Decision-Support Tools

Imagine being able to access the collective climate knowledge relevant to business decision-making. Using TheBrain software, the Climatographers have focused for more than a decade on building a the Climate Web to that end - the Climate Web.

The Climate Web can be used to help deliver a range of climate-related products and services. Most obviously, we can deliver webinars and briefings on a wide range of business climate topics. A specific example is profiled here: Client Webinar: Does Low-Carbon Investing Reduce Risk and Mitigate Climate Change?

But the Climate Web can also support business advisors of all kinds in delivering a series of specific products and services, as profile below. These all represent services we delivered to clients when we were focused on client-facing management consulting. Today’s we’re interested in helping client-facing business advisors leverage the Climate Web for their own purposes, with or without the Climatographers’ support.

• Pre-Mortems

• Rapid Materiality Assessments

• Climate Assumptions Audits

• Scenario Planning

• Preparing for Radical Uncertainty

Pre-Mortems

Pre-Mortems are an under-utilized tool for overcoming, among other things, one of the biggest challenges we face in tackling climate change. This is our inability to really think of the future as being fundamentally different from the present and the past.

Is there a solution to this problem? Behavioral economist Richard Thaler thinks so. In a 2017 article, he argued that instead of focusing on post-mortems to explain after the fact why things have gone wrong, we should engage in pre-mortem thinking to understand in advance why a project or policy went wrong or right in the future. Done effectively, it might cause us to rethink our near-term actions and decision-making.

Thaler notes that research shows that having to explain why something actually succeeded or failed in the future, rather than just hypothesizing a laundry list of “sensitivity variables” as you might see in scenario planning, can spur more creative thinking. Such creative thinking is then taken more seriously. On the solutions side, having to pro-actively explain in detail how a problem came to have been solved could generate entirely new ideas about how we should tackle that problem today.

Pre-mortems could be a boon to climate risk thinking and management. Scientists, policy-makers, and corporate strategists could all benefit. With all the discussion of net zero by 2050, for example, who’s doing the pre-mortem -- who is asking: “Net Zero didn’t work. Why?” And that’s just for starters, both with respect to exploring climate risks as well as potential climate solutions.

Pre-mortems draw on the tools and benefits of both story-telling and scenario planning for thinking about climate futures, and the Climate Web is ideally suited to supporting pre-mortems.

Rapid Materiality Assessments

Decision makers of all kinds and at all levels are constantly balancing the priority they assign to competing problems and opportunities. Any addition to the corporate “priority list” has to be considered sufficiently important to the organization’s mission or values by management. When it comes to climate change, the critical question is: “Does climate change pose material risks or opportunities that as an organization we can’t afford to ignore, or that as an organization we want to pro-actively engage upon?”

In many cases, the answer to this question will vary depending on an organization’s vulnerability to the potential physical, policy, market, and other impacts of climate change, as well as the organization’s sensitivity to risk. The Climate Web makes it a lot easier to answer these questions regarding the materiality of climate change.

A Climate Risk Rapid Materiality Assessment (RMA) is a resource-effective way using the Climate Web to assess the “materiality” of climate change to an organization’s goals and risk management objectives. The result is a quick but comprehensive assessment of climate risks and actionable conclusions for decision-makers. The RMA is carried out using the expertise of company staff.

A Rapid Materiality Assessment Case Study: Working with an equipment manufacturer in the oil and gas industry, the Climatographers initially encountered an RMA situation in which a sizable fraction of the company’s participants in the project didn’t accept climate change science. (The company had recently been acquired by a European company, which mandated the RMA.) The company team involved in the RMA project was understandably skeptical of the whole idea of a Climate Risk RMA. But after just three one-day workshops spread over three months, the team's participants concluded that the “materiality” of climate risks was real and strongly advised management to adopt a strategic response.

Climate Assumptions Audits

Management gurus have long advised business leaders to frequently reevaluate their core business assumptions. Business books are full of case studies of the bad things that happen when companies fail to heed that advice. As noted by scenario planning expert Kees van der Heijden, for example:

“ . . . in times of rapid change the large well-run companies are in particular danger of suffering from strategic failure, caused by a crisis of perception….[because of] the inability to see an emergent reality by being locked inside obsolete assumptions.”

Today, business leaders are being told to incorporate climate change risks and opportunities in their planning and decision-making. But these are relatively new topics for many business decision-makers, and all kinds of underlying assumptions are in play when it comes to:

• Climate change itself

• The business materiality of climate risks and opportunities

• The economics of climate change and climate change mitigation

• The changing probabilities of extreme events and business disruptions

• The timing of potential climate change and climate policy tipping points

• The likely evolution of climate policies and measures

• How climate risks will play out at the sectoral level

These are complicated and rapidly changing topics. It should not surprise anyone that many decision-making assumptions about climate risks and opportunities don’t reflect the best available information. An Assumptions Audit can help company decision-makers make sure they are taking advantage of the best available information when it comes to climate risk assessment, climate strategy development, or climate scenario planning.

An Assumptions Audit Case Study: A Japanese electric utility had done an internal analysis of climate risk. It had arrived at a "worst case" estimate of risk to the company’s financial bottom line. The Assumption Audit suggested different ways to look at several of the key assumptions they were making. The company ended up revising several key assumptions and increasing estimated bottom-line risk 7-fold.

Scenario Planning

Companies are under increasing pressure from investors and other stakeholders to engage in climate change scenario planning. There are many potential scenario variables, starting with:

• The overall pace and numerous manifestations of climate change itself

• The future of climate change known unknowns and unknown unknowns

• The direct and indirect impacts of such manifestations and potential uncertainties on company operations and markets

• Climate change policies enacted locally, regionally, nationally, or globally levels

• The direct and indirect impacts of potential climate policies such as carbon pricing on the company operations and markets

But even before tackling specific scenario variables, there are plenty of outstanding questions for organizations looking to carry out climate scenario planning:

• Are there different approaches to climate change scenario planning?

• Why pursue scenario planning, and with what objectives?

• How far out do you have to look, using which scenarios?

• Is the primary audience internal (e.g., management) or external (e.g., investors)?

• How much will scenario planning cost?

• How much staff and management time will it consume?

There are no one-size-fits-all answers to any of these questions. A narrow and constrained scenario planning process may be more valuable to one company's decision-makers than a comprehensive and more costly scenario planning exercise; another company may benefit from just the opposite. A lot depends on the organization, its goals and needs, how it makes strategic decisions, and its decision-making environment.

The Climate Web contains thousands of hours of knowledge curation relevant to these and other questions. It can support scenario planning in a wide variety of contexts. Smaller companies may be able to carry out their entire scenario planning process using the Climate Web alone!

Do It Yourself (DIY) Scenario Planning

The Climate Web reflects thousands of hours of expert knowledge management to curate and integrate the information of tens of books, reports, journal articles, news stories, blogs, videos, websites and more, in order to facilitate actionable knowledge for scenario planning.

The Climate Web is a unique resource for DIY scenario planning research and analysis. It gives you a head start of dozens to hundreds of hours across numerous climate risk and opportunity topics. You can explore the scenario planning literature, the TCFD literature, alternative climate change scenarios and futures, carbon price forecasts associated with a 2^o C scenario outcomes, progress and uncertainties relating to the ongoing low-carbon transition, among many other topics.

Scenario Planning Support

The Climatographers have 30 years of climate change advisory experience and have specifically structured the Climate Web to help support climate change scenario planning, both conventional scenario planning and TCFD scenario planning. This is done through overlays built into the Climate Web that are not visible to open-access users. The overlays:

• Follow the scenario planning processes used in conventional scenario planning, as well as the process dictated for TCFD scenario planning.

• Pull together the relevant information for the many variables relevant to both kinds of scenario planning.

• Specifically support the bounding of future outcomes for these variables, and the identification of key uncertainties and potential tipping points, based on information pulled from all over the Climate Web.

Positioning for Radical Uncertainty

Scenario planning is a great tool for bounding future climate risks and opportunities. What scenario planning can't do is reduce the large uncertainties companies face when it comes to climate change, particularly in the near to medium terms.

• Will climate change accelerate?
• Will climate change tipping points be triggered?
• Will public opinion on climate change shift and polarization be moderated?
• Will governments implement the 2oC target (or some other target?)
• Will carbon be priced (how much and by when?)

These are just a few of the many uncertainties surrounding how climate futures will manifest. These uncertainties make it challenging for companies to commit to a specific business course that might include:

• Shifting to an entirely new business model
• Divesting business units or assets
• Acquiring business units or assets
• Relocating facilities and assets
• Selecting a carbon price to apply to internal capital decisions

To inform the timing of decisions like these a company can benefit by tracking the evolution of its climate change decision-making environment. The company can then be prepared to act when the time is right. A pre-planned "rapid response" capability for situations that you can't "go all in" on today can place the company in a much better position to move quickly when the time is right.

To discuss how you can take advantage of the Climate Web using the Climatographers’ support, or how your law firm or consulting firm can take advantage of the Climate Web to support your clients, contact the Climatographers.