How real-world events underscore the urgency of climate disclosures

With 2024 once again breaking records as the hottest year on record and a relentless series of extreme weather events continuing into 2025, the past few years have been a stark wake-up call for communities and businesses.

Recent data from NASA confirms what many are experiencing first-hand: floods, droughts and other climate extremes are becoming more frequent, severe and long-lasting. This year alone, we’ve seen devastating floods across NSW and Queensland, severe drought gripping the south, and unprecedented bushfires in California and Korea. Extreme weather events are no longer random threats; they’re here, they’re frequent and they’re hitting hard. Companies affected by these disasters are now confronting the real-life impacts on their operations, from supply chain disruptions to financial losses, insurance complications and cost increases.

Climate disclosures can help companies prepare for these challenges. The work underpinning these disclosures typically involves identifying risks and opportunities early, building resilience, and embedding mitigation and adaptation strategies into long-term financial planning and decision-making.

Repercussions of recent extreme weather events

Cyclone Alfred and extreme flooding in Queensland and New South Wales in 2025 have caused widespread outages, leaving communities and industries dealing with power and communication breakdowns. The 2022 floods remain the costliest insured event in Australia’s history, with over $6 billion in insured losses. In just the first six months of 2025, extreme weather has already triggered more than $1.8 billion in insurance claims, while the broader economy has taken a $2.2 billion hit due to reduced spending linked to these events. Many of the 2025 floods have been record breaking, underscoring the growing risk of underinsurance as climate science points to more frequent and intense weather events.

Prime Minister Albanese acknowledged the challenge, stating, “It is a challenge that we need to deal with and be conscious of, and we certainly are. And that’s why we’re engaged directly not just with the Insurance Council … but also individual insurance companies.”

Australia is not alone; climate extremes are escalating around the world. Wildfires exacerbated by the effects of climate change in the US, Canada, Greece and Hawaii have scorched vast areas, destroying property and infrastructure, while heatwaves across Europe have caused widespread power grid failures and slashed productivity in heat-exposed industries.

For businesses, this means direct financial hits, interrupted revenue streams and the challenge of maintaining customer trust during prolonged disruptions. Businesses that once saw climate risk data as a nice-to-have are now confronting the reality of its critical role in financial decision-making, regulatory compliance and long-term resilience.

The costs of inaction are clearer than ever — from damaged infrastructure and operational downtime, to strained supply chains and client relationships and the reality of not just rising insurance premiums but also the potential of being uninsurable into the future.

How ASRS-aligned reporting is beneficial to understand climate risks and opportunities

The Australian Sustainability Reporting Standards — ASRS (AASB S2) mandates that companies assess and report on their climate-related risks and opportunities. For businesses not directly required to report, these expectations will likely flow through procurement and supply chains, and beyond this, adopting them proactively simply makes sound commercial sense.

Benefits of reporting include:

• Holistic climate risk management: Integrating climate risks into your broader enterprise risk framework. As recent record-breaking floods and extreme weather in Australia show, unmanaged risks can disrupt core operations, supply chains and infrastructure, making it essential to treat climate as a strategic business risk, not a siloed environmental issue.
• Data-driven decisions: Using reporting to gain insights into your vulnerabilities and opportunities. Accurate climate data enables businesses to better anticipate impacts like regional drought, insurance exposure or workforce disruption, all of which have played out in 2025’s billion-dollar losses due to extreme weather events.
• Financial impact disclosure: Be prepared to account for the potential financial implications to your business of climate risks in your reporting. The $2.2 billion economic slowdown Australia has seen this year linked to extreme weather highlights how climate risks are already affecting bottom lines and why investors and regulators expect transparency on future financial exposure.
• Opportunities for leadership: Those who take proactive steps to think about the disclosures as a holistic and future-focused business exercise — rather than just compliance — can position themselves as climate-resilient leaders, building trust with stakeholders and investors. As governments and insurers step up climate engagement, companies that lead on disclosure and adaptation will stand out as credible, future-ready partners, especially in an environment of increasing scrutiny.
   

Key components of climate disclosures and real-life examples of solutions:

1. Climate risks and opportunities: Understanding your climate risk means not just recognising vulnerabilities but also identifying opportunities to strengthen your business. Companies that proactively manage their exposure through adaptation strategies or innovative climate solutions are better positioned to withstand shocks and even find new revenue streams. For example: some logistics companies are leveraging technologies like AI and developing climate-resilient infrastructure to minimise disruptions due to flooding, turning risk into strategic advantage.

2. Scenario analysis: One of the most powerful tools for preparing your business is conducting climate scenario analysis. This involves mapping out how various climate futures could impact your assets, operations and value chain. Businesses that run scenario analysis can put resilience measures in place such as diversifying supply chains or implementing stronger emergency protocols, reducing downtime and protecting their bottom line. For example: agri-foods companies that have conducted climate scenario analysis are identifying hotspots of physical and transition risks, understanding how they manifest across value-chain stages and estimating the extent of potential financial impacts they face from climate risks and opportunities under different future-world scenarios. This is enabling them to target risk mitigation, physical climate adaptation and opportunity prioritisation efforts accordingly.

3. Transition planning: Building a Climate Transition Plan means consolidating climate initiatives into a strategic plan, understanding the extent of business transformation required for continued growth and financial performance in a net zero future and planning for how your business will get there. This could include investing in decarbonisation strategies, implementing nature-based solutions or innovating to reduce emissions in your operations. Many companies are leveraging carbon credits to offset their emissions but forward-thinking businesses are going beyond to embed nature-positive initiatives into their overall strategy. For example: clothing and apparel sector companies are developing Climate Transition Plans that integrate all their climate and broader sustainability initiatives, aligning their targets and ambitions with global benchmarks and planning resources, training, internal cultural shifts and various other factors that will drive sustainable performance for their business in a net zero world.

4. Double materiality assessment: While not a mandatory component of ASRS-aligned climate disclosures, understanding the double materiality of climate and sustainability issues has been hugely helpful for companies looking to take decisive action and prepare for future scenarios. Double materiality assessments involve assessing and understanding financial materiality (inward-facing or the impacts of climate-related risks and opportunities on your business) as well as impact materiality (outward-facing or the impacts of your business on broader stakeholders and the environment). Given the complex interdependencies and relationships across most companies’ value chains, this exercise provides organisations with a valuable holistic view of the most pertinent factors to focus on. Businesses that understand both perspectives are better equipped to develop comprehensive Climate Transition Plans that account for risks, regulatory demands and shifting stakeholder expectations. For example: Guess conducted a double materiality assessment to support its strategic planning process for its upcoming mandatory disclosures including the CSRD.

Why taking action to understand your climate risks matters now

Even if your organisation isn’t yet legally required to report under ASRS AASB S2, voluntarily starting now makes strategic sense. And if you are required to report in the next few years — start preparing now.

The data-driven insights you’ll uncover and solid foundation you’ll build from climate risk reporting do more than just meet compliance requirements; they offer a competitive advantage. Companies that are proactive rather than reactive will build resilience to emerging shocks and discover new value opportunities.

During extreme weather events like the aforementioned floods, many businesses were caught off guard, logistics networks crumbled, supply chains were severed, and some companies faced millions in uninsured losses. In contrast, with the new requirements to conduct climate scenario analysis and develop transition plans, companies will be much better prepared with contingency measures in place to manage disruptions.

As more companies undertake materiality assessments and integrate climate risk disclosures into their overall business strategies, they will proactively mitigate climate-related impacts and reduce downtime. This highlights the practical value of ASRS-compliant reporting, helping your business think and plan ahead and prepare for a range of possible futures.

Image credit: iStock.com/da-kuk