Published: 5 August 2026
Author: Max Finney
What is climate scenario modelling – and why use it?
Climate scenario modelling is about making better decisions in uncertainty. It helps organisations understand how different policy, market and technology pathways could shape their operations and long‑term strategy. Instead of betting on a single forecast, it tests a range of credible futures—so leadership teams can challenge assumptions, pressure‑test investments and strengthen resilience where it matters most.
This matters because expectations have shifted. Regulators increasingly require organisations to assess and disclose climate‑related risk. But this goes beyond compliance. Investors, regulators and wider society want clear evidence that organisations understand their exposure and are actively building more resilient businesses and supply chains in response.
Our scenario analysis draws on work undertaken by external consultants as part of Shoosmiths’ Transition Risk Assessment and uses the European Sustainability Reporting Standards (ESRS) impacts, risks and opportunities (IRO) framework to identify the sustainability themes most relevant to our key client sectors. The high priority themes were then tested against three future climate pathways from the Climate Change Committee (CCC), reflecting different levels of policy intervention, behavioural change and progress towards net zero.
For each sector, the analysis considered how risks and opportunities could evolve under each scenario, examining implications across areas such as regulation, markets, technology, investment, operations and reputation. This helps to ensure the analysis reflects the sustainability issues most likely to shape future business performance, stakeholder expectations and legal demand. We are therefore able to use the results to turn abstract risk into practical insight that mobility, logistics and manufacturing leaders can act on.
1. Business as Usual (BAU)
No major policy changes beyond current commitments. This represents the slowest pace of decarbonisation and the highest level of sustained climate risk.
2. Moderate Ambition
Some policy progress, but behaviour change and infrastructure deployment lag behind net zero pathways.
3. 1.5°C Aligned (Balanced Pathway)
Policy and behaviour change keep pace with net zero goals. This scenario delivers the most resilient and lowest‑carbon future.
What are the material transition risks and opportunities for consumer & retail?
Our scenario analysis highlights several critical impacts of the transition to net zero across markets, technology, policy and consumer dynamics. These evolve over time and present both challenges and opportunities.
Key risks
- greenwashing and claims scrutiny: Environmental claims around recyclability, carbon neutrality, sustainable sourcing, recycled content and product impact must be clear, accurate, evidence based and consistent across the supply chain. The risk is particularly material where claims are repeated by retailers, online marketplaces or brand partners without sufficient substantiation.
- packaging compliance and cost pressure: Extended producer responsibility for packaging increases the importance of packaging data, material choices, recyclability assessments and governance over brand, private label, imported and ecommerce packaging. Poor data or hard to recycle packaging could increase cost exposure and operational complexity.
- energy cost volatility: Continued exposure to fossil fuel linked energy prices increases operating costs across stores, warehouses, refrigeration, hospitality, leisure sites, fulfilment centres and data intensive ecommerce platforms.
- logistics and distribution disruption: Storms, heatwaves and infrastructure vulnerability increase the risk of disruption to transport, warehousing and last mile delivery, affecting service levels, inventory availability and contractual performance.
- changing consumer practices: Cost of living pressures, sustainability expectations and trust in claims are reshaping purchasing decisions. Consumers may support more sustainable products in principle, but adoption can be uneven if alternatives are less affordable, less convenient or poorly evidenced.
Opportunities
- better claims governance can protect trust, reduce enforcement risk and allow genuine product improvements to stand out in a crowded market
- packaging design, refill, reuse, repair, resale and take back models can reduce resource dependence and create distinctive customer propositions
- investment in energy efficiency, renewable procurement and smarter estate management can reduce long term exposure to volatile operating costs
Key risks
- misaligned investment flows: Delays in decarbonisation infrastructure investment can constrain deployment of electrified retail estates, distribution networks and low carbon logistics solutions. Businesses may face higher operating costs and slower deployment of low carbon technologies, making it harder to compete with markets that are seen as more transition ready.
- regulatory tightening: Greater scrutiny of environmental claims, supply chain transparency, packaging compliance and reporting obligations creates additional administrative burden and increases exposure to litigation, fines, enforcement action and reputational damage where claims or disclosures cannot be substantiated.
- technology bottlenecks: Without sufficient grid capacity and electrification infrastructure, businesses may face constraints in expanding decarbonised logistics, warehousing, refrigeration, ecommerce fulfilment and AI-enabled retail operations. This can slow adoption of automation, digital inventory management and lower carbon logistics solutions, increase costs and reducing competitiveness against operators in markets with more mature infrastructure.
- water scarcity: Competition for water between households, agriculture, manufacturing and digital infrastructure increases supply chain risk across consumer and retail sectors. Businesses may face greater disruption to food, beverage, apparel and consumer goods supply chains, alongside increased due diligence requirements for suppliers operating in water stressed regions. This can increase costs, reduce sourcing flexibility and create greater scrutiny of responsible resource management practices
Opportunities
- organisations that embed circularity into product design and customer experience stand to strengthen branding, reduce material exposure and unlock new revenue streams.
- consumer demand for sustainable products and transparent supply chains strengthens the role of brands and retailers as enablers of more sustainable consumption. Organisations that can demonstrate credible progress on climate, packaging, waste reduction and responsible sourcing are likely to strengthen customer trust, attract investment and differentiate themselves in increasingly competitive markets.
Key risks
- systemic market disruption: Sustained vulnerability across energy, transport and water systems affects the availability, cost and reliability of products and raw materials that support consumer markets. Businesses face increasing pressure from supply shortages, price volatility and disruption to logistics and distribution networks, making long term planning, inventory management and customer fulfilment more challenging.
- digital inequality: Increasing reliance on digital commerce, AI enabled services and self-service customer journeys risks excluding digitally disadvantaged or lower income consumers if accessibility and inclusion are not embedded into product and service design. This can reduce market reach, weaken customer trust and create reputational and regulatory challenges.
- nature and biodiversity decline: Nature degradation and biodiversity loss threaten the availability, quality and cost of the natural resources that underpin many consumer and retail products. Food, beverage, apparel, personal care and consumer goods supply chains depend on healthy ecosystems, water resources, soil quality and biodiversity. Businesses may face increasing sourcing challenges, regulatory scrutiny and cost pressures where natural capital is degraded or poorly managed, requiring greater investment in responsible sourcing, traceability and nature positive supply chains.
Long‑term opportunities
- a fully decarbonised energy system reduces operational costs and improves resilience across stores, warehouses, manufacturing facilities, hospitality venues and ecommerce fulfilment centres.
- more stable energy prices from renewable energy deployment supports investment in electrification, automation and lower carbon logistics while improving long term competitiveness.
- mature circular supply chains and improved access to recycled materials reduce exposure to virgin resource constraints and volatile commodity markets.
- inclusive and affordable transition strategies strengthen customer trust, brand value and market resilience
How risks and opportunities vary across the three climate scenarios
Packaging and other compliance costs and reporting burdens increase as obligations expand unevenly across regions.
Environmental claims face scrutiny, but inconsistent regulation creates uncertainty and higher legal and compliance costs.
Regulatory expectations become clearer but overlapping regional requirements continue to create complexity.
Businesses improve governance around packaging, sustainability disclosures and product claims, inconsistency in data and progress within supply chains create ongoing challenges to delivery.
Clear and stable policy frameworks support long term planning and investment.
Robust governance, high quality data and mature compliance systems enable businesses to manage obligations, substantiate claims and respond efficiently to evolving sustainability requirements.
Credibility and transparency become competitive advantages.
Consumers remain concerned about sustainability but may push back where lower carbon alternatives are perceived as less affordable, less convenient or poorly evidenced.
Trust in environmental claims remains fragile and purchasing decisions are increasingly influenced by concerns around authenticity and value.
Sustainable products and services become more mainstream, but adoption remains uneven across customer groups and markets.
Businesses that can combine affordability, convenience and credible sustainability credentials strengthen customer loyalty and market positioning.
Lower system costs, more transparent information and greater availability of sustainable products support widespread consumer participation.
Trust in sustainability claims improves and businesses benefit from stronger customer relationships and more resilient demand.
Dependence on virgin materials and inefficient resource use increases exposure to commodity price volatility, material scarcity and waste management costs.
Circular business models remain niche and struggle to scale.
Resource efficiency improves through better packaging design, waste reduction and increased use of recycled materials.
Progress is uneven across sectors and products, but businesses that invest early begin to reduce cost and supply risks.
Circular economy principles are embedded across product design, sourcing and operations.
Reduced dependence on virgin materials improves resilience, lowers costs and mitigates exposure to resource volatility, while supporting long term competitiveness.
Nature degradation, biodiversity loss and water stress increasingly affect the availability, quality and cost of natural resources that underpin many consumer products.
Businesses face greater sourcing challenges, supply disruption and reputational risk where impacts on ecosystems are poorly managed.
Better management of natural capital reduces some risks, but pressure on ecosystems continues in key sourcing regions.
Businesses invest more heavily in responsible sourcing, traceability and supplier engagement to manage regulatory and stakeholder expectations.
Nature positive approaches, regenerative supply chains and stronger environmental stewardship support long term resource security.
Businesses benefit from more resilient sourcing, improved stakeholder trust and reduced exposure to ecosystem degradation and biodiversity loss.
Supply chains remain exposed to climate disruption, infrastructure vulnerability, water stress and geopolitical instability.
Product availability becomes less predictable, logistics costs rise and businesses must devote greater resources to continuity planning and supplier monitoring.
Greater visibility and collaboration improve resilience across supply chains, although disruption remains a material risk.
Enhanced traceability, stronger supplier partnerships and improved data help businesses manage cost, continuity and reputational exposure.
Diversified sourcing, strong supplier relationships and advanced traceability systems create more resilient and transparent supply chains.
Improved coordination reduces disruption, strengthens responsible sourcing practices and supports long term operational stability.
What this means for consumer & retail leaders
Transition risk has deep implications for consumer and retail strategy because it cuts across the core of how products are sourced, made, marketed, sold, delivered, used and recovered. For general counsel, sustainability leads, commercial teams, procurement, product, marketing and operations, scenario analysis is becoming more than a reporting exercise. It is a practical way to test whether the business remains resilient as regulation, consumer expectations, infrastructure and resource availability change.
The main lesson for consumer and retail businesses is that trust, resource efficiency and operational resilience are becoming connected. A product claim is no longer just a marketing issue. It depends on packaging data, supplier evidence, product design, logistics, lifecycle impact and the ability to prove what has been said. Similarly, packaging and waste are no longer back-office compliance issues. They shape input costs, customer experience, supplier resilience and exposure to regulatory change.
Organisations can use scenario analysis to:
- identify where transition exposure is highest across products, packaging, suppliers, channels, estates and customer segments
- test whether environmental claims, packaging data and sustainability governance are robust enough for higher scrutiny
- prioritise investment in circularity, waste reduction, supplier engagement, energy efficiency and logistics resilience
- understand how affordability, inclusion and changing consumer practices could influence adoption of low carbon products and services
- position for growth through credible product claims, practical circular services and more resilient supply chains
The consumer and retail organisations most likely to succeed will be those that treat the transition as a commercial redesign challenge, not a compliance add on. Businesses that can reduce waste, evidence claims, manage packaging obligations, work with suppliers and offer customers credible, affordable choices will be better placed to build trust and adapt as the transition accelerates.