The Cost of Inaction 2024

Climate change is becoming concrete and testing government and business leaders in unprecedented ways The threat climate change poses to livelihoods and economic prosperity has long been evident to the scientific community and to many in government and business. But as risks, predictions and impacts start materializing, the direction of the world’s climate and its related risks are expected to return to the top of the corporate agenda. How companies and governments can prepare for the uncertainty ahead FIGURE 22 1 Adopt a scenario mindset 2Measure the full impact of climate risksDevelop robust transition and resilience plans 3Companies Transition 1 Adopt a scenario mindset1 Close the 600+ Gt ambition gap 2 Expand the use of carbon pricing 3 Double financing and incentives 4 Remove transition obstacles 5 Prepare for more drastic transition measures1 Adopt a scenario mindset1 Develop National Adaptation Plans 2 Concentrate capital on high-impact projects 3 Increase public-private collaborationAdaptationGovernments Source: BCG analysis Business leaders need to prepare for a changing world Business-as-usual scenarios will likely not persist. The new normal is driven by extreme weather – affecting overall economic growth and threatening individual supply chains, assets and operations – as well as by a difficult-to-predict transition to a low- carbon economy that puts existing products, asset values and business models at risks. The following three actions can help business leaders prepare for the uncertainty ahead: 1. Adopt a scenario mindset to understand how a company’s context would change in different versions of the future. The speed of the green transition and the exact impacts of global warming are hard to predict. But climate leaders should know how to model the conceivable effects of shifts on their companies and how to develop resilient strategies against potential developments. 2. Measure the full impact of climate-related risks to help make better-informed business decisions. Both physical and transition risks can have major impacts on companies’ bottom lines. Quantifying them enables prioritization and the most efficient use of resources. 3. Develop robust transition and resilience plans that offer adequate resilience across the full spectrum of relevant scenarios. By building strategic optionality and flexibility, businesses will be able to adapt more quickly to unforeseen challenges and capitalize on emerging opportunities. Business-as- usual scenarios will likely not persist. The new normal is driven by extreme weather and a difficult-to-predict transition to a low- carbon economy. The Cost of Inaction: A CEO Guide to Navigating Climate Risk 49