We live in a dynamic, ever-evolving world; that’s nothing new. But since 2022, we’ve witnessed significant geopolitical shifts that have challenged the idea of “business as usual.” Recent tariff increases and persistent regional conflicts have pushed many nations to turn inward, prioritizing domestic and regional concerns over global cooperation.
In times of uncertainty, business models are inevitably put to the test. Yet some companies prove more resilient than others. What sets them apart? Organizations that have embraced a forward-looking, sustainability-driven strategy are often better equipped to navigate disruption with greater agility and confidence.
In particular, companies that have engaged in strategic climate risk assessments, grounded in robust scenario analysis, tend to stand on firmer ground. We see this consistently in our work with clients across geographies and industries.
In this article, we’ll explore the value of climate risk assessments and scenario analysis, and how they can help your organization build resilience and position itself for long-term success.
Why are transition risks and opportunities so relevant today?
A climate risk assessment is a strategic tool that enables organizations to identify and evaluate climate-related risks and opportunities under different scenarios, and understand how these might impact performance. This exercise helps organizations better grasp how climate change can affect their assets and operations. For instance, rising temperatures and an increase in extreme weather events such as floods or tornadoes are examples of physical risks.
However, given the current landscape of rapid political, economic and technological shifts, transition risks are taking center stage. These involve the broader socioeconomic implications that arise as external conditions evolve, including changes in policy and regulation, technological advancement, market dynamics and stakeholder expectations, affecting the company’s reputation. Scenario analysis allows organizations to explore how these factors might unfold under different future pathways, not only in the context of a low-carbon economy but also amid geopolitical or macroeconomic disruptions.
At the same time, transition opportunities, such as improving resource efficiency, diversifying energy sources, developing low-carbon products and services, entering new markets and enhancing overall resilience, offer important strategic advantages.
We’re currently witnessing how geopolitical dynamics are reshaping market conditions, influencing commodity prices, triggering tariff changes and causing supply chain disruptions. In this context, analyzing both risks and opportunities across different future scenarios becomes a fundamental part of strategic planning.
Why is this important? Because while the goal of a scenario-based climate risk assessment isn’t to predict the future, it gives organizations the chance to reflect, anticipate change and design actionable strategies under various plausible conditions.
Let’s take a closer look at what scenario analysis really means and connect the dots to the uncertainty we’re experiencing today.
Scenario analysis explained
Scenario analysis is a method for developing strategic plans based on a range of plausible future states. It is a powerful tool to help organizations understand the potential implications of climate-related risks and opportunities, and the actions they might consider in response.
A scenario describes a pathway that leads to a particular outcome. In other words, by using different “lenses” (scenarios), we can explore how the future might unfold and what strategic moves an organization could make to either mitigate risks or seize emerging opportunities.
There are various scenario types available for assessing transition risks and opportunities, but two of the most widely respected are those developed by the International Energy Agency (IEA) and the Shared Socioeconomic Pathways (SSPs). The SSPs were created by an international team of climate scientists, economists and energy system modelers, and are used by the Intergovernmental Panel on Climate Change (IPCC). They outline five global narratives that capture broad socioeconomic trends and how these may shape the future with a purpose to span a wide range of plausible futures.
Scenario analysis: Where are we going?
What makes today’s context particularly interesting, and challenging, is that the traditional notion of “business as usual” appears to be shifting. For a long time, the SSP2 “Middle of the Road” scenario seemed to offer a reasonable baseline. It reflects a world where societal, economic and technological trends follow historical patterns. Progress is uneven but steady, environmental systems degrade moderately and institutions make slow but steady progress toward sustainable development goals.
However, recent geopolitical developments are pushing us away from that baseline. Increasingly, the current landscape resembles the SSP3 “Regional Rivalry – A Rocky Road” narrative. In this scenario, resurgent nationalism, regional conflicts and heightened concerns about competitiveness and security lead nations to prioritize domestic and regional interests over global collaboration. Investments in education and technology decline, economic growth slows and inequality persists or worsens. Environmental degradation intensifies and coordinated international action becomes less likely.
In current client discussions, the SSP3 scenario has gained significant relevance, not just as a hypothetical case, but as a plausible reflection of emerging realities. As this new “business as usual” takes shape, scenario analysis becomes an essential tool for organizations. It enables them to plan for a wider range of future states, define mitigation strategies and identify opportunities that may otherwise be overlooked.
How Sphera can help
At Sphera, our climate risk assessment approach is aligned with leading sustainability disclosure frameworks, including the ESRS, IFRS and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We tailor our methodology to your organization’s specific needs — combining scientific data with scenario-based insights to help you understand how climate risks and opportunities could impact your business, including effects on cash flow, financial performance and financial position.
Our sustainability consulting team brings over 30 years of experience supporting companies in developing robust environmental, social and governance strategies. With deep expertise across sectors — from energy, chemicals and metals to construction, transport and agriculture — we work alongside clients to translate complexity into clarity and build future-ready sustainability roadmaps.
In an uncertain world, having the right insights and tools makes all the difference. If you’d like to explore how scenario analysis and climate risk assessment can strengthen your organization’s strategy, we’re here to help.
Reach out — we’d be happy to start the conversation.
