How do I identify IROs related to climate change?

To identify IROs (impacts, risks, and opportunities) related to climate change, follow this structured approach.

Identify Climate-Related Impacts

These are the actual and potential effects your organization has on the climate, primarily through GHG (greenhouse gas) emissions and other contributing factors.

How to identify them:
- Assess your emission sources: Identify where your emissions come from within your operations and your supply chain (e.g., energy consumption, transportation, production processes).
- Consider indirect climate drivers: Look beyond direct emissions and assess factors like land-use changes, black carbon, and ozone emissions that also impact climate change.
- Screen for process inefficiencies: Identify business processes across your own operations and value chain that contribute significantly to emissions and may require optimization.

Identify Physical Risks

These are the risks that arise from the physical effects of climate change, such as extreme weather events, rising temperatures, and changing precipitation patterns.

How to identify them:

Identify climate hazards: Determine how climate events like floods, heatwaves, hurricanes, or droughts could impact your facilities, supply chain, and operations.
Assess exposure and vulnerability: Evaluate how sensitive your assets, infrastructure, and supply chain are to these climate hazards.
Use climate projections: Use high-emission climate scenarios to predicts risks over short-, medium-, and long-term timeframes.

Examples of physical risks related to climate change:

Type of risk	Temperature-related	Wind-related	Water-related	Solid mass-related
Chronic	Changing temperature	Changing wind patterns	Changing precipitation patterns and types (rain, hail, snow/ice)	Coastal erosion
	Heat stress		Precipitation or hydrological variability	Soil degradation
	Temperature variability		Ocean acidification	Soil erosion
	Permafrost thawing		Saline intrusion	Solifluction
			Sea level rise
		Water stress
Acute	Heat wave	Cyclones, hurricanes, typhoons	Drought	Avalanche
	Cold wave/frost	Storms (including blizzards, dust, and sandstorms)	Heavy precipitation (rain, hail, snow/ice)	Landslide
	Wildfire	Tornado	Flood	Subsidence
			Glacial lake outburst

Identify Transition Risks

These are risks related to the shift towards a low-carbon economy, including regulatory, market, and technological changes that may negatively impact business operations.

How to identify them:

Monitor regulatory developments: Assess how new climate policies (e.g, carbon taxes, stricter emissions regulations) could impact your costs and business model.
Evaluate technology risks: Consider whether your business depends on carbon-intensive technologies that may become obsolete due to innovation in green alternatives.
Analyze market shifts: Identify how changing customer preferences and investor demands for sustainability could impact your revenue.

Examples of transition risks related to climate change:

Policy and legal	Technology	Market	Reputation
Increased pricing of GHG emissions	Substitution of existing products and services with lower emissions option	Changing customer behavior	Shift in consumer preferences
Enhanced emissions-reporting obligations	Unsuccessful investment in new technologies	Uncertainty in market signals	Stigmatization of sector
Mandates on and regulation of existing products and services	Costs of transition to lower emissions technology	Increased cost of raw materials	Increased stakeholder concern
Mandates on and regulation of existing production processes			Negative stakeholder feedback
Exposure to litigation

Identify Transition Opportunities

These are benefits and competitive advantages that come from adapting your operations to support the low-carbon transition.

How to identify them:
- Screen for areas where you can reduce costs or increase efficiency: Look for opportunities to implement energy-saving measures, adopt circular economy principles, or reduce waste.
- Identify new business opportunities: Explore how climate policies and consumer demand for sustainable solutions could open up new markets and revenue streams.
- Assess reputational and financial benefits: Companies that lead in climate action can improve their brand perception and attract ESG-focused investors.