For the last four decades, the climate action agenda was driven primarily by a small, centralized group of international governments, policy makers, scientists, NGOs and think tanks. CEOs and investors, for the most part, sat on the sidelines.

“We used to imagine we'd all sit around the table at the UN and agree to a global carbon tax,” Harvard Business School (HBS) Professor Gunnar Trumbull told business leaders on May 10 at HBS’s “Accelerating Climate Solutions” conference. “We had great theories about how it was going to be hard. It turns out we were right.”

Those days may be fading.

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Today, some businesses are incorporating climate into their business strategy, according to HBS research and conversations from the climate summit. It’s a departure from the way CEOs have traditionally managed businesses for decades.

But to thrive in a global economy being reshaped by a changing climate, meet market expectations, and reach important self-imposed decarbonization goals, climate must play a central role in business strategy, HBS Professor George Serafeim told audience. It’s equally vital to put climate front and center when it comes to people, from C-suite leaders to accountants to supply chain managers, as each individual must understand and work towards shared climate-driven goals.

Climate prompts comprehensive transformation of business strategy

From global insurers to disruptive agricultural startups, some CEOs across sectors are increasingly seeking new climate-driven opportunities while building climate risk into their firms’ short- and long-term strategies, according to HBS researchers who use deep, empirical research to study and understand business behavior.

“It’s an every sector of the economy issue,” said Serafeim. “It is really important for all of us to be thinking about it from an opportunity perspective and a risk perspective.”

What’s behind this shift?

Some companies are accelerating climate strategies as the world notices China’s rapid advances in launching disruptive climate-related technologies.

National competition is giving rise to industrial policies in the United States and other major economies offering subsidies to technologies deemed critical for climate mitigation and innovation. These policies are often accompanied by protections to ensure profitability for investors.

Trumbull said he is increasingly optimistic about the chances for success under the new approach. “Countries are going to compete their way out of our climate challenge. We're going to see a race to develop new domestic capabilities with a goal of ensuring future competitiveness in decarbonized industries,” he predicted.

Several HBS case studies demonstrate how the market’s gradually responding to the climate crisis, while also underscoring the school’s commitment to evolving how it educates tomorrow’s CEOs.

BMW integrates decarbonization across the full value chain

Despite growing pressures from governments and investors, German automaker BMW has not announced a hard deadline for changing its multi-powertrain strategy and transitioning to an all-electrical-vehicle strategy. While the transition to electric vehicles (EV) reduces emissions in the use phase of the vehicle, the reduction amount depends heavily on the emissions in the local grid, and the battery increases emissions in the supply chain by close to 50%.

Zipse takes decarbonization seriously and has encouraged a strategy to foster consideration of carbon emissions holistically over the lifecycle of vehicles, from sourcing to production to consumer use. That approach spreads the responsibility for decarbonization impact widely across the company.

“Every person, down to every engineer, owns a piece of BMW’s decarbonization target,” said HBS Assistant Professor Shirley Lu, who wrote the case with Serafeim and Professor Mike Toffel.

Allianz innovates amid increased extreme weather

A climate-focused business strategy isn’t limited to producers and manufacturers, an HBS case study demonstrates.

The case study on the Turkish subsidiary of the German multinational financial services and insurance company Allianz Group explores how the company is reimagining core assumptions and operations after an unusual natural disaster it attributes to climate change, according to HBS Senior Lecturer John Macomber, who has written case studies detailing Allianz’s climate-centric transformation.

In the face of a rising number of significant natural disasters, including a recent hailstorm that damaged more than 100,000 vehicles, management recognized the need to look at risks differently.

While Allianz previously had relied on historical data to assess risks, it recognized this approach was no longer sufficient in the era of climate change. Its risk engineers developed a whole new set of tools to assess future non-seismic natural disasters and help its insured clients become better able to respond to changing conditions. Insurance services now go beyond simple risk transfer contracts and into proactive interventions that reduce the underlying exposures and their impacts.

The adoption of these risk assessment tools will ripple through to owners of large portfolios of real assets – such as apartment buildings, power plants or airplane hangars – as cheap, traditional coverages become prohibitively expensive, or even unavailable. The proactive interventions that Alianz is pioneering to reduce risk – as opposed to simply transferring risk – will become increasingly central. Many mortgage agreements will require it.

“Unfortunately, if there's no insurance, there's no credit,” Macomber said.

Climate presents opportunity for agriculture

Meanwhile, Boston-based startup Indigo Agriculture is creating new approaches to agricultural production and supply chain logistics in response to the need to produce food with lower emissions. The company has shown how business can respond to new challenges facing the agricultural sector.

“A lot of times people think about climate from a risk management perspective, about adaptation,” said Toffel, who co-authored a case study about Indigo. “That's important, but there's also money to be made on the opportunity side.”