imperative, demanding proactive measures to address climate-related risks and opportunities for resilience and long-term success. Effective management strategies enable companies to anticipate and adapt to challenges while safeguarding financial performance. Navigating the evolving regulatory landscape and conducting thorough risk assessments and scenario analyses are essential steps.

By integrating climate risk into strategic planning, businesses not only ensure future security but also position themselves as leaders in driving a sustainable global economy. A standardized approach to disclosure that includes comprehensive risk and financial impact assessment, coupled with third-party assurance, provides the quality data needed to effectively mitigate risks and unlock opportunities in a rapidly changing environment.

EcoEngineers: Your Guide to Effective Climate Action

EcoEngineers’ team of engineers, scientists, auditors, consultants, and researchers brings a multidisciplinary technical approach to administering, implementing, and supporting climate action initiatives, ensuring clients receive comprehensive and tailored solutions that fit their specific climate resilience and net-zero goals.

To learn more about our climate action planning expertise, click here.

For more information about how EcoEngineers can support your climate action and resilience efforts, contact:

Dan Krekelberg, Director, Climate Strategy | dkrekelberg@ecoengineers.us   

About EcoEngineers

EcoEngineers, an LRQA company, is a consulting, auditing, and advisory firm exclusively focused on the energy transition and decarbonization. From innovation to impact, EcoEngineers helps its clients navigate the disruption caused by carbon emissions and climate change. Its team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. For more information, visit www.ecoengineers.us.