The news that more companies are converging around international sustainability reporting standards is encouraging.

Greater consistency makes it easier to compare performance, while independent assurance increases confidence in what is being reported. After years of competing frameworks, that represents real progress.

Better reporting should not be mistaken for better preparedness, however. As organisations become more confident in reporting against recognised standards, boards should ask whether they are becoming equally adept at governing climate risk as an ongoing and rapidly evolving threat. And better still when they see real business opportunities in a clear understanding of the effects of climate change—opportunities that their competitors may well overlook.

This is where directors should now focus their attention.

Climate risk moves faster than reporting

The problem is that most organisations still treat climate risk assessment as a bounded exercise rather than a continuing discipline. Yes, annual reviews provide useful snapshots, but climate risk does not pause while the next reporting cycle comes around. Markets shift, while climate impacts gather pace in unexpected ways.

Consider how boards deal with some of the other biggest items on their agendas. None would approach assessment of cybersecurity risk as a static and mostly backward-looking exercise. Nor would they review geopolitical risk once a year and assume the conclusions would remain valid for the following twelve months.

Directors rightly expect leadership teams to monitor those risks continuously, challenge assumptions and adapt as circumstances change.

They should expect and direct exactly the same approach to climate change. The OECD says up to eight Earth-system tipping points could be triggered even if warming peaks below 2°C, bringing impacts that will rapidly cascade through socioeconomic systems and supply chains.

These used to seem like far-off catastrophes. But businesses are now recognising that these are present challenges.

One example will suffice. A recent assessment of the UK’s food system highlighted how material climate risks across ten key commodities already affect sourcing and pricing decisions today rather in the future.

This is paralleled in many other sectors and the direct results are accompanied by insurers increasing premiums or withdrawing cover where risks are changing fastest.

These developments require boards to evaluate climate risk in a more dynamic and operationally useful way—thinking not only of ensuring business continuity but looking for business opportunity.

Moving beyond compliance

Most directors have already experienced what happens when assumptions and assessments about resilience prove mistaken. The pandemic exposed vulnerabilities in supply chains that many organisations had never fully appreciated. Risks sitting several steps removed from the immediate business quickly became board-level concerns because they affected customers, operations and financial performance.

Climate presents a similar challenge. When an insurer increases premiums or withdraws cover, climate change has already entered the investment case. When a key supplier faces repeated disruption from drought or flooding, procurement becomes a strategic issue rather than simply a commercial negotiation. Those developments demand judgement, not simply disclosure.

That means asking questions beyond compliance. Will a major investment still make sense throughout the life of the asset if operating conditions become more volatile? Are today’s most efficient suppliers likely to remain the most resilient? Which assumptions within the current strategy depend on a climate that is becoming less predictable?

Those conversations belong at the centre of board discussions, because they shape the continuity and long-term strength of the business.

Preparedness creates advantage

Too often, climate is still discussed as a defensive exercise of compliance or risk reduction.

Experience suggests otherwise. Businesses that recognise structural change early place themselves in a stronger competitive position. The energy sector offers one example, where investment in efficiency brought greater flexibility when markets became more volatile. Supply chains provide another. Companies recovered more quickly when they diversified before disruption exposed the weaknesses of highly optimised operating models.

The same principle applies at national level. China remains a major producer of coal, but it has also recognised the commercial opportunities in photovoltaic technology and electric vehicles earlier than many others. Preparedness creates options. Those options support investment, innovation and growth when competitors are reacting to events.

That is one reason why we should remain optimistic. Businesses, even whole countries, have repeatedly shown that they can adapt successfully once they recognise the scale and direction of change.

The way forward

Boards should certainly continue to ask whether their reporting aligns with compliance mechanisms like International Sustainability Standards Board system, or the EU’s European Sustainability Reporting Standards (ESRS). They should also ask harder questions. Which assumptions in our strategy depend on a stable climate? Which assets become less valuable if those assumptions change? Where are we exposed through suppliers, energy or insurance? What capabilities are we building now that will make the business more resilient five years from today, and how might we turn that into opportunity too?

Better reporting gives directors better information. Whether it leads to better decisions, ways of working, and increased profitability is what really matters for the board.

John Gummer, Lord Deben is chair of Sancroft and former chair of the independent Climate Change Committee. Kathleen Enright is managing partner at sustainability and ESG consultancy Sancroft.