Climate risk compliance: Preparing for a future shaped by regulatory changes

Not only is climate change altering the physical environment, it’s also changing the way we do business and design organizations. Regulatory requirements from governments as well as reputational pressures from customers and investors shape the way businesses need to measure and report on their climate-related risks and mitigation strategies. 

Climate risk compliance: Preparing for a future shaped by regulatory changes

In that regard, climate risk compliance refers to the practice of identifying, managing, and reporting climate-related risks in line with evolving standards. At CEMAsys, we offer a range of solutions and services to support your company’s compliance needs.

From data collection, reporting, and analysis to comprehensive climate risk assessments, we help align your disclosures with international and regional regulations. 

Let’s help you report on your climate impact – book a demo of our carbon accounting software.

What is climate risk compliance?

Climate risk compliance is the process of managing and reporting climate-related risks in alignment with global and/or regional standards.

Examples of standards include:

  • TCFD (Task Force on Climate-related Financial Disclosures) - disbanded in 2023
  • IFRS S2 (Climate-related Disclosures) - new standard
  • CSRD (Corporate Sustainability Reporting Directive) - building upon the recommendations from the TCFD framework

And many more. Read our comprehensive guide and list of ESG reporting frameworks here

The climate-related risks are both physical, transitional, as well as liability-related. That is, the risks can stem from extreme weather conditions and supply chain disruptions (physical), and stem from evolving regulation and general market shifts (transitional). Lastly, risks can stem from legal claims and reputational damage (liability risks).

As you can imagine, it can prove difficult and complex to identify and manage the different risks across an entire organization. 

Use CEMAsys as your trusted partner and platform to do exactly that. We enable you to map out climate risks throughout your entire value chain effectively, support you developing robust mitigation strategies, and make sure your ESG reporting is compliant and up-to-date.

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Why does climate risk compliance matter?

On the one hand, climate risk compliance matters because it ensures companies adhere to certain safeguards put in place to protect the climate, thus protecting the future.

On the other hand, it matters because if a business is to thrive, it needs to adhere to an increasingly regulated environment where climate values impact expectations of corporate actions. 

The safeguards and regulations are in place to protect the future – and the companies successful in doing so, can be rewarded through increased trust and reputation. When you’re climate risk compliant, not only do you avoid penalties, you also signal to customers and stakeholders that you’re responsible.

Climate risk assessment: What is it?

A climate risk assessment is the process of identifying how climate change impacts a company’s assets, operations, supply chains, stakeholders, and more. 

Depending on the business and the industry, this kind of assessment can entail a whole range of items. Ultimately, it all boils down to strategic scope of the business, and the regulatory framework it resides in. 

As mentioned earlier, climate risks include both physical, transitional, and liability risks.

  • Physical risks: These can be extreme weather events, flooding, droughts, and heatwaves that can disrupt operations and damage assets. 
  • Transitional risks: These can be new regulations, shifts in market conditions, changing stakeholder expectations, breakthroughs in scientific climate modeling, and so on.
  • Liability risks: These are risks resulting from the reputational damages a company can face from inadequate climate risk management. Under TCFD, liability risks are seen as a sub-category of risks under transitional risks, however some regulatory bodies have started treating them as their own risk factor. See The Bank of England.

Keep in mind, most of the emission data for the vast majority of businesses are Scope 3 of the GHG protocol. That is, the result of activities from processed goods and services not owned or controlled by the reporting organization.

This portion of the protocol represents the largest – and often most opaque – share of a company’s total climate impact. It’s also very sensitive to transitional risks, as Scope 3 spans upstream suppliers, downstream product use, and everything in between.

For example, if new climate regulations are introduced — such as mandatory disclosure rules or supply chain emissions caps — the entire value chain must be re-evaluated to ensure compliance. This can involve reassessing supplier emissions, adjusting procurement criteria, or redesigning products to reduce end-use impact.

A climate risk assessment takes into account all of these various elements and pinpoints where a company can focus its efforts in order to do better – both in terms of general ethical obligations, and in terms of improving specific ESG metrics.

Read more: What is a good ESG risk score?

The climate risk assessment is typically accompanied by an actionable strategy for improving the areas that are not up to par. A roadmap for addressing weak spots, mitigating risks, and capitalizing on opportunities for improvement in order to stay climate risk compliant.

How CEMAsys can help companies stay climate risk compliant

Assessing risks, developing mitigation strategies, and reporting it in line with industry standards is what our expert consultants excel at here at CEMAsys. Our platform and experience allows us to effectively grasp the nature of your business’ strategic scope, and from there we define the relevant areas for measurements and tracking. 

This granular data, then, allows us to identify risk hotspots and prioritize action. The risk profile is defined in relation to niche industry needs, regional regulations, and international standards – all depending on the given company’s strategic focus. 

Having the right tools, processes, and expertise in place is essential to meet evolving ESG requirements. Doing it right will even allow you to turn ESG risk management into a strategic advantage. If you’re unsure where your company stands or how to improve, we’re here to help.

In our ESG advisory services, our experts help shape sustainability strategies, craft your unique narrative, and ensure full regulatory alignment. At CEMAsys, we guide you through the entire ESG reporting journey. This includes aligning your reports with international frameworks such as IFRS, CSRD, TNFD, or SASB, ensuring accuracy, credibility, and long-term value.

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CEMAsys is a trusted ESG solution provider with over 18 years of experience helping companies drive sustainability, manage compliance, and create lasting impact. Read more about our history here.

Frequently asked questions about climate risks

What is the ISO for climate risk?

The typical ISO standard for climate risk is ISO 14091:2021, which provides guidelines for assessing risks related to climate change. It supports organizations in understanding and managing climate risks as part of broader environmental management efforts.

What are the three components of climate risk?

Climate risk is generally broken down into three key components:

  1. Physical risks: Liabilities from direct impacts of climate change, such as extreme weather events, rising sea levels, and long-term environmental shifts.
  2. Transition risks: Liabilities linked to the global shift toward a low-carbon economy, including regulatory changes, technological disruption, and market shifts.
  3. Liability risks: Broader exposures for organizations, such as legal claims, reputational damage, or financial losses resulting from inaction or insufficient climate risk management.

What is climate compliance by 2050?

Climate compliance by 2050 refers to meeting national and international targets to reduce greenhouse gas emissions. The overarching goal is to reach net-zero emissions by 2050. This objective is usually seen in relation to the Paris Agreement of limiting global warming to 1.5°C. 

What is the difference between climate risk and ESG?

Climate risk focuses specifically on the potential liabilities and exposures arising from climate change, including physical, transitional, and liability risks.

ESG (Environmental, Social, and Governance) is a wider framework used to assess an organization's environmental, social, and governance impact. Climate risk falls under the Environmental pillar of ESG.

Furthermore, ESG is usually related to companies’ reporting and compliance efforts. Read more about ESG reporting here.

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