Why climate risk demands an innovation mindset
Climate risk is not a reporting exercise, it’s a mindset.
I would argue that too many businesses are still producing disclosure-driven risk assessments. And in doing so, we’re missing the benefits. The real opportunity is in treating climate risk assessment the same way we do innovation – as a mindset. As an ongoing exercise. As something that can be both big and small. As something that needs everyone’s input.
Static risk assessments made a certain kind of sense when climate risk still felt abstract, distant and relatively easy to separate from day-to-day commercial decisions. In 2026, the ROI of this approach is very limited.
Climate risk is already showing up in disrupted supply chains, volatile commodity markets, insurance stress, operational disruption and changing customer and regulatory expectations.
The real problem is not that companies are failing to assess climate risk. It is that too many are still approaching it as a bounded exercise rather than an ongoing way of thinking.
Annual assessments can produce useful snapshots, but they are poorly suited to a risk landscape defined by compounding pressures, shifting baselines and sudden discontinuities. A business would never approach innovation, cyber risk or geopolitical disruption this way. It would build capabilities, routines, incentives and decision processes that keep pace with change. Climate risk now demands the same treatment.
This matters because the context has changed. The UK Climate Change Committee’s 2025 assessment found that the country remains inadequately prepared for worsening climate impacts, with progress too slow in many areas of adaptation.Meanwhile, sector-specific assessments are becoming far more concrete. A 2025 assessment of the UK food system modelled material risks across ten key commodities, underlining how climate exposure is no longer a generic future concern but a live commercial issue for sourcing, pricing and resilience.
That is why climate risk should now be approached much more like innovation. The parallel is stronger than it first appears. Innovation is not managed through a single annual workshop. It is embedded in culture, incentives, investment decisions and leadership expectations. It accepts uncertainty, encourages experimentation and builds learning into the operating model. Climate risk requires a similar mindset because the challenge is not simply to predict the future more accurately. It is to improve an organisation’s ability to notice change early, respond before disruption becomes crisis and adapt decisions as the evidence evolves.
There is also a more uncomfortable truth.
Even now, many businesses remain stuck in planning mode. From the World Benchmarking Alliance’s latest benchmarks’ to EY’s 2025 Global Climate Action Barometer, we see that while many companies now have some form of transition plan, very few of those are making meaningful progress and many still do not assess the financial cost of inaction alongside the cost of action. That is a revealing gap. It suggests that climate is still too often treated as a disclosure topic rather than as a core financial and strategic variable. Is the reporting exercise getting more training than the reflexes that it should be strengthening?
The case for moving beyond planning becomes even stronger when tipping points enter the frame.
This is not simply a question of seeing familiar risks become incrementally worse. Tipping points are not just bigger storms; they are permanent shifts in the baseline, where yesterday’s ‘worst case’ becomes tomorrow’s normal. They are the possibility that whole systems change character: that operating assumptions on water, food, infrastructure, ecosystems or insurance no longer hold in the same way.
Up to eight Earth‑system tipping points could be triggered even if warming peaks below 2°C, including ice sheets, tropical coral reefs, permafrost and the Amazon rainforest. The OECD’s tipping‑points report stresses that crossing these thresholds would rapidly cascade through socio‑economic systems, making adaptation vastly harder and increasing the risk of abrupt shocks to infrastructure, supply chains and asset values.
For business, that changes the meaning of risk.
Tipping points create non-linear, path-dependent and systemic threats. They make it harder to rely on historical trends and more dangerous to assume that the future will unfold in a smooth, manageable line.
For business, that doesn’t just mean ‘worse weather’, it means the possibility that whole regions, commodities and infrastructure systems become abruptly more volatile or less viable within the life of today’s investments. In that world, an annual climate risk report is like checking your smoke alarm once your house is on fire.
Tipping points are not a future scenario, they are the backdrop against which every board decision should be made.
And yet many organisations are still stuck in reporting mode despite escalating risks, which strengthens your case that the mindset shift has not yet happened.
- The 2025 EY Global Climate Action Barometer reported that although around 64% of companies now have some form of transition plan, most show no real progress, and some have moved backwards against earlier commitments.
- From the same report: Less than one in three companies assess both the financial cost of climate action and the long‑term cost of inaction, meaning most still treat climate risk as a disclosure topic rather than a core financial variable.
Corporate and economic commentary stresses that sustainability remains central to “futureproofing” and that it is “time to move from planning to doing”, yet for many businesses it is hard to even get to the planning phase, let alone to move past it.
On a positive note, companies are starting to see climate and nature risks as interconnected (water stress, soil degradation, land use pressures), further reasons for why climate risk cannot be captured in a single annual snapshot.
It would be easy (and very tempting) to bury our heads in the sand at this point. The more productive response is to treat tipping points as a reason to strengthen governance, not abandon it: to build organisations that are better at acting under uncertainty, revisiting assumptions and preparing for abrupt shifts rather than only gradual trends.
Active climate risk management keeps more futures open, rather than allowing tipping points and systemic shocks to close options off.
Treating climate risk as a mindset embeds that agency into thousands of everyday decisions, not just into an annual plan.
Back to the ostrich.
Let’s be honest – “tipping point” narratives can confuse, panic and even paralyse audiences, because they focus on abstract catastrophe rather than concrete levers for action. So here’s the hard learned trick: deep uncertainty around exact thresholds can make tipping points a poor basis for governance goals if they are used alone… but not when linked to specific decisions.
- Ask boards to align strategy horizons with tipping point timelines: if material tipping risks could emerge within 20–30 years, those risks belong in today’s asset‑life and portfolio decisions;
- Encourage regular strategic reviews that explicitly test “post‑tipping‑point” scenarios for supply chains, customer demand, operating locations and insurance availability;
- Integrate tipping‑point‑informed scenarios into capital planning, making “no‑regrets” investments that perform acceptably across both smooth‑change and abrupt‑shift futures;
- Link tipping point risks (e.g. competition for resources, water stress) to specific commodities, regions and logistics hubs, then diversify and redesign accordingly;
- Encourage long‑term contracts, joint adaptation investment and risk sharing arrangements with critical suppliers in at‑risk regions;
- Make tipping point risk a standing topic for board risk committees at least annually, with management responsible for showing how it is reflected in the business strategy;
It becomes impossible to manage non‑linear, systemic risks with linear, annual planning cycles. You need an organisational mindset that continually asks: ‘What if the baseline shifts sooner than we expect?’”
The point is not to terrify boards and business leadership with apocalyptic thresholds. It is to recognise that deep uncertainty and the possibility of abrupt shifts make continuous risk management all the more important.
We need better risk governance, not just more dramatic rhetoric. But it’s more than that: when we treat climate risk as an ongoing discipline rather than a compliance chore, we don’t just avoid losses, we discover new ways to win.
Think of it this way:
- A company that constantly scans for climate risk on key commodities is also the one that spots opportunities in regenerative sourcing, new materials or new markets first.
- Integrating climate scenarios into investment and product decisions pushes teams to design offerings that work across a wider range of futures, which is exactly what robust, long‑term value creation looks like.
- Moving beyond the reporting calendar frees people up to experiment: pilots in new logistics routes, new customer propositions around resilience, new services that help others manage their risk.
The good news is that none of this requires waiting for the next global agreement or the perfect new framework. You can start today: ask how climate risk shows up in your next capital decision, in your next major contract, in your next product launch. Ask what would change if you assumed the baseline might shift faster than your current plan expects. Then act on the answers – and repeat.
Climate risk maturity will not be judged by the elegance of your annual report, but by whether climate considerations quietly shape the way your organisation thinks and decides all year long. That is what a hope‑driven response looks like: not a big project once a year, but thousands of clear‑eyed choices that keep more possibilities alive, for your business and for the world around it.
We need to shift from “tipping point doom” to “tipping point agency”. Continuous risk management is exactly how we turn a frightening future into opportunity and resilience.
As I have argued many times before, hope is not about blind optimism, but about choosing to act where you still have leverage.
Hope, in May 2026, is not pretending the science is less severe than it is. Hope is recognising that every decision to manage climate risk actively. Every avoided asset, every redesigned supply chain, every new product, nudges us away from the most dangerous futures and towards the ones in which our businesses, and our communities, can still thrive.
The most resilient organisations in the years ahead will not be those with the most polished annual climate reports. They will be the ones that build climate awareness into how they think, allocate capital, collaborate and adapt. That is what it means to approach climate risk as a mindset. It is also, importantly, what makes hope credible. In a world of rising uncertainty and approaching tipping points, hope is not passive. It is the discipline of acting early, learning continuously and refusing to mistake planning for preparedness.
And this is what Sancroft is all about – being the partner who helps businesses find competitive advantage in the unglamorous details, with intellectual rigor and a spirit of possibility rather than doom-mongering.
Let’s have a chat about your risk approach: kathleen.enright@sancroft.com