A recent AB article ‘Beyond Hormuz’ discussed how risk management and resilience must become permanent business architecture, embedded in balance sheets, logistics and trade strategy.
This does not happen often, and many businesses, both in and beyond the Gulf, had long known disruption like that caused by the Iran war was plausible yet still could not pivot quickly enough when it arrived.
Approaches to climate risk suffer a similar problem. The Climate Change Committee’s A Well-Adapted UK, published in May, estimates that extreme heat already costs the UK economy more than £1bn a year in lost productivity, with agriculture losing a comparable amount to extreme weather. It also reports that 40% of business-critical infrastructure is in areas exposed to flooding. Without further adaptation, annual climate-related damages could reach between £60bn and £260bn by 2050.
Risks featured in reports for years turn out to have no funded response
Many businesses have their own climate-related information, particularly around supply chains, but that data is not yet consistently translating into practical choices for operations, procurement, workforce planning and delivery teams. The real question is not whether climate risk exists, but where it will disrupt work in the next three to five years, through which dependencies, and what decisions need to change as a result.
The need is not more disclosure. The warnings already exist, documented in annual sustainability reports, filed, summarised in appendices, checked against reporting deadlines. But they are often not in a format that is decision-useful and get stuck in the boardroom rather than shared across teams. We need faster, clearer decisions on where disruption is most likely to hit first, what that means for cost and delivery, and what actions are justified now.
Weak connections
Finance plays an important role in this but as part of the wider effort: Sustainability teams may understand the hazard, while procurement manages the commercial relationship and operations prepares for interruption. Risk records the exposure, and finance sees the cost when it crystallises. Each function has relevant expertise, yet the connections between them are often weak.
You may have little control over your direct suppliers’ dependencies
In this structure, climate risk can become everyone’s concern without being anyone’s clear responsibility, showing up in the P&L without a joined-up conversation about the decisions on investment, contracts and contingencies that would follow from taking the issue seriously. Sustainability, procurement, operations and finance must work much more closely together, early enough for it to matter, and that starts with asking better questions.
These might include:
- Where does the forecast depend on uninterrupted access to water, energy, transport or critical commodities?
- Which assumptions would fail first under stress?
- What would the consequences be for revenue, margins and working capital?
Supplier scrutiny
The answers can be revealing. Organisations discover that risks they have featured in presentations and reports for years turn out to have no funded response.
Supplier relationships deserve particular attention. As an example, in June 2024, exceptional rainfall flooded a Novelis aluminium facility in Switzerland, halting operations for several weeks. For Porsche, which uses aluminium body components in every series it manufactures, the cascading impact was devastating, forcing a cut in the 2024 sales forecast from €40bn–€42bn to €39bn–€40bn, and its forecast return on sales from 15%–17% to 14%–15%.
Overall, analysts estimated production losses of up to 17,000 vehicles, more than 11% of Porsche’s first-half deliveries. One flood at a single supplier, outside Porsche’s own operations, had coursed through the supply chain into production forecasts and expected financial performance, not to mention the damage to reputation.
A credible resilience strategy begins with the wiring
This is the cascading character of climate risk. Without the right conversations, you may understand direct suppliers but will probably have far less visibility or control over their dependencies.
Unglamorous but vital
The challenge with resilience is that success looks like a factory that keeps running, an alternative route that works or a supplier interruption that never reaches the customer or damages reputation. Such success is difficult to celebrate and often unglamorous, but it becomes extremely valuable when disruption arrives.
Businesses need to ask themselves if their climate risk assessment is connected to capital allocation decisions, to procurement, to insurance strategy, to what the company builds, to what it buys, to what it contracts for in its supply chain over the next decade. Does this detail sit in a sustainability report, dutifully published and professionally presented but essentially disconnected from the decisions that actually determine what the organisation does?
Financial discipline can turn a foreseeable exposure into a funded plan
A credible resilience strategy begins with the wiring, not words in a well-fashioned report. It lives in data systems, decision rights, contingency routes, supplier relationships and the clauses buried in contracts. These details protect margins, preserve options and allow organisations to move at speed.
Finance already knows this territory well and how to act when a shock appears in prices and cashflow. Applied earlier, alongside sustainability, procurement and operations rather than after them, that discipline is what turns a foreseeable exposure into a funded plan. Each dependency mapped, every assumption challenged and every contingency funded leaves the organisation better prepared for the next disruption.
This work may be unglamorous, but it is crucial for the future of businesses, their resilience and their profitability.
More information
Watch on demand ACCA’s webinar ‘Connecting sustainability to business strategy’.
Read ACCA reports 'Sustainability reporting: track your progress'; 'Internal control over sustainability data'; 'The climate tech forecast'; 'Sustainability reporting: working with estimates'.
