Why should companies engage with stakeholders regarding climate risk?

Engaging with stakeholders regarding climate risk is crucial for companies primarily to comply with regulatory requirements. Various jurisdictions are increasingly implementing regulations that mandate companies to disclose their climate risks and any potential financial impacts associated with those risks. By engaging with stakeholders, companies ensure they are transparent about their climate strategies, adhere to these regulations, and avoid potential legal ramifications. Additionally, such engagement fosters trust and credibility with stakeholders, including investors, customers, and regulators, which is essential for long-term sustainability and responsibility.

While enhancing brand loyalty, promoting diversity in hiring, and limiting market exposure are valuable objectives for companies, they do not directly address the pressing need for compliance with climate-related regulations. Engaging with stakeholders specifically to understand and manage climate risk is fundamentally tied to meeting these evolving legal expectations, thereby making regulatory compliance a primary reason for stakeholder engagement on this issue.