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Published on: Feb. 14, 2020, 2:37 p.m.
What would “an under 2°C future” look like?
  • Smog envelopes a Delhi road. Source: Wikipedia

By D. Shivakumar. The author is Group Executive President, Aditya Birla Group
T

he world faces an incredible challenge. We see the effects of climate change at home and abroad in droughts, floods, stronger cyclones, as well as changing temperatures and rainfall patterns. Many have come sooner than we originally foresaw. And we know now that it will get far worse. As future generations take to the streets from Scandinavia to India to Latin America, the business community is asking two questions: how will we adapt? And how can we protect the planet from further damage?

Under the 2015 Paris Agreement 193 nations committed to keep the global temperature rise to “well under 2°C”, aiming for 1.5°C. To some, this is a seemingly impossible task as it requires a 30 per cent absolute reduction in CO2 emissions by 2030, 60 per cent by 2050 and zero carbon emissions by 2100. Absolute. Not relative. But as the new Banksy at Marble Arch states, “from this moment despair ends and tactics begin”. The Paris Agreement must be realised, and not just by government. It requires tremendous action from businesses.

The reports from the Intergovernmental Panel on Climate Change (IPCC) make the consequences of inaction very clear. Beyond 2°C we risk a “hothouse earth” and runaway climate change that would decimate our food supplies, make some of our biggest cities unlivable and change trade routes beyond recognition. For business this means value chains will have to look different and some will not be sustainable, the market conditions will dramatically change, customers and employees will be living very differently and probably with much tighter legislation, all of which will challenge business leaders (and their management systems) to the limit and, for many, beyond into unsustainability.

This makes targeting “well under 2°C” the only option. But what would that mean? What would “an under 2°C future” look like? What transitions would we need to make to get there? It still means massive disruption. So how might businesses need to adapt in order to remain successful? In <2°C Futures, the Aditya Birla Group and Forum for the Future set this out so that all businesses can prepare themselves and their value chains for the radically different decades to come.

What do we know about an under 2°C future?

It is imperative for businesses to plan and act now if we are to deal with the disruption. How severe this disruption will be depends on us adapting business models, products, operations and supply chains so that we build sustainable businesses for the future. But some disruption is inevitable as it is determined by our past emissions.

<2°C Futures makes it clear that, if we are to stand any chance of staying below 2°C, we will need to see the complete transformation of the energy matrix that supplies global power, food, infrastructure and transportation systems. We must see the end of coal; a rapid shift to electrified cars, two-wheelers and trucks; all buildings will need to be zero carbon, and we need a quick roll-out of negative emissions technologies on a massive scale. All this together with a massive reorganisation of how we produce our food and use our land.

These transitions must be rapid. This isn’t a gradual phase out of a few isolated technologies, but a more wholesale shift from coal and internal combustion engines, plastics and energy inefficient appliances, and a growing focus on maintaining biodiversity and water. The impact of this transition on business will depend greatly on how governments, markets and the general populace make it happen. This is hard to predict and could come about in a number of different ways, but we do know it will be a major socio-political shift.

Very few businesses seem to be talking about this, and even fewer are considering their strategies in light of it.

Traditionally, business leaders have not had to operate in a constrained world. Without constraints, businesses have produced the most incredible advances in healthcare, invented products and fostered lifestyles that were unimaginable even 30 years ago. These advances, however, have not been without their negative side effects, including pollution, waste and greenhouse gas emissions. Currently legislation drives the management of these impacts, but not yet to the level needed to stay well under 2°C.

Whilst legislation will likely be the main ‘lever’ we pull to enforce the constraints needed, it is a laggard and the way that customers behave, businesses compete and are rewarded, and how lifestyles and communities change will also help lead how we make this transition.

When exposed to change such as this, the range of future eventualities will be new to many management teams. We know just telling people that things must change does not make it happen. The real challenge is in inspiring business leaders to develop their management systems and use future scenario planning to understand the issues and tease out the opportunities and the non-financial risks they face. It will be hard work, it may involve total transformation of some key business models, product ranges and operating practices, all of which will require investment but for many that wait, or find they cannot adapt, their businesses may well become unviable or unsustainable.

There is lots to be done: we need to understand how business value chains end to end will need to adapt to the physical impacts that climate change will have on the assets they operate. Not acting is no longer an option for leaders who want their businesses to thrive in the next 20, 30 and 50 years. A mindset shift is needed and deep scenario planning, as demonstrated in <2°C Futures, is a way of bringing these crucial issues alive.

The <2°C Futures materials identify four things that business leaders should be mindful of:

• The likely physical impacts of climate change in 2040 and their implications for a business’ entire value chain

• The transitions that will have to be made to get us on to a below 2°C trajectory

• The different ways that these transitions could manifest in 2040 and what they mean for interconnected issues such as biodiversity loss, water shortages and plastic pollution

• The critical changes that all businesses must plan for and contribute to bringing about

Imagining our possible futures:

<2°C Futures sets out four possible scenarios for 2040. They explore different socio-economic paths, varying types of governmental systems (strict and autocratic to collaborative and democratic) and differing business management processes, all within two degrees of warming.

The scenarios help business leaders to consider the likely impacts on their value chains, for instance operating with new, fossil fuel-free energy systems whilst managing water and biodiversity differently. The premise is that those that are proactive and transform their strategies accordingly will be the ones that thrive. “Business as usual” as a general practice will fail.

<2°C Futures sets out four critical future scenarios so that businesses can plan ahead:

Efficiency First: where constant and often risky technological innovation, motivated by high carbon prices, is just keeping us on track

Redefining Progress: a highly localised but digitally connected world where priorities have moved from rapid growth to a newly defined “healthy growth”

New Protectionism: a splintered world of protectionist blocs, climate change is now a matter of national security

Service Transformation: a world where the mainstreaming of access over ownership has happened quickly, and globally-applied and individual carbon budgets are traded and tracked.

Each scenario is tough and constraining, but they are all scenarios for success. Crucially, the scenarios are not favoured visions or predictions, but rather a description of alternative possible futures that will help leaders to enhance their business strategy.

The Aditya Birla Group experience:

A global conglomerate that has businesses across industries, over 120,000 employees in 35 countries and integrated into a host of complex supply and value chains, the Aditya Birla Group has developed a comprehensive Sustainable Business Model and Framework to prepare its companies for 2040.

Through the symbolism of a funnel bound by tightening legislation, it has three strategic pillars:

• Responsible Stewardship – building better management systems to better reduce negative business impact;

• Strategic Stakeholder Engagement – understanding what Is needed to create a sustainable world;

• Future-Proofing – making a business plan to adapt to a sustainable world 2°C hotter than today.

<2°C Futures is a cornerstone resource in ABG Future-Proofing, which is supported by Forum for the Future, an international non-profit that helps businesses, governments, and other organisations to tackle sustainability challenges through the application of futures and other systems change approaches. Crucially, the Group is responding to both the transition and physical baselines that affect its operations. It has mapped all manufacturing and operations sites to water stress and biodiversity threat and is basing future investment decisions on locations of lower risk. Current projects that are mapping entire value chains will help the sourcing decisions of tomorrow.

When ABG first shared the <2°C Futures scenarios at the annual Sustainable Business Conference it was a real wake up call. Many attendees were surprised that these are best-case and had not been confronted with the level of disruption that is inevitably coming our way.

What does <2°C Futures tell us we must be prepared for by 2040?

• A tough policy landscape and robust implementation

• The end of coal

• A huge transformation in the built environment

• A step change in agriculture and food

• A mobility revolution

• New materials and minerals to the fore

• Detailed transparent monitoring of corporate, and even individual, behaviour

• The emergence of radically different governance and business models

• A change in land use on a massive scale for protection, sequestration and energy

• Sea-level rise that poses serious challenges for low-lying cities

• Hotter, more frequent heatwaves and intense flooding

• Increasing migration, particularly from water-stressed areas

• Tackling poverty will have become critical to all

• An acceptance that technology alone will not save us

One critical challenge raised by our business leaders when operationalising our model is that they are not seeing buyers direct more customers to the more sustainable option. The ‘dirtier’ suppliers are not losing market share to the pioneers of sustainable business. Essentially they are not yet winning through being more sustainable. Part of what holds this back is that buying decisions, whether other businesses or the general public, are not transparent. Customers are not rewarded for making more sustainable decisions, nor punished for choosing ‘dirtier’ suppliers. A number of NGOs are working on this, but we would like it to go further faster and would encourage brands, including our own, to be more transparent about where they are sourcing from.

Creating an optimistic future:

The reality is that the future will likely be a combination of the different <2°C Futures scenarios. The transition requires a mindset shift in management and value chain transformation, quickly and at all levels. Businesses must engage, innovate and transform their energy matrix, product portfolios, and their production processes to reduce the side effects they produce and adapt. Governments and markets need to provide incentives to leaders and penalties to those that lag. We need to build mechanisms that mean the market competition that created this situation can be harnessed to rectify and manage it. Top performers need to see more market share for instance.

In <2°C Futures, a resource to help businesses lead this change now exists. Using the baselines and the scenarios to test your business strategy, operating models and supply chains will help leaders to see and take action on the risks and opportunities. Use the tools to ensure your commitments are ambitious enough and that you are taking action commensurate with the need. Involve external experts in your business. Recognise that we are in for big disruptions the likes of which we have never seen and that these tools can help business leaders to act now to prepare their companies for the disruptive journeys ahead. True leaders will be those that take heed of what a <2°C Futures business model looks like and that transform themselves now.

These are the tactics that the world is calling for.

*This column has been co-authored with Tony Henshaw, chief sustainability officer, Aditya Birla group; Dr Sally Uren (OBE), chief executive, Forum for the Future


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