In recent years, there has been a noticeable shift in how companies approach climate change. Deloitte’s 2024 Sustainability Report indicates that climate change is one of the top priorities for the C-suite, outranking concerns over political instability and regulatory shifts. What’s more, the majority of the 2,100 executives surveyed for the report say they’ve increased investment in sustainability initiatives.
What explains this shift in the way companies are addressing climate change, and why is its relevance likely to continue increasing in the coming years? The answer, I believe, lies in the growing recognition of its direct implications for business risk and financial performance.
Climate disruptions are increasingly perceived as concrete threats to business continuity and profitability due to disruptions in supply chains, materials shortages, impacts on workforce health, and uncertain operating conditions. These are just a few of the risks consistently cited in reports such as the World Economic Forum’s Global Risks Report.
The reality is that climate change has a monetary impact that has risen to the top of corporate agendas, making it virtually impossible to ignore.
The High Cost of Inaction
There is growing evidence of the financial impact of climate-related events. A recent report by Swiss Re estimates that insured losses from natural catastrophes reached $137 billion globally in 2024. These figures reflect the increasing costs already being absorbed across markets.
Yet the deeper concern lies not only in the current financial toll but in the much greater economic risk that comes with inaction.
According to a 2025 report by the Boston Consulting Group, if global temperatures rise by approximately 3 degrees Celsius by the end of the century, global GDP could contract by 11 to 27 percent. In contrast, allocating just 1 to 2 percent of global GDP today to investment in mitigation and adaptation strategies would help keep warming below 2 degrees and significantly reduce long-term economic losses.
The report also warns that delaying action could result in cumulative GDP losses between 11 and 27 percent higher than if investments were made now. Deferring climate action will increase future costs.
This economic reality is reshaping the conversation. The focus is shifting from whether to act to how quickly and decisively action must be taken. Inaction is becoming a measurable financial liability, already influencing capital allocation, operational strategies, and business continuity planning.
The ability to act early, adapt quickly, and innovate for resilience is critical.
The Cost to Business
The physical impacts of climate change present a direct threat to business operations, infrastructure, and supply chains. Reports of storms, floods, wildfires, heat waves, and droughts are becoming more frequent, often followed by news of asset damage, revenue loss, or rising operational costs. According to the National Centers for Environmental Information, 27 major weather and climate disasters were recorded in the United States in 2024.
Beyond these extreme events, chronic climate pressures such as water scarcity, rising sea levels, and sustained heat conditions are also becoming more common. As global temperatures increase, the probability and intensity of these impacts are expected to rise.
While each event may be treated as a one-time shock, the underlying risks are evolving into persistent operational conditions. This trend increases the likelihood of physical damage to critical assets, lowers workforce productivity, and creates ongoing disruptions across supply chains that are sensitive to environmental volatility.
According to the World Economic Forum, failing to prepare for climate risks could put up to 25 percent of a company’s EBITDA at risk over the next two decades, as the frequency and severity of physical climate impacts continue to grow.
Rethinking Climate Action in Business
Corporate climate action often begins with incremental efforts focused on operational efficiency and impact reduction. These typically involve improving energy use, managing resources more sustainably, and adopting responsible sourcing practices. While these actions remain important, they are no longer sufficient.
The scale and urgency of the climate crisis demands a more ambitious and systemic response. This means moving beyond efficiency gains to rethinking business models, value chains, and value propositions through the lens of resilience and long-term sustainability. Although this shift involves greater complexity, it also opens the door to significantly greater value creation.
One of the strongest arguments for advancing climate action lies in its potential to drive innovation. Rather than a constraint, the integration of climate considerations can serve as a strategic lever for developing new solutions, rethinking business models, and building lasting competitive advantages. This transformation not only addresses environmental and business risks but also creates tangible opportunities for differentiation and market leadership.
Across both public and private sectors, there is increasing demand for solutions that lower emissions, enhance resilience to climate-related risks, and meet evolving regulatory expectations.
The impact and consequences of climate change are undeniable and already affecting all sectors of the economy. Even more concerning is the expectation that these costs will rise sharply without immediate action.
It is not simply about the losses we face today, but about the far greater cost of postponing action.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
The early-rate deadline for the 2025 Inc. Power Partner Awards is Friday, June 27, at 11:59 p.m. PT. Apply now.
English (US) ·