The business cost of climate inaction

This week, Malta was once again reminded that climate change is no longer a distant or theoretical risk. Storm Harry, a severe gale that reached Force 9 intensity, left behind a trail of destruction across the islands. Uprooted trees, damaged infrastructure and property, coastal and road flooding were not abstract scenarios from a climate model – they were lived realities for households, businesses and workers.

Steve Stivala Director, Advisory - Infrastructure, Public Policy and Strategy KPMG in Malta, stevestivala@kpmg.com.mt

Storm Harry brought sustained gale-force winds, intense rainfall over a short period and dangerous sea conditions that forced the suspension of ferries, flight disruptions, and the closure of some schools. Workers were advised to stay at home, affecting productivity across multiple sectors. These disruptions come with real economic costs: lost output, delayed services, damaged assets, and increased pressure on emergency response systems. Most critically, such events pose serious risks to life, particularly for vulnerable groups and those working outdoors or at sea.

This is not an isolated incident. Just two years ago, Storm Helios caused widespread damage, with insurance claims reportedly reaching €1.8 million. In recent weeks, a localised hailstorm devastated agricultural land in parts of Rabat, wiping out crops within minutes. For farmers, these losses are existential; for the wider economy, they translate into reduced local supply, higher prices, and greater reliance on imports. These are actual, measurable impacts already affecting our economic fabric – not projections for 2050.

Rachel Decelis Associate, Director, Environmental, Social & Governance (ESG) KPMG in Malta, racheldecelis@kpmg.com.mt

At a global level, the science is unequivocal. We are already around 1.5 °C above pre-industrial temperature levels, and recent data confirms that 2025 was the third-warmest year on record. In KPMG’s recent report, Takeaways from COP30, we highlight that even if all current climate policies were fully implemented, the world is heading towards at least a 2.5 °C temperature rise. The implications are profound: extreme weather events will become more frequent, more intense and more disruptive, with exponentially rising social and economic costs.

Yet, paradoxically, we are also witnessing a slowdown in climate-related regulation and disclosure. In the EU, we have seen changes in sustainability reporting requirements, with far fewer companies required to report on their climate impacts and actions under the Corporate Sustainability Reporting Directive (CSRD). These are political decisions, shaped by competing priorities and concerns about regulatory burden. But climate change does not care about politics. It does not respond to delays in reporting or shifts in legislative mood. It will continue to affect our natural environment, our infrastructure, and our businesses regardless.

The danger lies in complacency. Climate action is often framed as a cost today for a benefit tomorrow. But Storm Harry, Storm Helios and the recent hailstorms show that the costs of inaction are already being paid – through insurance claims, business interruption, damaged assets, and lost livelihoods. Organisations that fail to prepare for climate risks may find themselves increasingly exposed, while those that act strategically and sustainably will be better positioned to endure and adapt.

This is where a clear call to action is needed. Organisations must systematically assess climate-related risks: from physical risks to buildings and infrastructure, to transition risks affecting investments and supply chains. At the same time, businesses and individuals alike must reflect on how their own carbon footprint contributes to these impacts and identify practical ways to reduce it, such as through investments in renewable energy, energy efficiency, or waste reduction.

Additionally, climate adaptation is not optional; it is essential for safeguarding business resilience. In our view, corporates should prioritise what can be delivered affordably and at pace: redirecting products and services towards cost-effective, resource-efficient solutions, investing in proven, scalable adaptation technologies, and prioritising decarbonisation actions with the strongest cost-benefit outcomes. For businesses to be future-proof, they need to understand the risk, make informed decisions, and build resilience in an increasingly volatile climate.

The question is no longer whether climate change will affect us – it already is. The real question is whether we choose to prepare, adapt and act, or continue to absorb mounting impacts and costs, until resilience is no longer an option.