Climate change is no longer merely an environmental issue; it has\nbecome a tangible business risk with a direct impact on a company\u2019s\nfinancial performance. Organisations that maintain a conventional\nmindset will undoubtedly face increasing risk exposure, ranging from\noperational disruptions and regulatory pressure to surges in production\ncosts. Therefore, understanding climate risk is no longer an option, but\na crucial global standard in determining a company\u2019s long-term\nresilience and sustainability.<\/p>\n
Currently, net-zero commitments cover a large portion of global\nemissions and are officially enshrined in the policies of various\nnations. While global sustainability ambitions continue to strengthen,\nthe greatest challenge for business leaders is how to transform these\nambitions into measurable actions. The primary obstacles generally stem\nfrom internal aspects, such as fragmented data, the complexity of\nscenario modelling, and the difficulty of translating climate issues\ninto financial language. To overcome these hurdles, companies are\nencouraged to unify finance, risk management, and sustainability\nfunctions into a single decision-making forum to develop accurately\nquantified business strategies.<\/p>\n
Beyond merely responding to market demands, climate risk analysis has\nnow become a regulatory obligation. Through the International\nSustainability Standards Board (ISSB) pillar, the IFRS S2 standard\nstrictly requires companies to disclose climate-related risks and\nopportunities, including their impact on business models, value chains,\nfinancial performance, and strategic resilience under various climate\nscenarios.<\/p>\n
In Indonesia, these global standards have been adopted as\nSustainability Disclosure Standard Statement 2 (PSPK 2) regarding\nClimate-related Disclosures. This regulation was ratified by the\nSustainability Standards Board of the Indonesian Institute of\nAccountants (DSK IAI) on 1 July 2025 and will come into effect on 1\nJanuary 2027. Given this deadline, companies are now required to begin\nbuilding governance, strategy, risk management, as well as measurable\nmetrics and targets through climate scenario analysis from an early\nstage, ensuring that climate disclosures are not merely narrative but\ndirectly linked to financial reports.<\/p>\n
The urgency of structured climate risk management is strongly\nreflected in the phenomena of forest and land fires (karhutla) and\nextreme droughts in Indonesia. Within global governance frameworks such\nas TCFD and IFRS S2, forest fires represent two types of exposure\nsimultaneously: physical risk and transition risk. From a physical\nperspective, land fires trigger damage to operational assets, disrupt\nworker health due to haze, and sustainably degrade peatland ecosystem\nfunctions. From a transition perspective, companies face threats of\nlegal sanctions, pollution fines, and the potential loss of access to\nglobal markets due to increasingly strict deforestation regulations.<\/p>\n
To protect organisations from these threats, companies can\nimmediately implement a more comprehensive climate risk evaluation\nframework. A crucial first step is establishing oversight at the board\nlevel and implementing a strict no-burning policy. Furthermore,\ncompanies must identify vulnerable areas through spatial analysis based\non satellite data and climate scenario modelling. Through stress testing\nagainst high-emission scenarios or strict regulatory transition\nscenarios, companies can measure potential financial impacts. All\nfindings should then be incorporated into an integrated transition plan\nand reported transparently to maintain investor confidence.<\/p>\n
Addressing this, the Risk Advisory Service Partner at BDO in\nIndonesia, Johan Sebastian, stated that climate risk assessment is not\nmerely a defensive action to meet regulatory compliance. It is a\nstrategic navigation tool to identify where your business can excel and\nwin competition amidst global economic changes.<\/p>\n
\u201cThe resilience of future businesses will be determined by how\nquickly and accurately the decisions we make today are implemented,\u201d\nsaid Johan in a press release on Wednesday (16\/9\/2026).<\/p>\n
Ultimately, the success of this sustainability agenda will depend\nheavily on an organisation\u2019s ability to manage its internal changes. Key\nelements include appointing reliable communicators capable of\ntranslating technical terms into business insights, implementing a\ngradual adaptive approach, and forming internal forums to ensure the\ninvolvement of all stakeholders.<\/p>\n
\u201cBy adopting these proactive steps, climate risk assessment will no\nlonger be a mere compliance burden, but will transform into a strategic\nnavigation tool that will protect assets, control future costs, and\nensure victory amidst global economic competition,\u201d he concluded.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/climate-risk-assessment-called-a-strategic-navigation-tool-to-win-global-competition-1789553084", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }