Climate Strategies as the Key to Future Fitness

by Dr Jan-Ole Brandt, Director ESG/Sustainability, and Antonia von der Beeck, Senior Consultant ESG/Sustainability at Kirchhoff Consult

From Regulatory Compliance Exercise to Important Value Driver

Which parts of our supply chain are particularly vulnerable to the impacts of climate change? And what effects could rising CO₂ prices have on our costs? These questions are not only on the minds of business decision-makers. An increasing number of investors, banks and other stakeholders are also seeking answers to these questions.

Rising average temperatures, increasingly frequent extreme weather events and the associated losses have long since become reality, and are in some cases having a drastic impact on the economy and society. According to Swiss Re, climate-related damages worldwide now reach three-digit billion figures annually. At the same time, financial markets, banks and insurers are becoming ever more sensitive to climate-related risks. Companies are therefore confronted with the fact that climate issues are no longer merely the subject of societal debates or regulatory requirements, but are also developing into an important factor for competitiveness, long-term value creation and resilience. Against this backdrop, the role of corporate climate strategies is also changing. What was long regarded primarily as a compliance and reporting matter is increasingly evolving into a potential value driver. On the one hand, companies are called upon to contribute to climate protection by reducing the emission of climate-damaging greenhouse gases to a minimum. On the other hand, the challenge lies in making their own business model resilient and future-proof against physical and transitional climate risks.

Read the full article here (in German only).

Many Paths to the 1.5-Degree Target

The signing of the Paris Climate Agreement by the international community of nations gives rise to far-reaching transformation requirements — particularly for the business sector — as well as an urgent need for innovation. Within the EU, this transformation is to be driven forward by the European Green Deal, which aims to make Europe climate-neutral by 2050. Complementing this, a comprehensive regulatory framework creates transparency and governance instruments for companies and capital markets.

Despite the initially delayed transposition of the CSRD into German law, political and regulatory requirements are also tightening at the national level. The German Climate Protection Act, reformed in 2024, defines binding emissions targets for various sectors, thereby anchoring the path towards climate neutrality in 2045.

These developments show that climate strategies are no longer merely an expression of voluntary or marketing-driven sustainability ambitions, but are increasingly a prerequisite for regulatory compliance, market viability and strategic resilience.

Climate Strategies Between Adaptation and Transformation

At its core, a climate strategy encompasses two closely interrelated fields of action. The first concerns what is known as adaptation to climate change. Companies must engage with the physical and transitional risks arising from climatic changes and from political, technological, market-related and reputational developments. Physical risks range from acute extreme weather events such as heavy rainfall, flooding or drought periods through to permanent rises in temperature and changed wind and precipitation patterns that can disrupt entire supply and value chains. Transitional risks, by contrast, arise in connection with political and regulatory changes, rising CO₂ prices, technological disruption or new market requirements.

On the other side, the focus is on reducing greenhouse gas emissions. Companies are developing comprehensive transition plans that define concrete levers and measures for decarbonising their business models. These include, amongst other things, energy efficiency measures, the switch to renewable energies, climate-friendly product innovations, and the transformation of entire supply chains. The combination of climate adaptation and emissions reduction thus forms the basic structure of a modern climate strategy and aims to make companies sustainably resilient and future-proof. You can read more about the future relevance of transition plans in the article here by Hannah Helmke, Founder and Managing Director of right°.

Growing Requirements from the Market and Society

Alongside regulatory developments, market and stakeholder requirements are also increasing the pressure on companies to engage strategically with climate change and its impacts. Investors and banks are now explicitly integrating climate-related risks into their assessments and financing decisions. Initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD) or the standards of the International Sustainability Standards Board (ISSB) are further promoting the stronger integration of climate-related information into financial reporting. Insurers, too, are responding to increasing climate risks with adjusted risk models and premium structures. Companies that fail to build resilience against their material climate risks may in future face rising insurance costs or restricted insurability. Furthermore, stakeholder expectations are changing along the entire value chain. Customers, employees, investors and business partners are increasingly demanding clear, science-based climate targets and transparent transformation strategies. In many industries, ambitious climate targets are already part of the award criteria in tendering processes. Last but not least, climate issues are gaining importance in the competition for talent in the labour market. Studies show that younger professionals in particular are placing greater emphasis on sustainable corporate strategies and actively aligning their choice of employer accordingly. This makes clear that a credible climate strategy is today a central component of a company's long-term viability.

How Can a Climate Strategy Be Successfully Developed and Implemented?

Despite the growing strategic importance of ambitious climate management, many companies face a range of challenges when developing and implementing climate strategies. Experience from various transformation projects and studies has taught us that certain patterns recur. The greatest obstacles typically lie not in a lack of technological capability, but rather in organisational, cultural and strategic factors. Below, we have outlined six key challenges that, in our experience, are amongst the most common reasons why climate strategies have so far fallen short of their potential. At the same time, we present concrete approaches to solutions that should help to make better use of that potential in the future.

Challenge 1: Failing to Recognise Strategic Relevance and Economic Benefits

Many companies begin their engagement with climate issues driven by a regulatory trigger. The preparation for new reporting obligations (e.g. CSRD/ESRS) or a direct customer enquiry regarding emissions data or science-based reduction targets is frequently the starting point. In practice, this often leads to climate management projects being organised as reporting projects, housed within sustainability management or corporate communications, and not embedded in overarching structures and processes. In practice, this results in situations such as the following:

• A project team works on producing the first carbon footprint, whilst central strategic business areas — such as product development, procurement or investment planning — remain excluded.
• Decisions on investments in energy-efficient technologies, new production facilities or climate-friendly products are taken independently of climate targets.
• Climate issues run in parallel to the core business, rather than becoming part of strategic management.

A well-known problem is the perception of reduction or resilience measures as a straightforward cost factor. In budget discussions, investments in the decarbonisation of the business model are frequently associated only with short-term costs, whilst potential economic benefits — such as lower energy costs, greater resilience to energy price fluctuations or new market opportunities — receive little or no consideration. Uncertainties regarding future regulatory developments also lead companies to delay relevant decisions, asking themselves questions such as:

"Should we invest in new technologies now, or wait to see how regulation evolves?""How likely is it that CO₂ prices will actually continue to rise?""Are our customers even willing to pay more for climate-friendly products?"

These uncertainties result in climate data being analysed but not translated into concrete strategic decisions. The consequence is a fragmented approach in which individual efficiency measures are implemented, but a clear and holistic transformation pathway is absent.

Yet various studies show that companies which pursue comprehensive decarbonisation and corresponding risk management at an early stage can achieve long-term competitive advantages. According to the World Economic Forum, climate-friendly technologies and business models will give rise to new markets with enormous economic potential in the coming years. Companies that align their strategy to this early on will be able to position themselves accordingly in these markets. For many organisations, therefore, the central challenge lies in making a shift in perspective — no longer viewing strategic climate management merely as an additional obligatory task, but as an important component of an integrated corporate strategy.

Making Innovation Potential Visible and Developing Sound Economic Business Cases

The first and decisive step towards a successful climate strategy often consists of extracting climate issues from the purely sustainability or compliance perspective and systematically integrating them into strategic corporate management. In practice, this means that companies must begin by making the financial implications of climate risks and measures visible. Whilst many companies have a rough idea of possible cost increases arising from higher CO₂ and energy prices, these aspects are rarely systematically integrated into strategic planning processes. An effective approach consists of developing what are known as Climate Business Cases, in which climate measures are not considered in isolation but embedded within an overall economic assessment. Companies might analyse, for example:

• potential savings from energy efficiency measures,
• expected CO₂ costs across different scenarios,
• the impacts of rising energy prices, or
• potential revenue opportunities from climate-friendly products.

In practice, such analyses can yield surprising insights. Many companies find, for instance, that investments in energy-efficient technologies have considerably shorter payback periods than originally assumed — particularly when rising energy prices are taken into account.

Example from industry: 

A manufacturing company analyses the economic viability of electrifying its process heat. In a conventional investment appraisal, the project initially appears unattractive. It is only by factoring in expected CO₂ price increases and long-term energy price trends that it becomes apparent that the investment could generate significant cost advantages over its lifecycle.

Beyond individual investment projects, companies should also consider their product and innovation strategies in the context of the climate transition. Climate protection can ultimately be a genuine driver of innovation, for example in the context of:

• climate-friendly materials,
• energy-efficient products, or
• new services in the area of the circular economy.

A helpful step in this regard is the integration of climate targets into existing strategic key performance indicator systems. Possible KPIs include:

• the revenue share of climate-friendly products,
• CO₂ intensity per unit of production, or
• the proportion of renewable energies in the company's energy mix.

These metrics can help to make progress measurable and to anchor strategic climate management permanently within corporate governance.

Challenge 2: Lack of Governance and Organisational Embedding

Even when companies have recognised the strategic importance of climate issues, implementation often founders on absent or inefficient organisational structures. Relevant projects are frequently driven forward by small teams within the sustainability or communications department, which typically have limited resources and only indirect influence over operational decisions. In day-to-day business life, this leads to typical friction points: sustainability managers develop ambitious climate targets, for example, whilst procurement departments continue to make decisions primarily on the basis of cost criteria. And whilst those responsible for production prioritise efficiency and delivery capacity, investments in more climate-friendly technologies are perceived as an additional burden. The result is goal conflicts between different areas of the business, leading to significant process losses.

Added to this is the fact that climate issues are often insufficiently integrated into existing decision-making processes. Investment decisions, for instance, are evaluated using classical metrics such as return on capital or payback period. Climate-related effects — such as future CO₂ costs or physical climate risks — are as yet rarely factored into such assessments. At the leadership level, too, clear accountability is usually lacking. In many companies, the question arises: who ultimately bears responsibility for implementing the climate strategy? The sustainability team? The Chief Financial Officer? Corporate Strategy? Without clear accountability, there is a risk that issues will be passed back and forth between different departments and perceived as an additional burden.

Key takeaway for practice: Climate strategies can only realise their potential when they are integrated into existing governance and management structures — and when clear accountability exists at every level of leadership.

Establishing Clear Governance Structures and Accountability

In order for climate strategies not to remain confined to individual projects, they must be organisationally embedded within the company. This requires clear governance structures that integrate climate issues into strategic decision-making processes. One tried-and-tested model is the establishment of an ESG or Climate Council. Such a body acts as a central steering committee for sustainability and climate issues, bringing together different areas of the business. It typically includes:

• At least one member of the Management Board or Executive Committee
• Representatives from Finance and Controlling
• Procurement and Supply Chain Management
• Strategy and Innovation
• Sustainability Management

The body meets at regular intervals — quarterly, for example — legitimises the strategic direction, and evaluates progress in the implementation of the ESG and climate strategy.

A further building block is the integration of climate targets into existing management systems. This includes in particular the linking of targets to remuneration and incentive systems at management level. An increasing number of companies already incorporate sustainability metrics into variable Executive Board remuneration. According to our annual DACH study on sustainability management and reporting in the German-speaking region, this approach is now also widespread in this area. Relevant metrics include, for example:

• the absolute or relative reduction of greenhouse gas emissions,
• the expansion of renewable energies within the company, or
• progress on selected transformation projects.

Furthermore, it is important to integrate material climate risks into existing risk management processes. Companies can, for example, systematically incorporate climate-related risks into their enterprise risk management systems, thereby ensuring that these issues are regularly discussed at leadership level.

Challenge 3: Poor Data Quality and Insufficient Measurability

One of the greatest challenges in developing climate strategies is the provision and handling of data. Many companies initially have only limited information on their emissions and climate-related risks. A typical example is the preparation of the first carbon footprint. Companies frequently begin with data on energy consumption that is relatively readily available (Scope 1 & 2) or on business travel (Scope 3.6). However, as soon as indirect emissions along the supply chain are to be considered (e.g. purchased goods and services/Scope 3.1), data collection becomes considerably more complex and less precise. Suppliers often do not yet have detailed emissions data themselves, or use different calculation methods. Companies therefore frequently have to work with estimates based on assumptions and average values from publicly accessible databases. These uncertainties make it difficult to define clear reduction targets.

Internal accountability for climate data is also often unclear. In some companies, energy data resides with Facility Management, transport data with the Logistics department, and supplier data with Procurement. Without clear processes for data collection and validation, gaps and inconsistencies inevitably arise.

Similarly to carbon accounting, many companies do not yet have systematic analyses in place with regard to climate-related risks. The following questions therefore frequently remain unanswered:

• How could extreme weather events affect our sites?
• Which parts of our supply chain are particularly vulnerable to the impacts of climate change?
• What effects could rising CO₂ prices have on our costs?

Without this information, it is difficult to make well-founded strategic decisions. Accordingly, in climate management — just as in finance — a fundamental principle applies: only what can be measured can be managed.

Building a Robust Data Foundation and Systematic Measurability

Building a robust data foundation is a central prerequisite for an effective climate strategy. In practice, a pragmatic, step-by-step approach is recommended. When compiling a carbon footprint, the first step often involves creating a complete emissions inventory. This is frequently based on relatively rough assumptions, particularly with regard to upstream and downstream value chain activities (Scope 3). What matters initially, however, is creating transparency about the most important emissions sources. On this basis, companies can conduct so-called hot-spot analyses, which examine which activities account for the largest share of total emissions. In many cases, emissions are concentrated in a small number of areas — such as energy-intensive production processes or certain purchased raw materials. On the basis of this insight, companies can align their decarbonisation strategy considerably more precisely.

In parallel, companies should standardise their data collection processes. This includes, for example:

• a clear definition of data responsibilities across different areas of the business,
• uniform calculation methods for emissions, and
• transparent documentation of uncertainties.

Many companies are increasingly integrating climate data into existing IT systems or sustainability platforms, enabling data to be collected and evaluated automatically. In addition, collaboration with finance departments is gaining in importance. It is worthwhile linking climate data with financial metrics in order to better evaluate investment decisions (e.g. through an internal carbon price). Companies can also have reported climate data externally verified. Even where there is no regulatory obligation, voluntary auditing by external auditors can materially improve data quality in the medium and long term.

Gira on the 1.5-Degree Pathway

“Since 2015, we at Gira have been preparing carbon footprints, the quality of which we have been able to improve year on year. The carbon footprint alone, with its abstract unit of CO₂ equivalents, said too little about our actual contribution to climate change. We therefore decided to measure our contribution in degrees Celsius, so as to be able to determine the gap to achieving the 1.5-degree target. This gap is the foundation of our climate strategy, which has been an integral component of our overarching corporate strategy since 2023. In the annually prepared carbon footprint, we use our emissions intensity to check by how many degrees the Earth would warm by the year 2100 if the world were to operate as Gira does. Currently, this stands at 1.8 °C. From this simulation, we derive a 1.5-degree pathway with annual reduction targets for Scopes 1, 2 and 3. As the world around us is constantly changing, this 1.5-degree pathway is regularly readjusted. For Gira, contributing to the mitigation of climate change is part of our culture of responsibility, which spans more than 120 years. The company has therefore expressly committed to the 1.5-degree target of the Paris Climate Agreement.” Dario Hudr, Corporate Communications Officer, Gira Giersiepen GmbH & Co

Challenge 4: Dependencies on Other Actors Along the Value Chain

A central characteristic of many carbon footprints is that a large proportion of relevant emissions arise outside the company's own operations. In many industries, more than 70 per cent of emissions lie within the upstream supply chain or in the downstream use of products. For companies, this means that they cannot achieve their climate targets alone, and that implementation is in part highly dependent on the willingness and capability of business partners. In practice, this challenge is particularly evident in procurement. Procurement departments frequently face the task of simultaneously meeting multiple requirements: minimising costs, ensuring delivery capability and additionally factoring in climate-related criteria. One problem, however, is that many suppliers — particularly smaller companies — do not yet have sufficient resources to develop their own climate strategies. If a company requires its suppliers to set their own emissions targets or provide detailed climate data, this can encounter considerable practical hurdles.

Similar challenges arise with regard to adaptation to physical climate risks. Companies depend on their business partners also making their production sites and supply chains resilient. If, for example, key suppliers are affected by extreme weather events, this can impact the entire value chain. This makes clear that effective climate strategies are increasingly dependent on collaboration along the entire value chain.

Strengthening Collaboration Along the Value Chain

Since a large share of emissions arises within supply chains and business models are often reliant on resilient supply and value chains, companies must actively involve their business partners in climate strategies. This is increasingly achieved through what are known as supplier engagement programmes. Such programmes typically begin with the definition of clear expectations for suppliers. Companies communicate requirements such as:

• the disclosure of emissions data,
• the use of renewable energies, and
• the development of their own climate targets and resilience measures.

A tried-and-tested approach is to prioritise suppliers according to their relevance, focusing initially on the largest emissions sources or the most strategically important suppliers and business partners. This prioritisation, too, is frequently carried out using hot-spot analyses, which allow for targeted deployment of resources.

Example from practice: 

A mechanical engineering company identifies its ten most emissions-intensive suppliers and launches a joint emissions reduction programme with them. The programme encompasses workshops, data exchange and joint innovation projects.

In addition, sustainable procurement guidelines can be introduced. These define, for example, minimum requirements regarding climate targets, energy efficiency standards or environmental management systems. At the same time, companies should also analyse their supply chains with regard to physical climate risks, in order to increase the resilience of the entire value chain.

Challenge 5: Insufficient Sense of Responsibility and Cultural Resistance

A frequently underestimated obstacle in the implementation of climate strategies lies in corporate culture. Even where a clear strategy exists, its implementation can founder on a lack of prioritisation in day-to-day business. In many companies, employees are under enormous time pressure and must simultaneously achieve a range of objectives. New requirements in the area of sustainability are therefore sometimes perceived as an additional burden. Added to this is the fact that climate issues are to some extent becoming politicised. In some cases, this leads to uncertainties or resistance. Employees then ask questions such as:

• "Is this really relevant to our business model?"
• "Isn't this more of a political issue?"
• "Why should we change the way we work if our competitors are not doing so?"

Such discussions can lead to transformation processes advancing more slowly than planned. A core problem is that it is often unclear what role employees themselves are expected to play in implementing the climate strategy. When climate targets are formulated exclusively at Executive Board level, without concrete instructions for action for operational areas, implementation remains abstract. The success of climate strategies therefore depends to a significant degree on whether it proves possible to actively involve the workforce and to create a shared understanding of the relevance of the transformation.

Promoting Cultural Change and Capability Building Within the Organisation

The successful implementation of a climate strategy requires not only technical changes but also a cultural shift within the organisation. An important building block for this is the development of knowledge and competencies. Many employees have so far had only limited exposure to climate issues. Targeted training programmes can help to create a basic understanding. These include, for example:

• introductory workshops on climate risks and climate protection,
• specific training courses for individual business areas, or
• training on sustainable procurement practices.

Another highly effective instrument is the use of so-called Green Teams — voluntary employee initiatives that develop ideas for sustainable measures within the company. Such initiatives can help to embed climate issues more firmly in everyday business life. In addition, companies should create clear incentive systems, ensuring that employees recognise that their commitment to climate targets is also valued within the organisation.

Sustainability Committees at Gira: Addressing Emissions Drivers Together

“In our sustainability committees, we regularly review and prioritise our reduction targets. To identify concrete levers, we use hot-spot analyses that show where the greatest emissions drivers lie along our value chain. In addition, we draw on ideas from our employees — a deliberate approach to harnessing the operational know-how of our workforce whilst simultaneously strengthening acceptance of change. The measures identified in this way — whether large or small — are assessed for their economic viability. Where they can be realised as business cases, we implement them in a project-oriented manner. A current example of this is the construction of our own solar park in 2025, which is intended to make a direct contribution to reducing our Scope 1 and Scope 2 emissions.” Dario Hudr, Corporate Communications Officer, Gira Giersiepen GmbH & Co

Challenge 6: Communication Barriers

(Climate-related) communication presents companies with particular challenges. On the one hand, stakeholders increasingly expect transparent information about climate targets and progress. On the other hand, sensitivity to potential greenwashing allegations is growing. Many companies therefore find themselves navigating a tension between transparency and caution. Communications departments frequently ask themselves:

• What statements about climate targets are legally permissible?
• In how much detail must progress be reported?
• How do we deal with uncertainties or deviations from targets?

Regulatory developments such as the Green Claims Directive/EmpCo or new requirements in competition law are placing additional demands on climate-related communications. Companies must ensure that their statements are scientifically grounded and substantiated in a verifiable manner. Internal communication needs are also arising. Complex climate issues must be explained in a way that employees can understand and take into account in their daily work. In day-to-day business life, it therefore frequently becomes apparent that successful climate strategies require not only technical or organisational changes, but also a targeted communications strategy.

Establishing Transparent and Dialogue-Oriented Communication

A credible climate strategy requires transparent communication with both internal and external stakeholders. Internally, companies should regularly communicate about objectives, progress and challenges. Formats such as town hall meetings or internal campaigns can help to actively engage employees and build commitment. Externally, investors, customers and shareholders are increasingly expecting transparent information about climate strategies. Sustainability reports prepared in accordance with recognised standards — such as ESRS or TCFD — can play an important role in this regard. At the same time, companies should ensure that complex information is presented in an accessible manner. Infographics, short videos or interactive formats can help to make climate issues more approachable. Open communication about challenges and deviations from targets can moreover build trust and help to pre-empt greenwashing allegations.

Conclusion: Climate Strategies Are a Success Factor

Climate change poses enormous challenges for companies — but at the same time opens up new opportunities for innovation, transformation and sustainable growth. An integrated climate strategy can make a targeted contribution to identifying risks at an early stage, unlocking new market potential and strengthening resilience. Companies such as Gira, which integrate climate aspects into their business strategy early and consistently, thereby secure not only regulatory compliance, but also long-term competitive advantages.

Recommendations for Action for Corporate Leadership

For management and executives, a number of very concrete recommendations for action can also be derived:

1. Integrated strategy development: Anchor climate issues strategically and align them with the corporate strategy and corresponding objectives.
2. Establish clear governance structures: Define unambiguous accountability and decision-making structures.
3. Continuously improve data foundations: Prepare high-quality carbon footprints including Scope 3 materiality analyses, and conduct climate scenario and resilience analyses (with subsequent monitoring).
4. Actively engage stakeholders from supply and value chains and develop partnerships for emissions and risk reduction.
5. Involve employees and systematically build competencies within the organisation.
6. Ensure transparent communication and present progress openly.

Those who pursue these steps consistently lay the foundation for a climate strategy that not only meets regulatory requirements, but also creates long-term economic value for the company.