For decades, climate adaptation lived on the fringes of corporate strategy. It was typically addressed through insurance coverage, emergency protocols, and risk registers. These tools were helpful at the time as they helped organizations respond to disruption, but they often positioned climate considerations as something to manage episodically, rather than as part of how a business operates day-to-day and plans for growth.
In 2026, that distinction is becoming increasingly blurry. Extreme heat, water scarcity, flooding, wildfires, and energy volatility are affecting cost structures, disrupting supply chains, and constraining labor productivity and capital planning. These factors increasingly show up in routine operational and financial decisions and interact with broader economic dynamics. Climate impacts intersect with geopolitical competition, supply-side volatility, and regional fragmentation. At the same time, the transition to a low-carbon economy continues to progress unevenly across markets, with carbon increasingly subject to pricing, regulation, and disclosure expectations.
Together, physical climate impacts and transition pressures are influencing how companies plan, invest, and operate. Many organizations are approaching adaptation and mitigation as an integrated business capability, on par with financial management, supply chain planning, or cybersecurity.
Why adaptation and mitigation demand sustained leadership attention
S&P Global Energy Horizons projects that physical climate risks could more than triple corporate financial exposure by 2050, driven by asset damage, supply disruptions, and productivity losses. Despite this growing exposure, however, fewer than one in five companies have implemented adaptation measures at scale.
This widening gap between risk and readiness has profound implications for CEOs and boards, who recognize this threat. A new report from WEF found that business leaders identified extreme weather events as the greatest long-term business risk, with cascading effects across economic stability, supply chains, and social cohesion. Climate risk is now:
- Financial, affecting margins, asset values, insurance availability, and cost of capital
- Operational, disrupting production, logistics, and workforce availability
- Strategic, influencing where companies invest, source, and grow
- Reputational, shaping trust with investors, customers, regulators, and employees
For many leadership teams, climate adaptation and mitigation have become part of the broader challenge of enterprise readiness. In some cases, they are also influencing access to capital, insurance terms, talent attraction, and long-term market positioning.
Going beyond the contingency mindset
A common constraint on progress is how climate adaptation is still framed inside organizations.
When it is treated primarily as contingency planning, it tends to be reactive and episodic. Plans are developed, documented, and revisited only after disruption occurs, while ownership is often spread across risk, sustainability, operations, and finance teams with limited integration into core decision-making.
A capability-based approach works differently. Business capabilities are embedded and inform everyday decisions, supported by data, systems, governance, and incentives.
Climate capability emerges when organizations integrate climate risk, resilience, and carbon considerations into the core of how the enterprise runs.
The four pillars of climate capability
1. Supply chains designed for disruption
Global supply chains are increasingly exposed to climate volatility and regulatory pressure. Highly optimized, linear supply chains designed primarily for cost efficiency have shown limitations under these conditions. Many organizations are adjusting value chains to improve resilience and address emissions. Supplier diversification, regionalization, circular material flows, and better data sharing can reduce exposure to physical disruption and, in many cases, lower Scope 3 emissions. In practice, efforts to improve decarbonization and resilience often reinforce one another.
What this requires is more reliable, timely data across supply chains, so that COOs are empowered to turn insights into meaningful outcomes.
2. Assets and infrastructure built for a changing climate
Facilities, equipment, and logistics networks are increasingly exposed to chronic stresses, such as heat and water scarcity as well as acute events like flooding. At the same time, carbon-intensive assets face growing transition risk as energy systems and regulations evolve.
A capability-based approach evaluates assets through a dual lens: physical climate exposure and carbon intensity. This informs where companies locate facilities, how they maintain them, and when they invest in retrofits, electrification, or renewable energy.
Investments in energy efficiency and clean energy can reduce emissions while also moderating exposure to energy price volatility and supply disruptions.
3. Workforce resilience as a business priority
Climate impacts are also affecting people. Rising temperatures and extreme weather are already reducing labor productivity and increasing health and safety risks in many roles and regions.
The International Labour Organization estimates that heat stress alone could result in the equivalent of 80 million full-time jobs lost globally by 2030 under a 1.5°C warming scenario. Organizations that treat workforce resilience as a core business issue are adjusting schedules, working conditions, training, and safety protocols, protecting people while maintaining productivity.
4. Financial decision-making informed by climate reality
Despite growing awareness, climate data is often still disconnected from financial planning and analysis. CDP reports that while 67% of companies identify climate-related risks with potential financial impact, only a fraction can quantify those risks with enough precision to guide investment decisions.
A capability-based approach incorporates carbon and climate risk into financial models. This allows leaders to assess physical risk, transition risk, and return on investment together, turning climate action into a disciplined, value-driven decision process. SAP’s carbon accounting solutions, like SAP Green Ledger and SAP Green Token, can empower organizations to drive actionable climate strategies and unlock measurable impact by helping them integrate sustainability into core business processes through the combination of trusted financial data and granular carbon insights.
A C-suite framework for climate capability in 2026
Across industries, five leadership actions will define those organizations building true climate capability:
- Embed climate and carbon assumptions into core business planning and governance.
- Redesign value chains for resilience and emissions reduction.
- Protect assets and people with predictive, forward-looking insight.
- Align mitigation and adaptation with financial strategy.
- Measure resilience and emissions together, not in isolation.
Together, these actions help shift climate efforts from parallel initiatives into a managed enterprise capability, one that determines operational continuity, financial resilience, and long-term competitiveness.
Learn more about how you can build a more compliant, sustainable, and resilient business with SAP Sustainability solutions.
Sophia Mendelsohn is chief sustainability and commercial officer at SAP.
