Climate risk and opportunity assessments, commonly known as Task Force on Climate-Related Financial Disclosures (TCFD) reports, have become crucial tools for businesses to navigate the complex landscape of climate change and position themselves for long-term financial success. These assessments are also increasingly being woven into regulations around the globe, including in California, where businesses with revenues above $500 million will be required to publicly post their assessments by January 1, 2026, and every other year moving forward.
Quantifying GHG Emissions and Identifying Cost-Saving Opportunities
Quantifying GHG emissions and using those results to identify operational efficiency opportunities is a proven strategy for businesses to reduce operating costs. By measuring and monitoring their carbon emissions, businesses can identify areas where they can make process and infrastructure improvements that will lead to cost savings over time and simultaneously reduce their GHG emissions. According to Harvard Business Review, companies receive an internal rate of return of 27% – 80% on their low carbon investments. These investments include, but are not limited to:
- Energy efficiency upgrades such as the replacement of traditional lighting with LED technology.
- Installation of high-efficiency HVAC systems with smart thermostats.
- Improving building insulation by sealing air leaks and installing double pane windows to passively maintain indoor temperatures.
- Incorporating renewable energy sources, such as solar panels, which decrease the cost of purchased electricity and potentially yield additional income when excess energy is fed back to the grid.
Investing in energy-efficient technologies and optimizing energy usage not only helps businesses save money on utility bills in the long term but also demonstrates their commitment to environmental stewardship, a priority for many internal and external stakeholders.
Mitigating Risks and Building Resilience
Climate change poses significant risks to business. While most are familiar with the physical risks associated with climate change such as extreme weather events, rising sea levels and resource scarcity, investors and other stakeholders want businesses to account for transition risks as well. Transition risks are related to policy changes, technological shifts and market disruptions. Companies can identify and quantify these risks through the climate risk assessment process, allowing them to develop targeted strategies to mitigate potential impacts. This proactive approach helps build resilience, ensuring business continuity and minimizing financial losses in the face of climate-related disruptions.
Seizing Opportunities for Growth and Innovation
While climate change presents challenges to business health, it also offers new opportunities for businesses to innovate, grow and create value. Climate risk and opportunity assessments provide a framework for companies to analyze their business model through financial modeling and identify areas where they can strategically develop and deploy sustainable products, services and technologies to increase future revenue. Businesses can tap into emerging markets, gain competitive advantages and position themselves as leaders in sustainable innovation. This drives growth and enhances brand reputation and customer loyalty. According to McKinsey, products with sustainability claims achieved 36% more growth from 2018 to 2022 than products who didn’t make those claims.
Meeting Investor Expectations and Attracting Capital
Investors are increasingly considering sustainability factors when making investment decisions. They recognize that companies with robust climate risk management and sustainability practices are more likely to generate long-term value and resilience. By conducting climate risk and opportunity assessments, businesses can provide transparency to investors regarding their internal strategy, processes and procedures. This can enhance investor confidence, attract capital and lower the cost of financing.
Enhancing Stakeholder Engagement and Reputation Management
Climate change is a critical concern for a wide range of stakeholders, including customers, employees, communities and civil society organizations. According to the Yale Program on Climate Change Communication, 32% of Americans prefer purchasing products from businesses that demonstrate a commitment to mitigating their climate impact. By conducting a climate risk and opportunity assessment and publicly releasing the results, a business can build trust, enhance reputation and strengthen relationships with key stakeholders. This can lead to increased customer loyalty, employee retention and positive brand perception, all of which contribute to long-term business success.
Improving Business Outcomes
The business case for conducting climate risk and opportunity assessments is clear and compelling. By proactively identifying and managing climate-related risks and opportunities, companies can build resilience, drive innovation, attract capital, ensure regulatory compliance and enhance their reputation among stakeholders. Businesses that embrace climate risk management and seize sustainable opportunities will be better positioned to thrive in the face of global climate challenges. Investing in climate risk and opportunity assessments is not only a responsible business practice but also a strategic imperative for long-term success in the 21st century.
How Full Scope Insights can help you assess your climate risks and opportunities
At Full Scope Insights, we are dedicated to conducting insightful and thorough climate risk and opportunity assessments, providing management with detailed analysis that identify opportunities and manage potential risks due to climate change.
Working side by side with your business, we leverage our expertise and proprietary models to conduct an in-depth climate scenario analysis that identifies the potential risk and opportunities and quantifies the fiscal impact that both may have on a business’s long-term financial future.
About Full Scope Insights
Full Scope Insights provides fit-for-purpose fractional sustainability program management services. We specialize in developing and executing value-add sustainability strategies for public and private organizations in a cost-efficient manner, including scope 1, scope 2 and scope 3 GHG emissions accounting as well as various types of reporting, including TCFD reporting and annual sustainability reporting services. Our fractional resources provide our clients with flexibility in the way they structure their human capital needs and ESG program sensibly.
By partnering with Full Scope Insights, you can confidently navigate the complexities of ESG reporting, strengthen stakeholder confidence and make well-informed, data-driven decisions that align with your organization’s sustainability goals and values. Our goal is to foster a culture of sustainability that resonates with your stakeholders.
For more information on Full Scope Insights, contact us today.
Marisa Flower, Sustainability Director
Full Scope Insights