Climate Risks in Business: Strategies for Resilience and Growth in 2025

Climate risks have long since become a reality and require decisive action from companies. Extreme weather events, increasing regulation, and shifting market demands are posing major challenges to business models. But there are solutions. Recent findings, such as those from the Allianz Risk Barometer 2025, confirm that climate change has reached a record-high level of concern among global businesses, second only to cyber risks. This underscores the urgency for companies to adapt proactively.[Source]

The key points at a glance:

• Supply Chains: Extreme weather, such as low water levels on the Rhine, threatens supply chains. Companies are responding with digitalization, alternative transport routes, and contingency plans. According to FreightWaves, 2024 has already seen a surge in climate-related disruptions, with logistics providers reporting increased operational costs and delays due to floods, droughts, and storms.[Source]
• Financial Regulation: New EU requirements (CSRD, EU Taxonomy) demand precise climate risk assessments and reporting. Banks and insurers must adapt their strategies. The European Central Bank has also intensified climate stress testing, highlighting that inadequate adaptation could threaten financial stability across the EU.[Source]
• Green Products: Sustainability is shaping demand. Companies that focus on recycling, repair services, and transparent supply chains are securing their market position. The OECD notes that green growth is now a central pillar for competitive advantage, with consumers increasingly favoring brands that demonstrate genuine environmental responsibility.[Source]

Your advantage: With data-driven decisions and targeted measures, you can minimize risks and seize new opportunities. Now is the time to future-proof your business model.

Scenario 1: Supply Chain Disruptions Due to Extreme Weather

The Problem: Supply Chains at Risk

The impacts of extreme weather conditions on German supply chains are already being felt. In the summer of 2025, a heatwave in Western Europe caused extremely low water levels on the Rhine. As a result, the capacity of cargo ships at Kaub was reduced to about 50%, and at Duisburg and Cologne to 40–50%. Shipping companies responded with surcharges on transport costs, significantly increasing the financial burden for shippers.

Even in 2022, companies in Germany faced similar challenges. Low water levels on the Rhine caused supply shortages and production problems. Harry Seifert, Chairman of Seifert Logistics GmbH, described the situation at the time as follows:

“The current economic situation is very tense... Everyone is fighting for survival, and we have to take such unconventional measures.”

A recent study highlights the extent: 67% of German transport and logistics companies have already been affected by resource shortages due to climate risks. 51% reported infrastructure damage, and 46% had to deal with supply shortages due to disrupted supply chains. These challenges have profound impacts on business models. The 2024 Allianz Risk Barometer further notes that supply chain interruption is now the top climate-related concern for German companies, with over 40% ranking it as their primary business risk.[Source]

How This Affects Business Models

The consequences of supply chain disruptions are far-reaching. Higher transport costs, longer delivery times, and expensive emergency measures put significant strain on companies.

Christopher Mims, technology columnist at the Wall Street Journal, sums it up:

“It shows how a bottleneck somewhere in the supply chain can affect the availability of critical goods.”

These bottlenecks are forcing many companies to rethink their previous just-in-time strategies and switch to more costly warehousing. But the changes go even further. Austin Becker, an expert in maritime infrastructure at the University of Rhode Island, warns:

“Climate change is a slow-moving crisis that will last a very, very long time and will require fundamental changes.”

A 2020 study even forecasts:

“Global supply chains will be massively disrupted, beyond what can be adapted to while maintaining current systems.”

To meet these challenges, companies must fundamentally rethink their strategies. Approaches to strengthening supply chains are explored in the next section.

Building More Resilient Supply Chains

German companies are increasingly implementing measures to make their supply chains more resilient. 64% are investing in digitalization, while 24% are willing to invest 10% of their annual revenue in a “green transformation.” Dr. Steffen Wagner of KPMG explains:

“Climate change affects us all—and therefore all companies. Awareness of the real impacts that companies have on our environment, and the associated consequences, should be factored into every strategic decision companies make today.”

A role model is Taiwan Semiconductor Manufacturing Company (TSMC). The company has invested in water treatment and conservation technologies to cope with droughts. Production sites have also been diversified to minimize the risk from natural disasters in certain regions. German companies could take similar measures, such as diversifying their supplier base and using sustainable technologies.

Intel also pursues a clear strategy. Jackie Sturm, Corporate Vice President of Global Supply Chain Operations at Intel, emphasizes:

“I hope that we can make the promise of uninterrupted supply for our customers a literal reality—through structural and operational improvements, more learning, more transparent supply chains, and greater intrinsic resilience in our supply chains.”

Concrete measures include:

• Geographic diversification of the supplier base: This reduces dependency on individual regions.
• Integration of real-time weather data: These data can be incorporated into logistics systems to identify risks early.
• Development of alternative delivery routes and transport modes: This offers more flexibility in unforeseen events.

For German logistics companies, technologies such as AI-powered forecasting tools and IoT solutions offer enormous advantages, especially for Rhine shipping. They enable proactive adjustment of procurement strategies. According to the World Economic Forum, digital supply chain visibility and predictive analytics are increasingly being adopted to anticipate and mitigate climate-related disruptions.[Source]

Another key component is standardized contingency plans and alternative sourcing strategies. These form the foundation for a climate-resilient supply chain.

Scenario 2: New Regulations Create Risks for Financial Companies

The Problem: Complex Reporting Rules

EU regulation on sustainable finance is presenting German financial institutions with significant challenges. With the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy Regulation, they are required to capture and disclose comprehensive climate risks. As a result, the number of companies required to report in Germany will rise from 550 to 15,000.

Mark Branson, President of BaFin, aptly describes the situation:

“The environment in which companies in the financial sector must operate is extremely challenging, because for many risk drivers—such as climate change, geopolitical upheavals, and quantum leaps in technological progress—we lack relevant historical experience.”

A major problem is the lack of precise and up-to-date data. Many companies do not have sufficient information, for example, about their customers’ locations or flood protection measures. Without this data, accurate climate risk assessment is significantly hampered.

The urgency is underscored by a PwC survey from 2024: 72% of investors rate the management of sustainability risks and opportunities as a decisive factor in their investment decisions. For financial institutions, this means they must fundamentally overhaul their reporting. The European Banking Authority has also highlighted that climate-related risks are now a core component of prudential supervision, with scenario analysis and stress testing becoming mandatory for major institutions.[Source]

Changes to Risk Models and Business Strategy

The new regulations have a profound impact on the business models of German financial companies. Banks, for example, must disclose the share of their financing or investments in environmentally sustainable activities, often using specific metrics such as the Green Asset Ratio (GAR). At the same time, the CSRD requires companies to explain how they are affected by sustainability risks and how their activities impact these risks. This concept, known as double materiality, is a central requirement.

Risk models must also be adapted. Climate stress tests show that if CO₂ prices rise abruptly, probability of default (PDs) can increase by up to 40%. Smaller and less diversified credit institutions could be particularly at risk.

An EU analysis shows that over 70% of EU banks’ exposures are to high-emission sectors, while only 3% of assets are classified as green. Potential total losses from climate risks are estimated at €340 to €640 billion. These figures highlight how urgently business and risk strategies need to be realigned.

Meeting Compliance Requirements

To meet the requirements of the CSRD, financial companies must take targeted measures:

• Conduct climate risk analysis: Identify specific risks and opportunities of climate change and systematically integrate them into taxonomy reporting.
• Conduct scenario-based stress tests: Assess how climate-related risks could impact the business model across different time horizons and scenarios.
• Use specialized tools: Platforms such as the XDI Climate Risk Hub, Moody’s Intelligent Risk Platform, and S&P Essential Climate Analytics offer comprehensive analyses and decision support.

Despite these approaches, challenges remain significant. Many companies have not yet fully implemented scenario analyses and struggle to select scenarios that suit their business models. Insurers also face the task of assessing and monitoring climate risks in relation to their risk appetite.

Siemens Healthineers provides a positive example. The company has committed to the Science Based Targets Initiative (SBTi) to develop long-term climate strategies and become climate-neutral by 2030 [Tracera, 2024].

Mark Branson of BaFin emphasizes the importance of a forward-looking approach:

“A forward-looking approach will not only protect the solvency of insurers and banks but can also drive preventive measures. If risks are properly assessed, it is more likely that they will be mitigated.”

These measures lay the foundation for successfully meeting the challenges ahead.

Scenario 3: Market Demand Shifts to Green Products

The Problem: Losing Customers to Competitive Green Offerings

Sustainability is no longer a niche topic: 60% of people in Germany already consume sustainably, and 71% plan to do so even more. Particularly noteworthy is the growing popularity of second-hand goods, which 67% of Germans actively prefer—and not just because of price.

This trend can be risky for traditional companies. A cautionary example is H&M: In 2023, the company was fined €750,000 in France because its “Conscious Collection” did not meet sustainability standards. Such incidents show how quickly accusations of greenwashing can arise and damage a brand’s reputation.[Source]

The consequences for companies that ignore the sustainability shift are severe. Experts predict:

“Companies that do not act sustainably will face rising costs in the long term. In addition to higher energy and CO₂ costs, there will be increased costs for sourcing capital and possibly even fines.”

Another obstacle is consumers’ willingness to pay: Only 23% of global buyers are willing to pay more for sustainable products—a significant drop from 35% in 2020. At the same time, the cost-of-living crisis is making sustainable consumption more difficult for 63% of Germans. According to the OECD, companies that fail to adapt to green demand risk losing market share and facing regulatory penalties.[Source]

New Revenue Opportunities

Despite the challenges, opportunities are emerging. As early as 2017, consumers in Germany spent around €47 billion on “green” products, with the market share of eco-friendly products in certain categories at 8.3%.

The circular economy is particularly promising. 47% of Germans see extending product life cycles as one of the most important tasks for companies. Dr. Jennifer Hendricks of Mintel emphasizes:

“German consumers are reducing the number of products and services they buy, as many believe that consuming less helps save the planet. Brands that address our throwaway culture with a holistic approach—for example, by extending product life cycles or offering complementary services such as repairs—will resonate with consumers.”

SSP provides an example of successful adaptation: In partnership with DB InfraGO AG, the company will open a total of 40 “Point” convenience stores at train stations across Germany by 2025, including in Berlin, Hamburg, Frankfurt, and Stuttgart.

To tap into these potentials, however, companies must fundamentally rethink their strategies, as described below.

Steps to Competitiveness

As in the previous scenarios, the shift towards greater sustainability requires a comprehensive realignment. Companies must move away from superficial “green marketing” and towards authentic concepts. Issues such as cost per use, durability, and ethical sourcing should be central.

Practical measures for companies:

• Sustainable product development: Recycling programs, repair services, and resale models offer real added value. 80% of Germans also prefer sustainable packaging.
• Utilize digital channels: Digital catalogs and collaborations with local sustainability influencers can strengthen credibility.
• Create transparency: Flexible return options, guarantees, and insights into the supply chain increase consumer trust.

Nikolaos Sioulvegas of BearingPoint summarizes:

“The results of our study clearly show that consumers in Germany are increasingly making sustainable purchasing decisions, with a particular increase in the purchase of second-hand and organic products.”

To successfully navigate this development, a clear strategy that takes climate risks and market changes into account is essential. Specialized consulting can play a decisive role here.

Tools and Methods for Adapting Business Models

The scenarios presented clearly show that companies need systematic approaches to assess climate risks and adapt their business models accordingly. Without suitable tools and methods, risks often go undetected, leading to costly consequences. Below, we present concrete approaches to help you assess and reduce climate risks.

Methods for Climate Risk Assessment

Accurate assessment of climate risks and vulnerabilities forms the basis for effective management of physical climate risks. For German companies, this is gaining importance due to the EU Taxonomy: Those seeking taxonomy alignment for certain economic activities must also meet the “Do No Significant Harm” requirements, including consideration of climate adaptation.

Traditional, retrospective risk assessments are no longer sufficient. The German Environment Agency criticizes the lack of practical guidelines here.

A resilience-based approach offers a solution: Instead of trying to predict future climate risks precisely, companies should invest more in resilience to an uncertain climate future. One example illustrates this: In 2024, a flood in the Valencia region of Spain caused significant damage—an event not accounted for in most risk assessments.

Practical tip for German companies:
Conduct a systematic climate risk and vulnerability assessment to meet the requirements of the EU Taxonomy. Identify material risks and implement measures that are economically viable. Methods from climate adaptation economics can help evaluate the savings potential and efficiency of protective measures.

Data-Driven Decision Making

Good data management is crucial for specifically addressing both physical and transition climate risks. You can draw on existing resources such as financial data, asset management records, and operational metrics.

A reliable, data-driven approach is indispensable. Hyperlocal data are particularly helpful, revealing threats not only for the present but also for the coming decades. This information enables you to make informed decisions. According to McKinsey, companies leveraging advanced climate analytics and scenario modeling are better positioned to anticipate disruptions and optimize their adaptation investments.[Source]

Practical examples show how data-driven approaches can be successfully implemented:

• A global telecommunications company has firmly integrated climate risk management into its strategy and operations. Through modeling, climate-related hazards at key sites were analyzed across various climate scenarios—a crucial step for long-term risk management plans.
• A global energy company examined the impact of a CO₂ price on nearly 100 generation facilities and strategic growth areas. The goal was to demonstrate the stability of the transformation plan to investors.

ESG Reporting and Compliance Management

In addition to risk analysis, transparent ESG reporting is becoming increasingly important. ESG-focused investments are expected to reach $33.9 trillion by 2026, accounting for 21.5% of assets under management. For German companies, this means: Transparent reports are essential to meet both regulatory requirements and stakeholder expectations. The Global Sustainable Investment Alliance notes that ESG transparency is now a key factor for investor confidence and access to capital.[Source]

Here is an overview of the most important ESG frameworks for German companies:

An example of regulatory developments:
In March 2024, the SEC adopted new climate disclosure rules. These require listed companies to disclose material climate-related risks. Larger companies must also disclose their Scope 1 and Scope 2 emissions—reporting begins with filings for the 2025 fiscal year.[Source]

Practical steps for German companies:
Analyze which ESG requirements are relevant for your industry and region. Develop clear guidelines that meet compliance requirements, and set measurable sustainability goals. Use software solutions to automate ESG data collection and reporting.

The urgency of these measures is underscored by the numbers: 94% of executives feel pressured to prioritize ESG initiatives, and 88% of customers show greater loyalty to companies that meet ESG criteria.[Source]

Conclusion: Developing Climate-Resilient Business Models

The three scenarios presented make one thing clear: Climate risks are already part of everyday business and will increase even further in the coming years. According to calculations by the Boston Consulting Group, climate impacts could reduce corporate profits by up to 25%.[Source] These figures clearly show how urgently companies need to act. Three key insights can be drawn:

The cost of inaction far exceeds the investment in climate adaptation. For Germany, experts estimate climate costs of up to €900 billion by 2050 due to extreme weather events such as heat, drought, and flooding.[Source] But there is also good news: Companies that invest in adaptation measures achieve returns of $2 to $19 for every dollar invested.[Source] The green economy will also grow from $5 trillion in 2024 to over $14 trillion by 2030.[Source]

First: Supply chains, revenue streams, and business models should be diversified to better cushion disruptions. One example is the energy company E.ON, which, after the floods in the Ahr Valley in 2021, adapted its approach to grid infrastructure and now increasingly relies on higher-altitude sites.[Source]

Second: Regulatory requirements can become a competitive advantage. German companies that invest early in ESG reporting and climate risk management gain a better starting position for upcoming legal requirements.

Third: Customer expectations are driving change. In Germany, 45% of companies already report a shift in demand due to climate risks.[Source]

The pressure to act is unmistakable. Pedro Gomez, Head of Climate at the World Economic Forum, puts it succinctly:

“Climate risks are escalating, and the window to act is closing fast.”

Companies in particularly vulnerable sectors could lose 5–25% of their EBITDA to physical climate risks alone by 2050.[Source]

The time to act is now. Investments of around 3% of cumulative global GDP in mitigation and adaptation measures could help avoid global GDP losses of 10–15% this century.[Source] For German companies, this means: Those who act today not only secure their existence, but also lay the foundation for sustainable growth in a climate-changed world.

FAQs

How can companies better protect their supply chains against climate risks?

To make supply chains more resilient to climate risks, you should implement regular risk analyses. This allows you to identify and address vulnerabilities early. Diversifying suppliers and increasing the use of sustainable and climate-friendly raw materials also help minimize potential risks.

At the same time, compliance with legal requirements, such as the German Supply Chain Act, is essential. This law obliges companies to ensure environmental and human rights standards throughout the entire supply chain. In addition, investing in modern technologies and supporting local suppliers can help reduce dependencies and increase transparency—a crucial step towards a more robust supply chain.

With these targeted measures, you can not only effectively reduce risks but also secure long-term competitive advantages. For further reading, see the FreightWaves 2024 supply chain report.

What steps should financial companies take to meet the EU requirements for climate risk reporting from 2025?

EU Requirements for Climate Risk Reporting from 2025

From 2025, financial companies will be required to implement the new EU requirements for climate risk reporting. This means that climate risks must be integrated into existing risk models. At the same time, detailed reports must be prepared that meet the specified transparency requirements. Another important point is ensuring that investments meet sustainability criteria and are regularly reviewed. The European Banking Authority’s final guidelines on ESG risk management provide a practical roadmap for implementation.[Source]

Effective Management of ESG Risks

The importance of well-organized management of ESG risks (environmental, social, and governance) cannot be underestimated. Financial institutions should design their internal processes and systems to meet the new regulatory requirements. It is important to be flexible and able to respond to future changes. Early preparation and strategic adaptation are crucial for reducing risks and at the same time recognizing and seizing new opportunities.

How can companies leverage growing demand for sustainable products without risking greenwashing accusations?

Companies can successfully meet the growing demand for sustainable products by focusing on honesty, transparency, and verifiable facts. Consumers in Germany value clear, comprehensible information and place great importance on evidence of sustainable practices. Therefore, companies should openly communicate their sustainability strategy and back it up with concrete, verifiable data.

To avoid suspicion of greenwashing, it is important not to make vague or misleading statements. Instead, companies can pursue the following approaches:

• Certifications and standards: Use recognized systems such as the German Sustainability Code (DNK) to credibly demonstrate sustainability measures.
• Set measurable goals: Formulate clear, achievable goals and report regularly on progress.
• Transparency in the value chain: Disclose how sustainability aspects are integrated into all processes and operations.

With open and honest communication, companies can not only build trust but also benefit long-term from the growing demand for sustainable products.