by Lynne Baber, Renate de Lange and Colm Kelly
The search for ways that businesses can speed growth and lower costs never ends. It becomes even more pressing in uncertain times, when leaders need ideas they can depend on. That’s why forward-thinking executives we know are taking a serious look at opportunities and risks stemming from climate change, just as they are doing with AI and geopolitics. When they dig into the financial implications of sustainability matters, they see how much value their companies stand to gain—and how to capture it.
Each company will have a unique set of sustainability factors that influence its ability to create value. Determining which factors carry the most weight involves deliberate study. But it needn’t take months. Experience working with hundreds of businesses has taught us that leaders find ample opportunities by considering five interconnected topics: value at risk, regulation, energy strategy, supply chains, and tax credits and incentives.
Just as importantly, these five topics are value drivers that executives can manage if they integrate more data into their decision-making processes. Advances in technology have produced better tools for generating insights, such as AI assistants and user-friendly risk models. Reporting requirements have compelled many firms to expand their stores of sustainability data, thereby giving managers new information to work with.
It all adds up to a strong case for taking action. Below, we explain the sustainability factors that drive business value and show how CFOs and COOs can bring those factors into the choices they make.
Value drivers
A businesslike approach to sustainability matters begins with understanding not only what value is in play now, but where value is flowing and why. Climate change, and the efforts of government and business to address it, have set a staggering amount of business value in motion. Just think of the trillions of dollars being spent to build clean-energy infrastructure and reinvent business models for a low-carbon future. Or the trillions going into disaster resilience and recovery.
Those flows of value have financial effects that executives will want to size up. Regulators and investors, too, expect businesses to disclose these effects, along with their plans to manage them.
The array of potential value drivers can appear overwhelming at first. But through our work with clients, we’ve narrowed the list to five closely related matters that create opportunities and risks for most companies.
Value at risk
When leaders assess what climate change means for their companies, they tend to focus on the energy transition. It’s rare that they give much attention to the threats posed by weather hazards: the storms, heat waves, floods, wildfires and other perils that climate change makes worse. Because weather risks to businesses are immediate, pervasive and growing, firms can gain an edge by making their operations and, especially, their supply chains more resilient before rivals safeguard their own.
That edge can provide immense business value through avoided costs. One report says that US spending related to climate disasters—insurance premiums, power outages, recovery, uninsured damage—totalled nearly US$1 trillion during a recent 12-month period. Food and beverage companies, and their customers, felt the squeeze in late 2024 when prices of arabica coffee and cocoa hit record highs because of concerns that drought and heat would hurt production.
What’s more, the resilience premium is likely to increase in the near term as the extra carbon already in the atmosphere heightens physical risks. PwC’s economic modelling, based on academic research, suggests that climate damage could leave the global economy nearly 7% smaller in 2035 than it would have been otherwise. Economic losses translate into reduced corporate revenues and valuations—but not for companies that get ahead of the risks.
The value effect
In assessing its exposure to climate hazards, a global technology company identified significant and growing financial risks. By one estimate, the insured loss from a flood that the firm experienced in 2020 would have been as much as 50% greater in 2025. Leaders recommended adaptation solutions to site managers, many of which have been implemented or planned. They also instituted a range of business continuity measures for their supply chain, such as designing products so that key inputs can be sourced from more than one vendor.
A supplier of plants, equipment and production systems found that some of its sites could lose €75 million (US$87.8 million) per year due to asset damage and interruptions from climate hazards over the coming five years. The losses—caused mainly by floods, rising sea levels and tropical cyclones—would increase in the years after. The results led managers to update their adaptation plans and evaluate climate risks when selecting future sites.
Regulation
Notwithstanding political debates over sustainability, many governments have established laws and regulations to foster clean, resource-efficient and resilient economic growth. Most of these regulations have a direct impact on business performance and the trade landscape.
One important class of regulations calls for businesses to publicly report sustainability-related risks and opportunities, financial effects and management plans. As enacted by the EU, Australia, Singapore and other jurisdictions, these mandates will require many leadership teams to complete financial-materiality assessments and other analyses they’ve never done before. The resulting disclosures will give executives and investors new data to use when making business decisions.
Governments have also instituted compliance requirements and financial penalties to make businesses conserve energy, prevent waste, reuse resources and curb pollution. The EU’s Carbon Border Adjustment Mechanism (CBAM), for example, could bring about a fivefold increase in the emissions fees on certain imported goods. That could disrupt supply chains and export markets.
The value effect
A consumer goods company had just completed the setup of a production line for packaging when it discovered that a key material was set to be banned in two years. The restriction would require the company to write off its investment or spend more to repurpose the line. Prompted by the discovery, management resolved to bring regulatory factors into their decisions about the company’s packaging mix, the materials it used and its operational footprint.
After a fast-growing food business had finished the sustainability reporting process, managers looked for ways to get additional value from the data they’d compiled. Careful analysis of the data revealed opportunities to bring down operating costs by reducing waste and electricity consumption.
Another consumer company had imports of certain goods stopped at the border because the labelling violated product requirements set by sustainability regulations. The incident led managers to recognise a problem faced by many businesses: functional specialists hadn’t been informed about the regulations or asked to help ensure compliance. In response, managers organised workshops and a cross-functional committee to coordinate action. They also created a digital dashboard that consolidated information about new regulations, distilled it into plain language and helped users identify regulations pertaining to their work.
Energy strategy
Government policies and market forces are rapidly changing the world’s energy system—in ways that disrupt business as usual and redefine sectors. Demand for energy keeps rising, driven in part by the electricity needs of data centres. Those increases, plus the uneven expansion of renewables, have led to energy insecurity and pricing risk for companies.
Yet innovations in energy and digital technology have now made it advantageous for businesses to generate their own power and optimise their demand, thereby achieving energy independence. Energy savings of US$2 trillion per year can be realised with this technology, according to a study by the World Economic Forum in collaboration with PwC. Some firms have begun capturing the opportunity: stabilising supplies, avoiding price swings, cutting costs and lifting revenues.
Going further, companies are using energy innovation to reinvent themselves. Take Associated British Ports. Its 21 locations handle a quarter of the UK’s seaborne trade. But ABP also leases property to clean-energy manufacturers. It produces renewable power at its sites and sells it to tenants. And it runs an accelerator for start-ups working on energy solutions, such as hydrogen, that its customers need.
The value effect
One global food and beverage company could recover about 60% of its current energy costs—nearly US$300 million a year—by upgrading energy-intensive building systems and vehicles, installing onsite solar, using battery systems to help balance the flow of grid power and taking other steps to manage its energy demand.
A business in Southeast Asia found that making energy efficiency upgrades and installing solar panels, battery storage and electric vehicle charging across some 2,000 sites could lift its energy-related EBITDA by roughly 80%.
Supply chains
Physical risks, regulations and energy issues affect firms throughout the economy. That means they touch every company’s suppliers. Many COOs are aware of the pressures: over 40% of those surveyed by PwC expect severe disruptions and sustainability-related compliance requirements to have a high impact on their supply chains in the next one or two years.
Even alert COOs can be surprised by the extent of some obligations. Under the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and Deforestation Regulation (EUDR), for example, large companies must identify, prevent and mitigate negative environmental impacts for their operations and those of their subsidiaries and business partners. Penalties for non-compliance with the CSDDD can be steep: fines of up to 5% of annual turnover, along with possible exclusion from public contracts.
Weather risks and energy costs bear watching, too. A PwC study on weather risks to semiconductor supply chains found escalating threats: the share of chip production that depends on at-risk supplies of copper could rise from 7% today to nearly one-third in 2035.
The value effect
A recent study for a UK food retailer showed that greater transparency in the supply chain could lead to a 2–5% increase in sales if the retailer adopted dynamic pricing, discounting products close to their expiry date. The retailer could also improve margins by reducing food waste (up to 75% at the retailer stage and 25% at the producer and processor stages) and optimising transport and inventory costs.
A multinational retailer estimated that it could pay up to €1.5 billion (US$1.8 billion) in fines if its imports from Asia failed to comply with Germany’s Supply Chain Act (LkSG, since repealed). To reduce its risk exposure, the company identified gaps between its existing processes and legal requirements, developed supplier guidelines and added processes to its supply chain management programme.
Tax credits and incentives
Given the many sustainability-related opportunities and risks before them, companies will need to make investments that drive growth and resilience. This is when it helps to have a handle on tax credits and incentives. China, the European Union, India and the United States are expected to spend trillions of dollars supporting clean energy during the current decade. Their outlays have already helped lower the cost of new technologies and de-risk capital projects. Companies that tap into these funding sources can gain cost advantages and accelerate innovation.
The value effect
A global cement manufacturer was considering plant modernisation efforts that would substantially reduce emissions, at a capital cost of around US$1.5 billion. One effort involved switching fuel sources, and another involved carbon capture and storage. After the firm modelled cost scenarios with and without government incentives and funds, it realised the incentives could cover half the cost of the projects it envisioned.
A multinational tank-storage company had set out an ambitious plan to develop hydrogen distribution and storage infrastructure at one of the world’s busiest ports. At first, the case for investing more than €300 million (US$350 million) in the project appeared less than convincing, because of uncertainty about hydrogen demand and technology development. But by securing a government grant worth approximately one-third of the capital investment, the company and its business partners improved the project’s risk–return profile enough for it to go forwards.
Getting started
The value created by bringing sustainability factors into business decisions is significant enough that CFOs and COOs owe it to their stakeholders to begin integration efforts right away. Some of those efforts can progress quickly and yield benefits in the near term. Others will take longer. Below, we offer some ideas about how to get started, based on what we’ve seen successful CFOs and COOs accomplish over time horizons of one month, one quarter and one year.
CFOs
One month: Map materiality. As a first order of business, CFOs should identify sustainability-related risks and opportunities for their company and link them to items in profit-and-loss, balance sheet and cash flow statements. The resulting materiality map can guide not only the CFO, but also colleagues who need to see which considerations pertain to their areas of responsibility.
A thorough materiality assessment takes time (and needs updating to reflect changing business conditions). But CFOs can produce a fine first version using the due diligence methods of M&A practitioners, who normally have only one or two weeks to place a value on sustainability factors. Their approach calls for collecting whatever company data is available, augmenting it with industry benchmarks and plotting the information onto sector-focused materiality frameworks.
One quarter: Stress-test the strategy. CFOs play an integral role in building strong business models, bringing a mix of financial and non-financial data to bear on decisions about capital allocation. In our experience, though, few CFOs stress-test their financial projections under divergent scenarios for climate policy, the energy transition and extreme weather. The finance sector is exceptional in this regard. The European Central Bank has had large banks perform climate stress tests for several years; the US Federal Reserve ran a pilot with six institutions in 2024. Large and even medium-sized institutions have climate-risk teams reviewing loans, insurance policies and investments.
Their stress-testing methods can help all CFOs offer sound strategic guidance to CEOs and boards. For example, a global energy company conducted its first test after facing questions from investors about its shift from coal power to renewables, energy storage and natural gas. The analysis showed that in time the company's reshaped portfolio would present limited exposure to financial risk from carbon prices, and less exposure to risk from physical hazards such as storms, floods and wildfires. It also indicated strong growth potential for all of the company’s business units.
One year: Build a data stack. To factor sustainability into decisions, managers need tech systems capable of delivering data at a firm’s operating tempo. CFOs and CIOs are natural partners in building such systems. Working together, they can clarify data needs and then review enterprise systems to see whether they perform the right functions. They’ll also want to make sure that governance of sustainability-related data is strong. That means designing internal controls to help confirm the data’s completeness and accuracy, integrating controls into tech systems and training staff to monitor the data.
One pharmaceutical business’s situation was typical. It had a manual process for collecting, calculating and generating readouts of sustainability data. Performance dashboards were often siloed, offering no enterprise-wide, executive view. After a series of stakeholder workshops, the CFO articulated the business’s data requirements, defined governance standards and established control processes. The business then deployed in-house technologies to automate data collection and analysis and accelerate reporting. The expected improvements are profound, including a leap from annual reporting of emissions data to monthly reporting.
COOs
One month: Scan for physical risks. The COO’s initial step should be obtaining a fuller picture of business risks. Otherwise, their company could be tied up by disruptions instead of pursuing opportunities. And when it comes to finding risks, many operations teams will have their work cut out for them. According to a PwC survey of CEOs, fewer than half of companies have initiated or completed plans to incorporate climate risks into financial planning and to protect their physical assets and workforce from climate threats.
Fortunately, many organisations possess enterprise-wide business continuity programmes to gauge risks and prepare for events like cyberattacks and health crises. After COOs understand the weather exposure and vulnerability of key locations—and the business value that’s at stake over time—they can work on extending business continuity measures to address climate risks.
One quarter: Plan an energy strategy. Some organisations with energy-intensive activities, such as chemicals companies and steelmakers, have long sought to improve their energy efficiency, knowing that this practice can reduce costs. Now, more organisations are not only saving money but also generating value by taking charge of their energy demand. Because opportunities can span a company’s operations and supply chains, the COO is well positioned to lead this effort.
A key to realising maximum gains is thinking big. Opportunities can be found by looking at every asset as a possible source of energy value. Some assets, like factory equipment, will be obvious. Others might be less apparent: think of rooftops or farmland where solar panels can quietly generate electricity without getting in the way. Once opportunities are known, companies create more value by assembling complementary demand-side initiatives into a portfolio, rather than pursuing them piecemeal. Installing energy sensors and controllers on equipment, for example, pays off more when companies also add capabilities to match energy consumption with fluctuating power prices.
One year: Review the supply chain. For many COOs, the tariff turmoil of 2025 occasioned a reassessment of the goods and materials, vendors, and locations in their supply chains. Some have also taken trade developments as a reminder that unseen risks and opportunities can build up in their networks of suppliers, so they’ve chosen to look at factors besides trade policy. It’s a step we’d recommend to all COOs, given the value that could be lost to challenging weather and to regulatory sanctions. A fresh look at sourcing programmes might also reveal opportunities such as the prospect of making ‘circular’ products from used materials, which can reduce input costs and drive revenue growth.
Other steps worth taking: amending procurement requirements and engaging suppliers on matters that create business value for them. For one multinational pharmaceutical company, a topic of major interest was the use of heat in its supply chain, which drove significant energy consumption and emissions. With help from engineering and supply chain specialists, the business located high levels of heat use, identified alternative processes and technologies, and mapped the heat-reduction opportunities which would most benefit the business and its suppliers. Analysis indicated the potential to cut heat-related emissions 40–70% by 2030, and the company has since begun working with suppliers to make changes.
The physical risks, public policies and industry shifts associated with climate change influence business value in ways that merit attention from senior executives. Leaders who bring these considerations into their management processes can position their firms to realise upside while their competitors struggle with risks. With better tools and data at hand, now is the time for companies to make a decided shift to active value creation.
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