Prof. Renata Peregrino de Brito, Pontifical Catholic University of Rio de Janeiro and FGV EAESP Alumna, shows why climate adaptation inside organizations is rarely straightforward. As risk perception, resources, institutions, and industry pressures collide, awareness alone fails to produce action. The lesson? Adaptation is less about exposure to climate change and more about an organization’s ability to interpret risk, build capability, and act under uncertainty.

Insight by CoBS Editor Hari Chandana Chinni. Related research: The multilevel path to climate change adaptation, published in RAE Journal, https://doi.org/10.1590/S0034-759020220609

The effects of climate change are no longer just a matter of concern regarding the future of the environment. It is now an ongoing disruption that affects and permeates all areas of the economy, including markets, operations, and value chains. Nonetheless, organizational responses are still disparate. Some firms have made early investments in adaptation, re-engineered their assets, and built resilience. Others, however, either postpone, minimize, or simply wait until disruption is unavoidable before taking any action.

The research of Renata Peregrino de Brito urges us to consider the deeper reason underlying the surface explanation that some companies are simply not as good as others at caring for the environment. Rather, it involves a more complex issue. The decision to adapt is not an isolated event but rather the product of the interaction of various forces ranging from the individual to the organizational level, from the industry to the institution. Energy and utilities companies may face climate change as a public directive to act, while others experience it through ambiguity, uncertainty, and conflicting priorities.

The consequence is not outright denial, but something far more insidious and hence more dangerous – strategic drift.

Why Exposure Alone Does Not Trigger Action

Being exposed to climate risk is not enough to provoke adaptation. Two firms can face similar physical threats such as flooding, heat stress, or supply disruptions, yet respond in radically different ways. The difference lies not in the climate itself, but in how risk is interpreted inside the organization.

Climate change is an abstract and probabilistic phenomenon. It lacks the immediacy of a financial crisis or a sudden market shock. As a result, it often fails to command attention at the top of the organization. Indeed, leaders may acknowledge the risk in principle while postponing action in practice, especially when short-term performance pressures dominate.

Adaptation, therefore, begins not with data or projections but with sensemaking. It is the process by which decision-makers translate environmental signals into something that feels strategically relevant.

Risk Perception as the Switch Between Awareness and Action

Risk perception is the door between companies’ climate awareness and their readiness to act. Climate risks will influence strategic decisions only when they are accepted as critical for the firm’s main operations, plausible within a relevant time frame, and demanding such a level of urgency that resources are reallocated in their favour.

This perception does not happen naturally. It is shaped through personal experience, cognitive framing, emotional reaction, and values. Managers who have witnessed extreme weather events, operational disruptions, or regulatory shocks are more likely to regard climate change as real and to see it as requiring immediate action. In contrast, those with no such experience often perceive it as distant or abstract.

The implication is uncomfortable but clear. Organizational change and adaptation depend heavily on who holds decision-making power and how they interpret risk.

Why Good Intentions Collapse Without Capability

Oftentimes, even when climate change is considered a risk, firms do not adapt their strategies. To fight climate change, a company must be financially robust enough to invest now and wait a long time for returns, build learning mechanisms to interpret ever-changing risks, and finally develop strong leadership that can sustain the commitment.

Moreover, such a company must build close relationships with its stakeholders and partners. If companies lack these capabilities, they will recognize climate risks but will be immobilized, able to make only very small or insignificant responses. Adaptation will no longer be part of the decision-making process; rather, it will be a topic for discussion, reporting, or delegation. In this regard, climate change becomes a stress test of the organization’s learning, reconfiguration, and action capabilities under uncertainty.

The Role of Institutions in Shaping Corporate Response

Organizations do not adapt in isolation. Institutional environments shape both the feasibility and legitimacy of adaptation.

Clear public policies, infrastructure investment, and technological support do more than reduce costs. They send signals about seriousness and direction. Where governments provide consistent guidance, firms are more willing to invest, experiment, and commit. Where policies are ambiguous or contested, climate adaptation remains discretionary and fragile.

Institutions also shape meaning. They influence whether climate action is seen as a responsible strategy or unnecessary risk-taking.

Industry Context and the Visibility of Risk

Climate change has different effects across industries through its environmental impacts. For example, tourism, agriculture, and utility operations depend heavily on natural resources that are directly affected by climate-related factors. In this light, risk is an obvious danger people must face directly because they cannot avoid it.

Time, too, plays a part, with the effects of climate change becoming evident over the years, decades even. This leads to the false belief that climate adaptation can wait. Evidence shows that industries with low climate risk visibility tend to experience sudden, nonlinear shocks that cause the most serious damage.

Learning as the Core Adaptive Advantage

Because of its high level of uncertainty, climate change cannot be predicted with great accuracy far in advance. Perfect forecasts are impossible. Accordingly, organizations need to develop their ability to learn from actual experiences while observing peers and business partners, and to update their beliefs and resource-allocation methods over time.

All in all, organizations need to move beyond their initial strategic shift to develop ongoing adaptation systems. It is a continuous process of sensing, interpreting, and adjusting: organizations that rely solely on plans and projections struggle; organizations that develop learning networks alongside business partnerships achieve greater success in adapting to change.

Climate change will not introduce entirely new problems to organizations. Rather, it will intensify existing ones. Organizations with weaknesses in monitoring, learning, coordination, and long-term thinking will find the pressure of climate change even harder to manage. On the other hand, companies with advanced adaptive capabilities will treat climate uncertainty as a source of innovation and resilience.

Finally, adaptation is not about moral advocacy or societal acknowledgment. It is about an organization’s ability to detect weak signals, take uncertain risks, and invest before crises become so severe that action is no longer optional.

Useful links:

• Link up with Renata Peregrino de Brito on LinkedIn
• Read a related article: Climate Adaptation as a Strategic Imperative for Business and Society
• Discover FGV EAESP
• Apply for the FGV OneMBA.

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