As teams understand the financial implications of inaction, including potential impacts on their own departmental budgets, they are more likely to support and contribute to mitigation strategies.”Ed PackshawHead of Risk, reporting and communications
Part 2 of 2 – Levers to embed climate risk management into operational models
Introduction
In part 1, we covered how the changing climate is creating significant financial impacts across society and for businesses. We discussed the alarming acceleration of extreme weather events and how these impacts will continue to grow in number, their impact on society and importantly, how they are fundamentally shifting how businesses are operating.
In response to these impacts, nations contributing to over half of greenhouse gas emissions have taken action to adopt climate regulations. These regulations are almost exclusively based on existing frameworks such as the TCFD. This creates hidden value in compliance, where going beyond the regulatory boundaries of what is absolutely essential can pay dividends.
Evolving sustainability regulations and frameworks are playing an important role in helping companies to identify, assess and communicate the financial implications of climate-related risks.
Frameworks and regulatory guidance for managing climate risk
A globally recognised framework embedded into regulation in many jurisdictions. TCFD supports companies in disclosing climate-related financial risks across governance, strategy, risk management and metrics.
A mandatory EU regulation that requires disclosure of physical and transition risks, climate scenario analysis and value chain vulnerabilities as part of broader sustainability reporting.
International Sustainability Standards Board (ISSB)– IFRS S1 and S2:
A global baseline for sustainability and climate-related disclosures. As of 2025, 16 countries including the UK, China, Australia, Canada and Japan have committed to aligning national regulations with ISSB standards – effectively mandating climate risk reporting.
UK Climate-related Financial Disclosure (UK CFD):
Mandatory climate risk reporting for the UK’s largest companies, based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. Disclosures cover governance,strategy,risk management, andclimate-related metrics, including emissions and targets.
By adopting these frameworks and regulations, companies not only strengthen their internal risk management but also enable stakeholders to better understand the financial consequences of inaction on climate issues. This transparency is becoming increasingly important as investors, customers, employees and communities demand credible, accountable and forward-looking climate strategies.
Embedding climate into risk management
Once companies have identified their climate-related risks using frameworks and regulations such as TCFD, CSRD or ISSB, it is important that these risks are actively monitored and managed in the same manner as other business risks, such as regulatory, market or financial risks. Businesses that successfully integrate climate risks internally through embedded risk management, effective governance and annual reviews are better positioned to mitigate threats and unlock new growth opportunities.
Unilever is a leading example of this approach. The company has embedded climate-related risks directly into its Enterprise Risk Management (ERM) framework, guided by the TCFD framework.¹ It assesses both physical and transition risks across short-, medium- and long-term time horizons. For instance, Unilever has analysed the impact of climate change on commodity availability across its supply chain. This insight has influenced its capital expenditure (CAPEX) decisions. As a result, Unilever has invested in projects such as sustainable agriculture partnerships, on-site renewable energy generation and water reuse and treatment systems —all designed to reduce risk and improve long-term climate resilience.²
Similarly, Legal & General has integrated its climate risks into its overarching risk management system, ensuring that climate considerations are embedded across its governance and decision-making structures.³ This enables the company to clearly identify potential threats —such as supply chain disruptions or declining property values caused by extreme weather events —as well as commercial opportunities, including the development of climate-resilient assets and investing in low-carbon real estate.
Siemens takes a strategic, opportunity-focussed approach. Its investment in smart infrastructure supports the decarbonisation of buildings, utilities and grid operations.⁴ This climate-focused innovation is not just a sustainability win —it is also a commercial one. Siemens reported a 17% profit increase in its smart infrastructure division, underlining how climate innovation can drive both resilience and growth.
Spreading responsibility across the organisation
Complying with climate-related regulations is the minimum standard for those in scope — but it is not enough to secure long-term business resilience. To manage climate risk effectively, companies must embed responsibility across the organisation —not isolate it within sustainability departments. From the board and executive leadership to procurement, finance, and operations, all teams play a role in identifying, assessing, and responding to climate risks. This ensures that climate-related risks are treated with the same level of priority and rigour as any other business risk, rather than being seen as peripheral.
Moreover, involving the full organisation fosters engagement and accelerates buy-in. As teams understand the financial implications of inaction, including potential impacts on their own departmental budgets, they are more likely to support and contribute to mitigation strategies. At the same time, this integrated approach helps identify new climate-related opportunities across the business —opportunities that can directly support the delivery of sustainability strategies, KPIs and long-term targets.
Conclusion
Integrating climate risk into core business strategy enables companies to better understand their exposures, strengthen alignment with sustainability goals, and build trust with investors. It supports more informed decision-making, improves accountability across teams, and enhances resilience in the face of growing environmental and market uncertainty.
As climate-related risks become more frequent and financially significant, businesses must treat them as strategic priorities. The action is to investigate the full value chain, consider risks and opportunities, and focus on the strategic resilience of the business model. Companies that embed this thinking into future decision-making and continually monitor their exposure will be best positioned to reduce risk, respond confidently to investor expectations and succeed in a low-carbon economy.
Ed joins the Simply Sustainable team with over 12 years experience in ESG and corporate sustainability, combining both in-house sustainability leadership roles with client leadership and project management expertise, across a range of sectors, including real estate, construction, education and pharmaceuticals.
As our Head of Risk, Reporting and Communications, Ed is responsible for leading clients through their disclosure journey, driving continuous improvement and transparency to deliver impactful and comparable reporting practices that align with a wide-range of stakeholder expectations and help clients present their achievements and goals towards becoming a truly sustainable and profitable business.
Ed has a wealth of experience in international standard and frameworks, including TCFD, SASB, ISSB, CDP, SDGs, GRI, UNGC and a detailed understanding of UK, EU and US regulations and compliance requirements.
Alongside his professional experience, Ed holds a diploma in Sustainable Finance from the University of Cambridge, professional qualifications in Environmental Management and Carbon Management from IEMA and an honours degree in Zoology & Biological Sciences from the University of Edinburgh.
