Businesses across the globe are facing increasing pressure to build a thorough corporate climate strategy to manage physical risks like floods and droughts, and transition risks related to shifting regulations and customer demands.

Investors, regulators, and customers are all driving the need for change, as well as meaningful and measurable results. A robust climate strategy is no longer optional; it’s essential for staying resilient, competitive, and trusted in a fast-changing world.

This article will detail the needs for corporate climate strategy, key elements to include, and the benefits that businesses can achieve.

Climate Risk is Business Risk

A corporate climate strategy helps companies manage climate-related impacts that disrupt operations and drive up costs. Physical risks may include natural disasters such as floods, extreme weather , and droughts. These events can disrupt global supply chains through impacts to production and storage facilities, interruptions to transportation, and marketplaces.

Businesses are already feeling the financial and operational impacts of climate risk.

• Extreme weather costs EU farmers 28 billion euros a year
• EU’s ‘chocolate crisis’ worsened by climate breakdown and wildlife loss
• Insurance costs for commercial real estate are outpacing rent increases and general inflation.

Evolving climate-related regulatory requirements such as emissions reduction targets, energy efficiency mandates, and building codes also pose new challenges to businessses. Shifts in carbon pricing can significantly increase operational costs if production methods are emissions-intensive. Companies that delay action risk losing market share, investor confidence, or falling out of regulatory compliance.

Regulatory and Market Drivers are Accelerating Change

New corporate climate regulations, such as the Corporate Sustainability Reporting Directive (CSRD) in the EU and the California bill 261 and other state bills in the U.S. accelerate the need for corporate climate strategy. These laws require reporting on:

• Business impact on environmental and social factors
• Identified climate-related risks and opportunities
• Sustainability-related financial information
• Standards covering ESG topics

Beyond regulatory reporting requirements, climate-related aspects are also being integrated into standardized management systems. In February 2024, the International Organization for Standardization (ISO) amended ISO 9001, ISO 14001, and ISO 45001, to incorporate direct and indirect impacts related to climate change. Organizations certified under these standards are now required to assess climate-related risks and opportunities as part of their risk management processes.

Additionally, Investors have come to prioritize climate-related disclosures and decarbonization strategies. within their portfolios. Transparent reporting on climate risks and mitigation efforts is becoming a critical factor in investor assessments.

The Business Case for a Corporate Climate Strategy

Developing and adopting a climate strategy empirically benefits businesses. Climate action supports operational efficiency, energy savings, and cost control.

Green buildings, for example, can enhance return on assets and profits due to savings in utility operating costs. The use of sustainable components/materials in building construction can increase overall property value.

Businesses of any size can take meaningful action to achieve climate goals. Public and high-profile initiatives, such as achieving climate neutrality, gain the favor of employees, customers, and partners who want to be part of the solution to climate change.

Organizations that take a proactive approach will reap the greatest benefits by anticipating market shifts and future-proofing their business models.

Key Elements of an Effective Corporate Climate Strategy

Comprehensive climate strategies must be actionable and aligned with global standards, including:

1. Comprehensive Greenhouse Gas (GHG) Inventory

A a full GHG inventory encompasses:

• Scope 1: Direct emissions from owned or controlled sources.
• Scope 2: Indirect emissions from the generation of purchased energy.
• Scope 3: All other indirect emissions, such as emissions from suppliers, logistics, product use, and disposal.

Tools like life cycle carbon assessments can provide a more complete picture of emissions across a product's or service's lifespan.

2. Science-Based Emissions Reduction Targets

The Science Based Targets initiative (SBTi) provides a framework to meet investor and regulatory demands for credible decarbonization commitments, such as:

• Reducing absolute Scope 1 and 2 GHG emissions by a significant percentage (e.g., 46%) by 2030 from a defined baseline.
• Addressing Scope 3 emissions, especially if they constitute a substantial portion of total emissions.

3. Actionable Decarbonization Roadmap

A successful roadmap translates targets into actionable plans with timelines, investments, and accountability. This can look like:

• Outlining specific initiatives and technologies to reduce emissions.
• Setting interim milestones and timelines to track progress.
• Identifying necessary investments and resource allocations.
• Assigning responsibilities to ensure accountability across the organization.

4. Governance Structures Embedding Climate Risk into Business Planning

Integrating climate considerations into corporate governance involves:

• Incorporating climate risks and opportunities into enterprise risk management frameworks.
• Ensuring board and executive oversight of climate-related issues.
• Aligning incentive structures with climate performance metrics.

Such integration ensures that climate strategy is not siloed, but is a core component of business decision-making processes.

5. Routine, Transparent Reporting and Stakeholder Engagement

Transparency in reporting and active stakeholder engagement are critical for building trust and demonstrating progress. This includes:

• Regularly disclosing climate-related information in line with recognized frameworks (e.g., TCFD, GRI).
• Engaging with stakeholders, including investors, customers, and employees, to gather feedback and align on expectations.
• Continuously updating stakeholders on progress toward climate goals and any adjustments to strategies.

Global Execution Requires Local Expertise

Implementing a corporate climate strategy across multiple countries presents complex challenges. Multinational organizations must navigate a patchwork of regulatory frameworks, cultural nuances, and technical requirements that vary significantly by region. That’s why local expertise is essential to deliver results that meet regional regulations and cultural expectations.

The Inogen Alliance offers a single point of contact and access to 6,000+ local environmental, health, safety, and sustainability consultants to support effective global climate strategies aligned to best practices and client organizational needs.

Assessing Readiness

Corporate climate strategy is critical not just for compliance, but for long-term resilience, competitiveness, and value creation. Businesses that take action immediately will be able to manage the accelerating changes and increasing pressure from regulators, investors, and customers.

Companies should assess their current climate readiness as a starting point to begin or refine their strategic planning. For more valuable insights, subscribe to the Inogen Alliance blog and keep up to date with the latest news.